Eni discovers 30 Tcf gas field in Mediterranean offshore Egypt | World Oil

Eni discovers 30 Tcf gas field in Mediterranean offshore Egypt

8/30/2015

Share on facebookShare on twitterShare on linkedinShare on google_plusone_shareShare on print

ANTHONY DIPAOLA

CAIRO (Bloomberg) -- Eni has discovered a “super giant” natural gas field offshore Egypt in what the Italian oil company said is the largest find in the Mediterranean Sea.

The deepwater deposit in the Zohr prospect in the Shorouk block may hold 30 Tcf of gas, equivalent to 5.5 Bboe, Eni said in an e-mailed statement. Eni, which wholly owns the license for Shorouk, said the discovery validates its strategy of exploring mature areas. Egypt’s petroleum ministry confirmed the discovery in a separate statement.

“Egypt has still great potential,” Claudio Descalzi, the company’s chief executive officer, said in the statement. “This historic discovery” will transform the energy industry in Egypt, he said.

International oil and gas companies are seeking new deposits as existing fields become depleted. Egypt’s energy demand is rising as the Arab world’s largest population grows, making the country more reliant on imports provided by Persian Gulf states. The latest discovery will contribute to Egyptian supply for decades, Eni said.

Export Plans

“A find of this size should be enough to cover a lot of Egypt’s energy gap,” Robin Mills, a Dubai-based analyst at Manaar Energy Consulting, said by phone. “They’ll likely have to meet domestic needs first, before any export plans are discussed. This will also put a damper on Israeli plans to export gas to Egypt.”

Eni will likely sell most of the fuel into Egypt’s domestic market, said a spokesman, asking not to be identified citing company policy. With a minimum development period of at least four years, it would be about 2020 before any production started in the Shorouk block, Mills said. Eni said it planned to appraise the field and start “fast track development.” It didn’t provide a time line for the project.

Companies including Noble Energy, which are developing gas fields in Israel, have been pushing plans to export the fuel to Egypt since the start of the year. Delek Group and partners in the Tamar field signed an export contract with Egyptian buyers in March.

Eni is looking to divest some of its peripheral businesses as a drop in global oil prices puts pressure on earnings. The company has asked advisers to look at options for assets including interests in Nigerian oil and gas fields. In March, Eni became the first major oil company to announce a dividend cut after prices slumped.

Gas Venture

Egypt is the first foreign country Eni expanded into from its home base in Italy in 1954. The Rome-based company already produces gas in Egypt and is a partner in a venture operating a gas liquefaction terminal at Damietta on the Mediterranean coast.

Descalzi, who became CEO a year ago, met Egyptian President Abdel-Fattah El-Sisi along with the country’s prime minister to discuss the discovery on Saturday in Cairo, according to the Egyptian petroleum ministry statement.

Descalzi led Eni in its largest natural gas find at the Mamba field in Mozambique, where the company has found 75 trillion cubic feet of gas in the offshore deposits of its Area 4.

Source: http://www.worldoil.com/news/2015/8/30/eni-discovers-30-tcf-gas-field-in-mediterranean-offshore-egypt

Israeli cabinet approves gas outline agreement | Globes

16/08/2015, 17:26 Hedy Cohen

Benjamin Netanyahu: This decision will earn the state treasury hundreds of millions of shekels.

The Israeli cabinet today approved the natural gas plan. All the ministers voted in favor except for Minister of Environmental Protection Avi Gabai. Gabai, who returned to Israel for 24 hours in order to take part in the cabinet meeting, said in advance, "Without a real change on the question of energy security, I'll vote against the gas plan."

Minister of the Economy Aryeh Deri voted in favor, but has not decided whether to take responsibility for using Section 52 of the Restrictive Trade Practices Law authorizing him to enforce approval of the agreement.

RELATED ARTICLES

Deri to insist on Knesset vote for gas roadmap

Gas roadmap is Knesset nightmare for Netanyahu

Netanyahu: Gas deal will lower cost of living

Israeli gov't reaches agreement with gas cos

Minister of Welfare and Social Services Haim Katz, Minister of Finance Moshe Kahlon, and Minister of Construction Yoav Galant did not participate in the crucial vote, due to conflicts of interest that they announced in advance.

