Page 5 - DMEA Week 35 2022
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DMEA                                         COMMENTARY                                               DMEA


                         Altogether, Cyprus’ offshore zone appears to   is specifically pursuing co-operation with
                         hold at least 17.5 trillion cubic feet (495.8 bcm)   Israel in the gas sector. The two countries have
                         of gas, making its reserves comparable to those   stepped up trade on this front over the last cou-
                         of Leviathan, which holds about 18.9 trillion   ple of years, and as a result Israel has been able
                         cubic feet (535 bcm).                to increase the volume of gas it delivers to Egypt.
                           But there are problems with EastMed.  It has also gained access to Idku and Damietta
                                                              LNG plants – a boon for Egypt, which is hopeful
                         EastMed’s old obstacles              of becoming a regional gas liquefaction hub of
                         The pipeline project has garnered a considera-  sorts.
                         ble amount of attention over the years and has
                         attracted some high-profile support since it was   Israel’s Egyptian strategy
                         first mooted more than a decade ago. That cul-  This has been a sensible strategy for Israel vis-à-
                         minated with the signing of a tri-partite accord   vis the European market because it has created
                         between Israel, Cyprus and Greece in early   synergies with existing infrastructure that was
                         2020, and the Israeli government approved the   already capable of exporting gas to Europe.
                         document later in the year, clearing the way for   In other words, Israel benefited from work-
                         construction to begin and gas to start flowing   ing with Egypt because it did not need to build
                         around 2025.                         its own export facilities from scratch or build
                           However, the scheme ran into trouble. The   its own relationships with European custom-
                         EU had designated EastMed a Project of Com-  ers from the ground up; instead, it could ben-
                         mon Interest (PCI) in 2013, but its interest began   efit from the LNG plants and customer ties that
                         to flag after Ursula von der Leyen became pres-  Egypt already had in place. At the same time,
                         ident of the EC. (Following her accession to the   Egypt also benefited from working with Israel
                         post in December 2019, she began pressing for   because it gained a new source of feedstock for
                         the adoption of greener energy policies.) Then   its LNG plants, which had been sitting idle for
                         in January 2022, the US government said that   some time, and the opportunity to portray itself
                         it would no longer offer political support to   as a reliable supplier.
                         the pipeline, as it viewed green energy projects   Meanwhile, the benefits of this arrangement
                         and cross-border electrical interconnections as   did not escape notice in Brussels. Israel, Egypt
                         higher priorities in Europe.         and the EU signed a memorandum of under-  Two of the gas
                           In the wake of Russia’s invasion of Ukraine,   standing (MoU) on co-operation in gas supplies
                         these obstacles are not quite as intimidating as   in June of this year.  fields discovered
                         they might once have been. Winter is coming,
                         and Europe needs gas. Green energy is nice to   Egyptian option for Cyprus?  thus far offshore
                         have, but fossil fuel is better than freezing.  Could Cyprus try to follow a similar strategy?
                           But is this argument strong enough to build   Perhaps.                   Cyprus are less
                         support for EastMed? Maybe not.        It could not do exactly the same as Israel has   than 100 km
                                                              done because it has no overland pipeline con-
                         EastMed’s ongoing drawbacks          nections to the North African country, but it   away from Zohr,
                         The problem with EastMed is that underwater   could pursue underwater connections via local
                         pipelines are difficult to build. They are compli-  pipelines or even tie-backs.  Egypt’s largest
                         cated feats of engineering, and they cost a great   After all, the distances involved would not be
                         deal of money to design, plan and install. The   large. Two of the fields discovered thus far off-  gas deposit
                         equipment needed to execute such projects   shore Cyprus, Glaucus and Aphrodite, are less
                         properly and safely tends to be limited in supply   than 100 km away from Zohr, Egypt’s largest gas
                         and booked far in advance.           deposit, with reserves of 30 trillion cubic feet
                           As a result, subsea pipelines are often diffi-  (850 bcm).
                         cult to build quickly – and there is no reason to   In turn, Zohr is connected to Egypt’s domes-
                         believe that EastMed would be any different.   tic gas networks and to the gas liquefaction
                         Indeed, there are good reasons to believe that   plants, meaning that a link to Zohr would allow
                         this particular subsea pipeline might be more   Cyprus to send gas to Europe as LNG.
                         difficult to build than others.        Even better, this kind of link could be estab-
                           In no particular order, potential complicat-  lished far more quickly and cheaply than a
                         ing factors include but are not limited to: the   large-scale, new-build, end-to-end system such
                         sheer length of the proposed 1,900-km route,   as EastMed.
                         which would make EastMed the longest under-  It would have a lower capacity, but it might be
                         water pipeline in the world; the technical and   able to make up for that with speed – and speed
                         geological complexity involved in laying pipe in   may be a more important consideration to the
                         3,000-metre-deep water; seismic activity in the   EU at a time when Russian gas supplies are dry-
                         region; and competing territorial claims over   ing up and prices are climbing.
                         multiple portions of the proposed route.  Some questions would remain, such as how
                           Under such circumstances, it is hardly sur-  rapidly Cyprus might actually be able to launch
                         prising that Israel has been willing to explore   gas production. Even so, these questions might
                         another alternative for moving its gas to the   seem easier to answer if the parties involved
                         European market. That alternative is Egypt,   knew that they had a fast, easy and cheap way to
                         which has shown itself eager to work with   move Cypriot gas to market in Europe – through
                         neighbouring states on this front – and which   Egypt. ™



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