Cyprus-Egypt pipeline paves way for island’s gas industry

• Cyprus to pipe gas to Egypt
• Gas to be turned into LNG
• Egypt could then re-export it

After years of high hopes and false starts, Cyprus’s natural gas industry might finally be flowing after the island state agreed this week to pipe prospective gas to Egypt, which is likely to be exported to Europe in liquid form.

The deal highlights the potential importance of Cypriot gas in the Eastern Mediterranean, particularly after some significant recent discoveries, including its Electra field.

Cypriot president Nikos Christodoulides and Egyptian president Fattah Al-Sisi this week agreed to build a pipeline to take gas from Cyprus’s offshore Aphrodite field to Egypt, and from the island’s Cronos, Zeus and Kalypso gas fields – all ENI-TotalEnergies projects – to Egypt’s Damietta liquefied natural gas (LNG) plant.

“The hope for this deal is that Cypriot gas can then be turned into LNG and re-exported by Egypt,” James Swanston, senior middle east and North Africa economist for Capital Economics, told AGBI. 

Cypriot energy minister Giorgos Papanastasiou has said that the Cronos field will start production in 2027, while Aphrodite will not start until 2031, according to the field development plan of a group of companies led by Chevron.

Cyprus’s offshore gas developments started in 2011 with the discovery of the 3.5 trillion cubic feet Aphrodite field at the southern limits of the country’s 200km exclusive economic zone (EEZ). 

However, the developments have long been plagued by disputes over maritime boundaries, reservoir shares and low-volume, high-cost discoveries. Under development by the Chevron-led group, Aphrodite, for example, shares subterranean space with Israel’s Ishai field. But negotiations over a unitisation agreement with Israel dragged on, delaying development of the field. 

Unitisation provides for combining separately owned petroleum interests into a pool or a single field to permit more efficient and economical drilling.

Electra, meanwhile, for which there are high hopes, is being explored in a partnership between ExxonMobil (60 percent) and Qatar Energy (40 percent).

“Electra could be as big as Zohr,” Charles Ellinas, CEO of EC Cyprus Natural Hydrocarbons Company Ltd, told AGBI, referencing Egypt’s offshore gas field. “There could be as much as 30 trillion cubic feet of gas there.”

A field of this size could be a game-changer for Cyprus, giving its gas sector the critical mass it would need to bankroll development of its own onshore gas industry rather than pipe its gas to Egypt.

The Cypriot government has been proposing this ever since Aphrodite was discovered, anxious to develop the island as an Eastern Mediterranean gas centre. So far though, the relatively small gas volumes involved and the distance to the fields have made this uneconomic.

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Alternatively, Electra too could be linked by pipeline to Egypt, but production would still not start until early next decade, given its still early stage of development. 

Hampering other developments, meanwhile, are objections to much of the exploration work from neighbouring Turkey, which has an overlapping maritime claim with much of Cyprus’s EEZ. Electra, however, is outside that overlap.

“ExxonMobil has said that if it makes a substantial gas discovery in the region, it could look into developing an LNG plant on Cyprus for export,” Ellinas said.