At the beginning of the meeting, Prime Minister Benjamin Netanyahu said, "The decision that we make today will be nothing less than historic. This decision will earn the people of the country and the state treasury hundreds of millions of shekels. This money will go for education, health, welfare, and other national needs.

"I want to praise the work by the team headed by Minister of National Infrastructure, Energy, and Water Resources Yuval Steinitz, which substantially reduced the price that the state will pay for gas, as well as other changes that greatly improved the plan. I believe that we will pass this decision by a large majority, and justly so. I am not impressed by demagoguery - for me, it is only demagoguery, even though people can believe in what they say, but the country needs gas. Unfortunately, gas resources are going to be developed in our region regardless, and we have to make sure that our resources work at full steam. We need to get the gas out of the sea. This decision is an important milestone. We are overcoming the obstacles, one by one; they will not stop this process. The gas will leave the seabed and reach the people of Israel, Israeli industry, and the Israeli economy for the benefit of all Israelis.

"Any objective examination will prove that this plan is a significant improvement on the existing situation. One more thing must be realized, however - this cannot be stopped. When it is right to do something, and it is so fateful for the Israeli economy and Israel's strategic situation, it cannot be stopped. They will look for another way to delay it, another excuse, another reason - but it will not help. This gas plan will pass in any case, and it is time for it to pass. The real interests of Israel require that it be passed, and as soon as possible."

Steinitz said, "After several years of regulatory deadlock and delay that have cost the state billions and damaged its energy security, I am convinced that the current plan is the best thing for Israel and its people. The important comparison that should be made is to the current situation: is this an improvement in the current situation? Where prices are concerned, there will be a significant improvement in the current situation, there will improvement in competition (today there is only the Tamar gas reservoir; there will be three reservoirs, and perhaps additional reservoirs); there will be improvement in energy security, and additional revenue for the state. The gas plan also has strategic economic value: an opportunity is being created for an economic connection on the peace axis. The improvement is significant, and preferable to any further delay."

The plan submitted to the cabinet today includes two key changes, in comparison with the original plan. These were added during the public hearing on the plan, and at the request of the State Comptroller and the Governor of the Bank of Israel.

Published by Globes [online], Israel business news - www.globes-online.com - on August 16, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Source: http://www.globes.co.il/en/article.aspx?did=1001061635&from=iglobes

Cyprus waits for Noble-Delek export deal to take shape | Cyprus Mail

Cyprus waits for Noble-Delek export deal to take shape

AUGUST 14TH, 2015 

By Elias Hazou

TOO many unknowns make it hard to predict how Cyprus’ gas plans are affected by the deal announced on Thursday between Israel and Noble-Delek for the development of the Leviathan field.

For one thing, the Israeli cabinet still has to ratify the deal on Sunday, and the country’s finance ministry has been pressing for more concessions from the gas companies. And even if that hurdle is overcome, the agreement must get the nod from the Knesset.

Assuming it all pans out, Noble and Delek will immediately get to work exploring the development of the massive Leviathan gas field. Under the deal announced by Prime Minister Benjamin Netanyahu, the Leviathan partners have committed to invest $1.5bn over the next two years.

But, as gas expert Charles Ellinas told the Cyprus Mail, in order for Noble to pour serious cash into the project they would first need to line up export markets, as Israel alone cannot absorb all of the Leviathan gas.

For Noble, the main options are three. First a pipeline to Egypt, where the gas would be re-liquefied (to LNG) and re-exported to Europe; a pipeline to Turkey, and then possibly onto Europe; and third, combining the resources of Leviathan and Cyprus’ Aphrodite fields via an LNG plant here, for export to Europe.

But things get tricky, since Noble would need to drop the sale price to Egypt substantially, if BG in Egypt is to agree to buy the Leviathan gas and then re-export it to Europe at a competitive price, as LNG.

That in turn would mean Noble having to drop their domestic rates (in Israel) further, because it’s understood that under the new deal they have committed to selling outside (for example, to Egypt) at prices lower than inside Israel.

In Israel, Noble’s gas goes for around $5.5 per million BTU. Should this be slashed by another dollar, say $4.5 per million BTU, and then the cost of the Leviathan gas to Egypt lowered further, Noble might not have an incentive to sell.

