Page 4 - EurOil Week 34 2022

EurOil COMMENTARY EurOil

Another major gas find

made off Cyprus

The new find could be a boon for prospects for east Mediterranean gas exports to Europe

CYPRUS ITALY’S Eni and France’s TotalEnergies have common interest (PCI) three years later. At that
announced making a significant gas discovery time, the price of gas in Europe was around $10
WHAT: off the coast of Cyprus, touting as a potential pro- per mmBtu, indicating that the project had a
Eni and TotalEnergies vider of extra supply to Europe at a time when clear economic basis. But from then until 2019,
have reported a 71 bcm the bloc is scrambling to reduce its dependence prior to the COVID-19 pandemic, the price fell
gas find off Cyprus. on Russian gas. to only $6 per mmBtu. There were also increas-
Preliminary estimates indicate that the dis- ing concerns about whether Europe really
WHY: covery is around 2.5 trillion cubic feet (71bn needed extra gas, in light of the aggressively
It is the latest of a series cubic metres) of in-place gas in size, Eni said in green policies that have been pursued by the
of discoveries off the a statement on August 22, adding that there was European Commission under the von der Leyen
Cypriot coast. “significant additional upside that will be inves- presidency over the past three years.
tigated by a further exploration well in the area.” In January this year, in spite of the surge in
WHAT NEXT: The Cronos-1 well at Block 6, 160 km off gas prices in the prior six months as a result of
The latest discovery Cyprus’ coast, was drilled in a water depth of the emerging energy crunch in Europe, the US
coulld galvanise support 2,287 metres. It encountered a gas column in government issued a statement saying it was
for the EastMed pipeline, a carbonate reservoir sequence of fair to excel- in effect abandoning support for the pipeline.
lent properties, Eni said, with data acquisition Washington had previously been one of the most
demonstrating an overall net pay of more than vocal supporters of the initiative. In its statement,
260 metres with intervals owning excellent the US government said it “remained committed
permeability. to physically interconnecting East Med energy
Eni said that studies on fast-track develop- to Europe,” but was “shifting [its] focus to elec-
ment options were already ongoing, adding that tricity interconnectors that can support both
the discovery “can unlock additional potential in gas and renewable energy sources.” The US had
the area and is part of Eni’s successful effort to effectively taken this position in light of the EU’s
provide further gas supply to Europe.” green policy.
Cronos-1 is the second find to be made at At that time, it was assumed that soaring
Block 6, following the discovery of the Calypso-1 energy prices in Europe might be short-lived,
field in 2018, assessed to be 6.4 tcf in size. Sev- potentially easing back by 2023. However, Rus-
eral more significant finds have been made off sia’s invasion of Ukraine in February and subse-
Cyprus over the years, including ExxonMobil quent cuts to European gas supply, as well as the
and QatarEnergies’ 2019 Glaucus field, assessed EU’s own commitment to eliminating Russian
at 5-8 tcf in size, and the earlier 2011 Aphrodite energy imports within the next few years, has
find, assessed to hold 4.5 tcf of gas. However, irrevocably altered the outlook.
infrastructure constraints and geopolitical EU policymakers are no doubt looking at
disputes have stifled the development of these EastMed far more favourably now, with the bloc
resources. There currently exists no way of dis- currently contending with gas prices approach-
patching this gas to mainland Europe, and mean- ing $3,000 per cubic metres and a clear shortage
while, Turkey does not recognise Cyprus’ right to of import alternatives to Russia. But there will
exploit these resources and has sent drillships to need to be a concerted policy shift to make the
the contested waters in the east Mediterranean in pipeline project a reality. The EU should start by
moves that have been widely condemned inter- fast-tracking the feasibility studies for the pro-
nationally as provocations. ject, currently due for completion by the end of
this year. This would provide it funding sooner
Fresh impetus from the EU’s Connecting Europe Facility, which
With the EU now more committed than ever it has access to as a PCI. Next, the EU should con-
before to diversifying its energy imports, there sider loosening the conditions for what it deems
could now be a fresh impetus to provide the as sustainable gas investments in its taxonomy.
necessary political and financial support to The current conditions have been criticised by
bring Cypriot gas to Europe. Primarily, this the gas industry as being overly strict, essentially
would involve support for the EastMed gas ruling out most investments in gas infrastruc-
pipeline, which would run from Israel, carry- ture. However, given that the taxonomy has only
ing gas from the giant Leviathan field, and run just been updated, this summer, it looks unlikely
through Cypriot waters to Greece. that Brussels will reopen the discussion on what
The idea for EastMed first emerged in 2012 should be considered sustainable investment
and was included by the EU as a project of anytime soon. ™

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