In a few short weeks Nicosia will host the 9th Mediterranean Oil and Gas Forum, shedding light on its emergence as a major energy player in the region – and a burgeoning option for Europe to diversify its energy (especially gas) portfolio away from Russia, where the EU gets about 35 percent of its gas imports.
The Cypriot gas bonanza dates back to 2007, when the country announced the first offshore licensing round in its Exclusive Economic Zone (EEZ), which gave companies the go-ahead to look for gas in Cypriot waters in the Mediterranean Sea. Four years later, Texas-based Noble Energy announced a breakthrough: the discovery of the Aphrodite gas field in Cyprus’s southern EEZ. The Aphrodite field contains an estimated 4.5 trillion cubic feet of gas – with some estimates putting that number as high as 8 trillion cubic feet. To put these numbers in perspective, in 2017 the United States used 27 trillion cubic feet of natural gas. Thus, a small island nation discovering even one-quarter of that amount is astounding. Gas from the Aphrodite field is expected to begin exporting in 2019.
Egypt is likely to be one of the first recipients of these exports. “Cyprus is close to selling natural gas to Egypt’s liquefied natural gas (LNG) plants, and we could reach an agreement in the coming weeks,” Cyprus Energy Minister Georgios Lakkotrypis told Bloomberg News in February. Egypt’s long-term plan is to become a regional export hub by receiving Cypriot and Israeli gas and then shipping LNG to Europe and potentially Asia.
The U.S. Geological Survey estimates that the Mediterranean area from Cyprus to Lebanon, Israel, and Egypt could have more than 340 trillion cubic feet of gas – that’s more than U.S. proven reserves, which is fourth largest in the world, after Russia, Iran, and Qatar.
Indeed, Cyprus continues to uncover gas beyond its Aphrodite field, which is also partly owned by Royal Dutch Shell and Israel’s Delek. In 2017, France’s Total SA and Italy’s Eni, two of Europe’s biggest oil and gas leaders, found small volumes of gas in the Cyprus’ Onesiphorus field, and just last month they announced another discovery in Calypso field, which they reported looked geologically similar to the enormous Zohr field off Egypt.
Eni has tried to carry out exploratory drilling in Cyprus’ Soupia field, but was recently blocked by Turkish warships. Turkey made headlines when it impeded Eni’s drilling in early February, arguing that such activity is not permitted until there is a solution to the Cyprus dispute. The block is still ongoing, despite international disapproval.
Turkey invaded the northern third of the island in 1974 and claimed the Turkish Republic of Northern Cyprus. Only Turkey has ever diplomatically recognised this entity. The EU recognises the entire island as territory of Cyprus, which joined the EU in 2004. And yet, Turkish President Recep Tayyip Erdogan has warned foreign companies about drilling offshore of Cyprus, and that Turkish Cypriot authorities should get a share in any gas discoveries and subsequent cash flow.
On February 23, Cyprus accused Turkey of threatening to use force against a drillship charted by Eni. Cypriot President Nicos Anastasiades addressed EU leaders in Brussels on the issue, saying Cyprus was determined to press ahead with its plans for oil and gas exploration. European Council President Donald Tusk said the EU was calling on Turkey to stop the activities that have led to these recent tensions.
As Cyprus marches onward with exploration in the Mediterranean, the benefits to the island nation and the EU could go far beyond diversification of gas away from Russia. According to an August 2016 Congressional Research Service (CRS) report on natural gas discoveries in the eastern Mediterranean, “The development of gas infrastructure in Cyprus could also help the country transition from oil to gas-fired power generation.”
Cyprus is heavily dependent on foreign oil imports to meet its energy needs, and most of the country’s electricity is generated by oil-fired power plants. The CRS finds, “Domestically using gas from the Aphrodite Field could help relieve some of this dependence,” adding that, “relieving dependence on oil imports for power generation could help Cyprus reduce carbon emissions.” The EU, a bastion of the Paris Agreement on climate change, aims to lower carbon emissions by at least 40 percent by 2030.
At the same time that Cyprus is beginning to utilise its offshore natural gas fields, the Cypriot economy is booming. The country’s GDP grew by 3.9 percent in Q4 in 2017, compared to 2016, and is expected to continue increasing at a similar rate through 2020. If the deal to sell gas to Egypt closes, this will only add to the country’s economic upswing.