At the same time, said Ellinas, BG in Egypt is seeking the lowest possible rate for the imported Israeli gas, since it’s currently re-exporting gas to Europe for around $7 to $8, which includes the cost of liquefaction (in Egypt) and re-gasification (in Europe).

Cyprus faces a similar conundrum. Recently EGAS Chairman Khalid Abdul-Badi said that the cost of importing Cypriot gas would not exceed $6.

According to Ellinas, that is problematic, because it suggests the cost of the gas at the Aphrodite platform would be around $4 – again, too low for Noble’s liking.

Noble reps have in the past indicated that their target price for Cypriot gas is around the $6 range.

Numbers and margins aside, geopolitics is likely to play a role. Shell – which has acquired BG – is reportedly committing to investing in Iran, complicating, or perhaps entirely ruling out, any possible collaboration with Israel.

Intriguingly, the best option for Israel rests with a possible solution of the Cyprus problem. That could pave the way for joint Israeli and Cypriot gas exports to Turkey, since the export routes are the same, through the island’s Exclusive Economic Zone.

And, says Ellinas, not only does a Cyprus deal now seem a real possibility, but also not that far off either, if media reports are to be believed about some kind of announcement by year’s end.

Such a development might allow both Israel and Cyprus to get their ducks in a row. For both countries, piping to Turkey is the easiest, cheapest way of monetising of the gas.

If not, then an LNG facility based in Cyprus – pooling gas from Aphrodite and Leviathan – might come back into play, Ellinas suggests. A decision around 2017 would allow for actual exports to Europe to commence by 2022.

The bottom line, the expert said, is that the situation with east Med gas is more fluid now than it was a few months ago.

Source: http://cyprus-mail.com/2015/08/14/cyprus-waits-for-noble-delek-export-deal-to-take-shape/

UPDATE 1-Israel reaches deal to develop Leviathan gas field | Reuters - CNBC

UPDATE 1-Israel reaches deal to develop Leviathan gas field

Steven Scheer | August 13 2015 | Reuters

JERUSALEM, Aug 13 (Reuters) - Israel's government said on Thursday it had reached a deal with a U.S.-Israeli consortium on the development of the huge Leviathan gas field and two other offshore wells.

After weeks of talks over the government's initial proposal in June, the controversial deal will allow Texas-based Noble Energy and Israel's Delek Group to keep ownership of the largest offshore field, Leviathan. They are required to sell off other assets, including stakes in another large deposit called Tamar.

"The outline will bring Israel hundreds of billions of shekels in the coming years," Prime Minister Benjamin Netanyahu told a news conference, saying he will present the agreement to the cabinet on Sunday for a vote.

The deal sent Israel's energy and oil and gas stocks up 5 to 6 percent by afternoon trading in Tel Aviv.

One change to the initial plan is that the price of gas in the new agreements will be lower, while the developers will also commit to invest $1.5 billion in developing Leviathan in the next two years.

Netanyahu had been adamant in seeking a deal that would allow Leviathan - one of the world's largest offshore discoveries of the past decade - to be developed. He had faced a coalition crisis over details of the plan on grounds that the government gave into most of the companies' demands and leave Noble and Delek with too much power since they would control most of Israel's gas reserves.

Government officials argued the current deal was the best they could achieve in ensuring there were no further delays in developing the gas field that sits 80 miles (130 km) off Israel's Mediterranean coast.

Netanyahu earlier this week won crucial backing from the central bank chief Karnit Flug, who said that while the deal was far from ideal it was the right move for the economy.

Leviathan, with estimated reserves of 22 trillion cubic feet (tcf) or 622 billion cubic metres, is slated to begin production in 2018 or 2019 and expected to supply billions of dollars of gas to Egypt and Jordan in addition to supplying Israel.

Energy Minister Yuval Steinitz said that years of delays of developing Leviathan, discovered in 2010, has cost Israel tens of billions of shekels.

Israel, which has gone from an energy dependence to a potential exporter, currently receives its gas for electricity generation from Tamar, which began production in 2013.

"More gas and oil discoveries await us," said Steinitz, who urged more foreign firms to invest in Israel. "There is no certainty on this matter, but there is a reasonable chance that further discoveries are waiting to be made."

