'Energy hungry' Egypt signs gas pipeline deal with Cyprus

'Energy hungry' Egypt signs gas pipeline deal with Cyprus
Video: Negotiations for a new submarine pipeline designed to export natural gas from Cyprus to Turkey have borne fruit, as authorities signed the deal on Wednesday.
3 min read
31 August, 2016

Cyprus and Egypt signed a deal on Wednesday paving the way for detailed negotiations on a submarine pipeline to export natural gas from the Mediterranean island to its energy-starved neighbour.

Cyprus has been eager to secure alternative ways to exploit its offshore reserves after proven finds so far were insufficient to make a planned liquefied natural gas plant on the island's south coast financially viable.

Cyprus Energy Minister Georgios Lakkotrypis, and Egypt's Minister of Petroleum and Mineral Resources Tarek El Molla signed the agreement clearing the way for further negotiations on construction of the pipeline from offshore fields in Cyprus's exclusive economic zone to Egypt, where the gas will be used either for domestic consumption or re-export.

"It is one of a series of legal arrangements which will further support the sale of Cypriot natural gas to buyers in Egypt, provide certainty to investors and complement the relevant commercial discussions which are underway," the statement said.

The two governments will now "speedily proceed" with discussions on an intergovernmental agreement for the pipeline.

The Egyptian minister said: "We signed our first milestone agreement in a series of events that we will be seeing soon.

"I am looking forward to a speedy process from now on and we will start immediately discussions regarding putting the key milestones and road map for the coming steps."

2020-2022 target

Lakkotrypis said the aim was to get the pipeline operational from 2020-2022.

"We hope this agreement will help speed up commercial agreements and create an investment framework for the sale of natural gas from Cyprus to Egypt," he said.

He said cooperation between Cyprus and Egypt would help support an "operational framework for the hydrocarbon industry in the east Mediterranean."

Since its first offshore gas find in 2011, Cyprus has held a series of exploration licensing rounds hoping to discover new reserves.

In the latest round, US giant ExxonMobil with Qatar Petroleum are among eight major energy players bidding to explore offshore for Cyprus oil and gas.

Energy companies -- making up six applications -- from Italy, France, Norway, the US, Israel, Britain and Qatar are bidding for Cyprus drilling rights at three blocks made available.

The discovery has raised hopes that there are more untapped reserves off Cyprus.

The blocks up for grabs are close to where Italy's ENI made a huge find in Egypt's offshore Zohr field that could hold 850 billion cubic meters (30 trillion cubic feet) of gas. The field sits adjacent to a Cyprus block licensed to France's Total.

El Molla said the record Zohr find last August would not diminish Egypt's appetite for Cypriot gas because of its large population and domestic demand.

The discovery has raised hopes that there are more untapped reserves off Cyprus.

US firm Noble Energy made the first find off the southeast coast in 2011 in the Aphrodite field (Block 12), which is estimated to contain around 127.4 billion cubic meters (4.54 trillion cubic feet) of gas.

Israeli firms Delek and Avner have a 30 percent stake in the venture. Noble handed over a 35-percent share to Britain's BG Group, which was bought by Royal Dutch Shell earlier this year.

Block 12 has been declared commercially viable but an action plan on the next steps has yet to be finalized.

Italian-South Korean venture ENI-Kogas has so far failed to discover any exploitable gas reserves in deep-sea drilling off the island.

ENI has the right to exploit three blocks (2, 3 and 9) in Cyprus's exclusive economic zone bordering Egypt's gas fields.

ENI chief executive Claudio Descalzi has said exploratory drilling off Cyprus's southern shore will "for sure" begin next year. Total is also expected to do the same in 2017.