The European Union has an issue with its energy supply: the majority of its oil and gas comes from just one source, Russia, and in 2016, the production of primary energy within the EU was 15 per cent lower than a decade earlier. Thus, the bloc is actively searching for means to diversify its supply and enhance internal energy production. Cyprus can be an answer to both.
The island has had a wave of good luck recently with significant natural gas discoveries in its Exclusive Economic Zone (EEZ) in the Mediterranean Sea. The story begins in 2011 when U.S. company Noble Energy announced the discovery of the Aphrodite field in Cyprus’s EEZ block 12. Appraisal drillings two years later confirmed natural gas reserves of more than 4.5 trillion cubic feet (tcf). Then, in 2015, another major discovery — 30 tcf of natural gas reserves — was made in Egypt’s Zohr field, near Cyprus’s EEZ. This caught the attention of other top oil and gas companies, turning the Mediterranean waters in and around Cyprus’s EEZ into a focus for energy exploration.
“The most recent discovery that we’ve had was Calypso in Block 6. That was discovered by the consortium of Eni and Total”, said Cyprus’s Minister of Energy, Tourism and Commerce, Mr. Georgios Lakkotrypis. “It is a very promising commercial discovery that we are currently in the process of evaluating, and indeed we are anticipating further exploration drilling to happen in the next few months starting with Block 10 — two back to back wells — and eventually we’ll move into the other blocks as well”.
According to Eni, an Italian multinational oil and gas company, natural gas reserves in Calypso could exceed anywhere from 6 to 8 tcf. ExxonMobil, a U.S. company, is planning to drill two wells in block 10 in the coming months.
With the promise of large discoveries in these two blocks, “Cyprus’s exclusive economic zone shows the potential not only for the country, but also for becoming an alternative source of supply and [an alternative] route of energy for the European Union”, said Lakkotrypis, who was appointed in March 2013 by President Nikos Anastasiades, after spending many years as an executive at IBM and then Microsoft.
The alternative “routes” will come in the form of new cables and interconnectors being built throughout the Mediterranean, something Lakkotrypis strongly supports and has been instrumental at accomplishing. In September, for example, Cyprus and Egypt signed an intergovernmental agreement (IGA) on a subsea pipeline that will carry natural gas from Cyprus to Egypt.
“Ultimately, through reexports of ‘Aphrodite’ gas in the form of LNG, the pipeline will allow for the transport of the first molecules of East Med gas to the EU, thus contributing to the Union’s much sought after security of supply and diversification of sources and routes”, commented Lakkotrypis at the IGA signing in the Presidential Palace of Nicosia.
His Egyptian counterpart, Tarek El Molla, agreed, saying, “Energy is a win-win opportunity for the new political partnerships, the integration of the markets, and the guarantee of stability and growth in the region”.
Another planned project to connect the region and diversify its energy routes is the East Med gas pipeline, which is envisioned as a 2,000-kilometer pipeline crossing from Israel and Cyprus into Greece and Italy to link gas resources in the Mediterranean and bring them to Europe. A decision to go ahead with construction is expected sometime in 2019.
Cyprus is also exploring the idea of building its own LNG plant to ship LNG to Europe more directly. In fact, just last week, Cyprus’ natural gas public company (DEFA) released tender documents for the design, construction, and operation of an LNG import terminal in Vassilikos, the country’s energy hub. Initial information reveals that the terminal is scheduled for completion by 2020, and will cost roughly 300 million euros, 40 per cent of which will be funded by the EU.
“The idea is to find multiple routes as well to drive gas to the European continent, because you don’t want to build dependencies on routes”, explained Lakkotrypis, stressing that the East Med, the pipeline to Egypt and Egypt’s LNG plants, and Cyprus’s potential LNG plant are not competitors, but rather they are all part of “the Eastern Med corridor of natural gas to the European Union”.
Beyond gas liquefication plants and pipelines, Cyprus is involved in several Projects of Common Interest (PCIs) — key infrastructure projects that link the energy systems of EU countries — to increase th security of supply, unlock the potential of renewable energies, and tap into the electricity-generating potential of the recently discovered gas reserves. The EuroAsia Interconnector, for example, is a PCI that will link the power grids of Cyprus with Greece and Israel by an undersea electricity cable.
“Among the other benefits of lifting Cyprus’ energy isolation, it will also enable us to stabilise the grid and allow us to penetrate renewables even further”, explained Lakkotrypis.
Cyprus is currently working hard to develop its renewables sector. Its focus, for now, is solar energy, since the sun continuously shines on the island nation. About 12,000 photovoltaic systems have been installed in the country over the past five years, and Cyprus is launching more programmes to encourage commercial entities to install rooftop solar systems.
“The target that we have for 2020 is to achieve 13 per cent penetration in renewables in the energy mix and about 10 per cent in transport. We are almost at 10 per cent with regards to the penetration in renewables, so we are pretty optimistic that we would be able to meet that number”, Lakkotrypis said with confidence.
All of these recent developments in the Cypriot energy sector — major natural gas discoveries in the country’s EEZ, the creation of pipelines that connect countries around the Mediterranean to each other and to Europe, and the establishment of solar energy as a viable primary energy source — promises to enhance Europe’s energy security and aid in the EU’s renewable energy goals. Moreover, all these discoveries are expected to be a massive boon to Cyprus’s domestic economy.
“We will soon be seeing also the benefits of selling those hydrocarbons…. we could be talking about a very high percentage of GDP”, and as a result, Lakkotrypis said, “we could be seeing a really strong new sector contributing into the country’s GDP”. Additionally, Lakkotrypis noted that in the long-term, the country wants to build a knowledged-base economy centered around the energy industry.
“We want to leverage on the number one asset that we have here, which is [our] human capital”, Lakkotrypis said with pride about his home country.