(Additional reporting by Dan Williams; Editing by Jeffrey Heller and David Evans)

Source: http://www.cnbc.com/2015/08/13/reuters-america-update-1-israel-reaches-deal-to-develop-leviathan-gas-field.html

Saipem 10000 resumes drilling off Cyprus | in-cyprus.com (Cyprus Weekly)

Saipem 10000 resumes drilling off Cyprus

incyprus — 11/08/2015

The Saipem 10000 drillship sailed through Cypriot waters on Tuesday where it is set to resume drilling operations on behalf of ENI in Egypt. Namely ENI’s drillship will be operating in block 8 of Egypt’s EEZ, which neighbours block 11 of Cyprus’ EEZ.

Should the vessel have a successful strike, then it will only be 2.5 nautical miles off Cyprus’ zone and 75 nautical miles south east of the Amathousa Well and south of the Eratosthenis underwater mountain range.

Saipem 10000 is back and full operational having previously been through maintenance works after two operations on behalf of ENI in Cyprus’ EEZ.

ENI last year signed Exploration and Production Sharing Contracts with Cyprus, for Blocks 2, 3 and 9 located in the Cypriot deep offshore portion of the Levantine basin, which encompass an area of around 12,530 square kilometres, thus marking the entry of ENI in the country.

ENI was awarded the three blocks whilst leading a consortium formed by ENI (80%, as operator) and the Korean company Kogas (20%) in an international competitive tender (Cyprus Second Offshore Licensing Round) which was completed in May 2012.

Exploration rights for blocks 9 and 11 – which fall under the EEZ of Egypt – fall exclusively under the umbrella of ENI while the Cypriot slice of block 11 belongs to the ENI/KOGAS consortium. Eni holds an 80 percent stake in the block 9 and KOGAS holds a 20 percent stake.

The rights for the Egyptian block 8 – which neighbour Cyprus’ block 11 – belong to the consortium of ENI and BP.

France’s Total failed to find any hydrocarbons at its offshore Cyprus block in January but said it would move forward with further exploration efforts.

Source: http://in-cyprus.com/saipem-1000-resumes-drilling-off-cyprus/

The New Region of the Eastern Mediterranean | Huffington Post

Aristotle Tziampiris  

Associate Professor of International Relations at the University of Piraeus

The New Region of the Eastern Mediterranean

Posted: 08/05/2015 11:50 am EDT Updated: 08/05/2015 11:59 am EDT

• Share

The Eastern Mediterranean has existed geographically throughout the ages. However, developments in the 21st century have necessitated viewing it conceptually as a distinct "new" region with specific characteristics.

Comprised by Cyprus, Egypt, Greece, Israel, Lebanon, Libya, Syria, Turkey, the region is assuming increased significance in world affairs.

This reverses a long period of relative decline for the entire Mediterranean, known as the Great Sea. Beginning in the 16th century, the Mediterranean gradually lost out in importance to the Atlantic rim. Not anymore. To quote Stratfor's Chairman George Friedman: "What happens anywhere along the Mediterranean's shore has the potential to influence and shape events on any shore."

The Eastern part of the Mediterranean is indeed witnessing some of the most intriguing, worrisome and dangerous events in today's world. Consider the civil war raging in Syria, the rise of ISIS, the unraveling of Libya, the strength of Hezbollah in Lebanon and Hamas in Gaza, the outbreak of Islamic sectarian conflicts, the uncertainty about Egypt's future (and that of the Arab Spring more generally), the ambition (and some would argue unpredictability) of Turkey, substantial new energy findings and, more recently, a refugee crisis.

As regards the role played by the various Great Powers in the Eastern Mediterranean, what is being evinced is a less engaged United States (though still the most powerful actor in the region), an ambitious China, a tenacious Russia and a perennially weak European Union. Quite possibly, there are operative conditions of multipolarity at a regional level. Almost certainly, the Eastern Mediterranean is becoming a big "laboratory" where balance of power policies are being tested.

Thinking of the Eastern Mediterranean as a separate "new" region (and not as merely an extension of the Middle East or of South Eastern Europe) has several advantages. First, regions are becoming a more useful analytical concept for the international relations of the 21st century. The world is simply too diverse for "one size fits all" policies like that of containment in the past.

Secondly, there is the issue of energy. The United States Geological Survey estimates that some 122,378 billion cubic feet of natural gas exist in the Levantine Basin. The exploitation of such resources produces incentives for cooperation. Already, Israel, Cyprus and Greece have created an "energy triangle" of sorts (with plans for a natural gas pipeline and an electricity cord linking all three). There is also the tantalizing prospect of Egypt joining them soon through the use of its idle LNG facilities. The region's new-found energy wealth may ultimately contribute to the lessening of Europe's energy dependence to Russia. At the same time, the possibility of friction and conflict over these resources among regional actors cannot be discounted.

These energy politics are best understood through an Eastern Mediterranean prism that facilitates the focus on a specific set of relevant issues. In such a framework, the Palestinian Question is only of marginal importance while the delimitation of Exclusive Economic Zones and the potential construction of pipelines at the very heart of developments.

There is one other reason that requires the region to be viewed separately: It constitutes possibly the most important border within East and West. In today's Eastern Mediterranean, the forces of modernity democracy, secularism, peace and toleration--let us say the best of the "West," meet (and inevitably clash) with the forces and ideologies of authoritarianism, theocracy, terrorism, intolerance, fundamentalism and perpetual conflict--the worst of the "East."

Ultimately, understanding the Eastern Mediterranean as a "new" region with the aforementioned characteristics can lead to more prescient analyses of shared regional challenges and, perhaps more importantly, actions and initiatives aiming at cooperation and stability. The United States will inevitably be required to play an even more active role given these circumstances.

Source: http://www.huffingtonpost.com/aristotle-tziampiris/the-new-region-of-the-eastern-mediterranean_b_7932916.html

Noble considers Aphrodite gas exports to Egypt | Offshore

Noble considers Aphrodite gas exports to Egypt

08/03/2015

Offshore staff

HOUSTON – Noble Energy and its partners have started pre-front-end engineering and design for a potential development connecting the deepwater Aphrodite field offshore Cyprus to gas customers in Egypt.

Earlier the partners submitted a declaration of commerciality and preliminary development plan to the Cypriot government.

During 2Q, Noble’s sales from its gas fields offshore Israel averaged 217 MMcf/d (6.14 MMcm/d), similar to the corresponding quarter in 2014.

The company has completed the associated Ashdod onshore terminal compression project, designed to increase peak natural gas deliverability at the deepwater Tamar field to 1.2 bcf/d (34 MMcm/d).

It has also been working with Israel’s government to establish a regulatory framework to provide certainty needed for future investment – the government is progressing toward final approval.

Elsewhere, Noble says decommissioning has started of the MacCulloch field in the UK North Sea.

Early last month a Noble-operated well start drilling on the Cheetah prospect in shallow water offshore Cameroon. The four-way structure, the company’s first test of a Cretaceous oil prospect in Cameroon, could hold more than 100 MMboe.

08/03/2015

Source: http://www.offshore-mag.com/articles/2015/08/noble-considers-aphrodite-gas-exports-to-egypt.html

Egypt completes feasibility study into Cyprus gas imports | Cyprus Mail

JULY 31ST, 2015

Egypt has completed a feasibility study into natural gas imports from Cyprus, Egyptian media are reporting.
According to Egyptian newspaper Al-Borsa, engineering company Enppi has completed the technical and financial studies, the results of which are currently under review by EGAS, the state-owned holding company.

EGAS Chairman Khalid Abdul-Badi told Al-Borsa that the technical and financial studies include specifications and the cost of linking the Egyptian territory with the Aphrodite field in Cyprus via a maritime pipeline.

He added that the quantities to be imported amount to roughly 700 mcf/d of gas, and are expected to begin in 2018.

Cyprus Continues Energy Outreach With Israel Agreement | Forbes

7/30/2015 @ 4:53μμ

Cyprus Continues Energy Outreach With Israel Agreement

Continuing its push to strengthen regional ties on the back of its energy potential, Cyprus agreed to expand cooperation with Israel this week, including pipeline and grid sharing as a means of reaching the European market.

According to Israeli media reports, Prime Minister Benjamin Netanyahu and Cypriot President Nicos Anastasiades stated that they would increase collaborations to exploit the full potential of the offshore natural  gas reserves claimed by each country.

Video (6:36 minutes) - Statement by Prime Minister Benjamin Netanyahu after his meeting today in Nicosia with Cyprus President Nicos Anastasiades

“There is palpably renewed energy in our relationship, I mean that figuratively and literally,” Netanyahu said, according to a Haaretz report. “… We think that by cooperating with each other we can take it out more easily, we can market it better, to the betterment of both our societies.”

Over the last five years, Cyprus has made a concerted effort to strengthen ties in the Eastern Mediterranean region based on the country’s new-found energy status. This has included downplaying historical tension, striking up technical and logistical sharing efforts and, in the case of Turkey, paved the way towards easing decades of separation.

While this effort has not always worked miracles, it has established Cyprus as a happy middle-man in a region with a viable, potential energy future, both as a producer and transport hub for reserves further afield.

This effort dates back to a 2011 discovery by Cyprus, but progress has been slow as the country’s weakened economic standing has made it difficult to nail down the financing needed to pursue exploration, production and export options.

However, according to recent reports, only one company has had any success in finding offshore reserves in the region. According to a Reuters report, Texas-based Noble, “discovered a field with an estimated 4.5 trillion cubic feet of gas south of Cyprus in 2011. It is close to Israel’s Leviathan with its estimated 22 trillion cubic feet of reserves.”

The country’s progress and access to potential export markets could be helped by new collaborations with Israel.

While the two leaders offered few specifics about what this closer relationship might ultimately mean, they did allude to an Eastern Mediterranean pipeline and a Eurasia interconnector, “a private project to transport to Europe electricity powered by natural gas.”

Source: http://www.forbes.com/sites/christophercoats/2015/07/30/cyprus-continues-energy-outreach-with-israel-agreement/

Not Just a Pipe Dream | Cyprus Weekly

July 24, 2015, Michael Leigh,Senior Fellow

The scenario of a pipeline from the offshore natural gas fields of Aphrodite to Cyprus and then onshore to Turkey is not as Utopian as it might seem, Sir Michael Leigh of the German Marshall Fund told the Cyprus Weekly. But it is premature today to take a front position on that, added the visiting senior advisor at the Washington DC based public policy think tank and a former European Commission director for enlargement.

"It would be in some respects less expensive, require less initial investment than for example the idea of building a 350 kilometre pipeline from the fields to Egypt," Leigh said.

Read the full article (PDF).

Source: http://www.gmfus.org/commentary/not-just-pipe-dream

Delek extends tender for supply of Leviathan gas to Cyprus | LNG Wolrd News

Delek Group’s gas subsidiaries announced that they have accepted a request by DEFA of Cyprus to postpone the period of validity of a proposal for the supply of natural gas from July 31, 2015 to October 30, 2015.

“The commercial examination process and the negotiation between DEFA and the bidders are expected to continue in the near future,” Delek said in a statement.

Noble Energy is the operator of the Leviathan project with a 39.66 percent stake. Avner Oil and Delek Drilling, subsidiaries of Delek Group, hold a combined 45.34 percent, and Ratio Oil has the remaining 15 percent.

LNG World News Staff; Image: Noble

Source: http://www.lngworldnews.com/delek-extends-tender-for-supply-of-leviathan-gas-to-cyprus/

Global Oil & Gas 23-24 September 2015 Athens Greece

Developing and maximising upstream prospects in Black Sea and Mediterranean oil and gas projects – Overcoming technical challenges for success

The Global Oil&Gas: Black Sea & Mediterranean Exhibition and Conference is officially supported by the Greek Ministry of Environment, Energy and Climate Change, and will focus on the latest hydrocarbons activity and developments in the Black Sea, East Med, Ionian and Aegean Seas. 5 Ministries of Energy, 6 national oil and gas companies and 28 international speakers have already confirmed their participation.

Source: http://www.global-oilgas.com/BlackSeaMed/Home.aspx

GREEK LNG AS A STRATEGIC PRIORITY, NOT A CONDITIONAL ONE | Natural Gas Europe

July 15th, 2015

“A well-connected EU energy market where energy flows freely across borders and no Member State remains isolated from the EU energy networks is a pre-condition for creating a resilient Energy Union with a forward-looking climate policy.”

These were the words used by the European Commission in the opening statement of the press release published following the meeting of the Central Eastern and South-Eastern European Gas Connectivity High Level Working Group (CESEC) meeting which took place in Dubrovnik on the 10th of July.

Energy ministers and officials from 15 EU Member States and members of the European Energy Community came together for what was the second meeting of the CESEC. The objective: to propose next steps for the development of South East Europe’s energy market and agree on a concrete list of priority projects. The key outcomes of this milestone meeting were: the signing of a Memorandum of Understanding, the outlining of Terms of Reference for CESEC, a List of 21 Projects, as well as a clearly defined Action Plan with specific steps to be taken by the Governments, National Regulatory Authorities (NRAs), Project Promoters and Transmission System Operators (TSOs).

The 21 projects listed in the Appendix have been assessed and – to varying degrees – are considered to provide benefit to the region, particularly in terms of contributing to security of supply and facilitating price alignment between markets and, with it, establishing competitive wholesale prices and affordable prices for end users. These are achieved – fully respecting EU legislation – via the development of reverse flows in existing pipelines and the establishment of new interconnectors, the development of new indigenous resources, the development of LNG regasification capabilities and storage capacity, as well as the introduction of the Southern Gas Corridor.

The build-up to the Dubrovnik meeting

The CESEC meeting has been eagerly anticipated both by the energy industry, as well as policymakers eager to strengthen their countries positions on the evolving energy chessboard of South East Europe. In light of the Ukraine crisis and the EU’s stressed relations with Russia, the dealings of the CESEC have become crucial for transatlantic energy cooperation – both US Assistant Secretary of State, Victoria Nuland and the US Special Envoy and Coordinator for International Energy Affairs, Amos Hochstein, were present in Dubrovnik. From a Greek perspective, the CESEC meeting was also the battle ground for discussions concerning the future of LNG development in Northern Greece, as it had been rumoured in past weeks that Greece’s LNG projects would be side-lined by the European Commission.

Initially, Greece had submitted two LNG projects for EU funding, one backed by Greece’s state-owned natural gas company (DEPA) in Kavala, and one by Gastrade S.A in Alexandroupoli – both cities are coastal and strategically located near the existing DESFA pipeline network with close proximity to neighbouring countries. Both LNG projects featured in the EU’s Projects of Common Interest (PCI) list of 2013, which sparked a head to head competition.

The project proposed by DEPA for the Aegean LNG import terminal had figured in the 2013 PCI list to receive funding of 252,500 EUR for a study relating to the permitting procedure. Similarly, the project proposed by Gastrade S.A was recognised as a PCI with funding of 1,755,000 EUR for a FEED study, preparation of the engineering procurement and construction process, as well as an invitation to tender. These projects remained in the spotlight when they featured in the European Commission’s Energy Security Strategy Communication of May 2014, where they received further political support from the EU, by being listed as a key security of supply infrastructure projects in the medium term.

However, driven by the current economic situation and market environment in Greece, and considering DEPA’s difficulties in accessing financing, a suggestion was made for the two project sponsors to pool resources and jointly propose the construction of a single facility, taking the form of a Public-Private Partnership (PPP).

Such an endeavour would make economic sense, and would overcome a number of challenges that the two projects would struggle with if maintaining an individual approach. First of all, the PPP would see the project built in Alexandroupoli and not Kavala - a city with intense environmental sensitivities. Secondly, financing hurdles would be surpassed with the support of both DEPA as well as private capital and EU funds. This suggestion, however, has not managed to secure the support of the Greek Ministry, mainly due to the fact that the concept of PPP’s is not aligned with the political ideology of its current leadership.

It is now clear following the outcomes of the CESEC meeting that the European Commission has shifted its focus away from the prospect of LNG in Northern Greece. Croatian LNG on Krk Island, which has been discussed for the past two decades, has been rubber stamped as a priority project. Responding to Greek dismay at the labelling of LNG in Northern Greece as ‘conditional’, the European Commission has on the one hand stressed that the upgrading of the existing Revithousa LNG terminal – located close to Athens – will cover the capacity requirements of Greece. On the other hand, the European Commission’s hesitation to give clear support to a new LNG facility could be interpreted as another signal of the growing disparities between the energy strategies of Brussels and Athens. It would appear that the mistrust characterising Eurozone discussions has spilled over to the energy world.

Do not ignore Greece’s role in LNG

In spite of this; exploring scenarios for the development of the natural gas market in South East Europe and the East Mediterranean region, Greece – at a minimum – is going to have an important role in the the transit of natural gas. When coupled with the involvement of the Greek shipping industry in the LNG market, one can immediately see the potential not only from an energy security perspective, but also in terms of economic growth, job creation and competitiveness. In particular, a lot of discussion has taken place regarding the functioning and commercialisation of East Mediterranean natural gas sources, and whether a trading hub, be it virtual of physical, will be established in one or more countries of the region.

Greece’s role in this equation is secured due to its comparative advantage in the region when it comes to LNG. Its geographic location makes it a preferential location for minimising the high LNG shipping costs for cargoes originating from North Africa, the East Mediterranean and the Middle East; it already has a functioning terminal that receives both contract and spot cargoes, while it also enjoys a dominant role in the LNG shipping industry.

From the outset, the LNG capacity of Greece provided by the Revithousa will be enough to cover the domestic demand for the years to come. However, there are significant complications with regards to the transmission network and regulatory framework that govern the gas flows from Revithousa. Specifically, gas molecules from Revithousa cannot travel north in the absence of a new compressor station. The Revithousa terminal is also linked to the Koula-Sidirokastro pipeline, which pumps Russian gas towards the South. As long as regulatory hurdles and Bulgaria’s position on the issue of the Koula-Sidirokastro pipeline remain unclear, LNG from Revithousa cannot contribute towards the goals of CESEC and the broader scope of the Energy Union.

On the flipside, the joint project of DEPA and Gastrade offers strategic advantages for Greece and the region, and fits perfectly into the timeline of upcoming regional and mega projects as well as existing infrastructure. Unlike Croatia, Greece already has a network of pipelines and planned interconnectors that can be utilised for gas transmission and facilitating cross border gas trade, thus minimising total costs needed to improve the interconnectivity of the region. Croatia on the other hand is severely lacking sufficient infrastructure to link LNG to other markets and will require substantial investment to develop a new energy network. The Greek LNG terminal in Alexandroupoli will facilitate flexible LNG supplies which could join the existing DESFA pipeline network and also TAP – with whom completion dates are aligned. TAPs capacity can be extended from 10bcm to 20bcm after 2020, so theoretically, it could transport gas from Greek LNG in Alexandroupoli. Furthermore, TAPs cooperation with the Interconnector Greece-Bulgaria (IGB) - long identified as a priority project of transatlantic interest- could enable direct access of new gas supplies to Bulgaria and the rest of the Balkans. The possibilities for synergies between these projects are immense, and LNG can be the key to balancing the supply of natural gas in these markets, thus contributing to security and diversification of supplies.

There is a significant strategic opportunity that could potentially be missed if support for this project were to evaporate. LNG is a game changer for the global energy market and Europe is a sellers market. Knowing that LNG volumes will be flooding the markets fully by 2020 when US LNG will be added on top of supplies from North Africa, the Middle East, and Australia, the European Commission should consider all the variables before selecting the LNG projects which it is going to support in the EU LNG strategy expected to be published in the beginning of 2016.

A pragmatic and strategic approach has to be applied in considering which projects are branded as priority and which conditional projects. While the construction of a wider regional network may be the long term objective, it’s impossible to neglect that these projects are to be financed mainly by the industry based on their commercial viability and potential. Thus, issues such as feasibility, financing, inter-connectivity, flexibility and profitability are all critical factors that should not be overlooked.

Constantine Levoyannis is Head of Greek Energy Forum in Brussels and Dr. Angelos Gkanoutas-Leventis is Vice President of the Greek Energy Forum. The opinions expressed in the article are personal and do not reflect the views of the entire Forum or the companies that currently employ the authors. Follow Greek Energy Forum on Twitter @GrEnergyForum.

Natural Gas Europe welcomes all viewpoints. Should you wish to provide an alternative perspective on the above article, please contact editor@minoils.com
SOURCE