NICOSIA — Israel and Cyprus have reached an understanding over gas reserves in the Mediterranean Sea straddling their maritime border, resolving a long-time dispute over the offshore resources, which could open up the development of Aphrodite gas field.
“What Cyprus and Israel have agreed to is a framework on the basis of which the companies can negotiate and agree quantities – i.e., how to divide Aphrodite,” Charles Ellinas, senior fellow at the Global Energy Center of the Atlantic Council, told New Europe on March 12.
“This is something they were not able to do until now,” he added, noting that the owners of the Aphrodite gas field and the Ishai block in the Israeli Exclusive Economic Zone (EEZ), into which Aphrodite extends, can now negotiate and agree how to divide Aphrodite gas reserves and how the Ishai block companies will be compensated should the gas ever reach the markets.
Development of Aphrodite, which was discovered in 2011, in Cypriot waters has been held up because a small part of it stretches into Israel’s maritime zone and another gas field there.
Reuters quoted Cyprus’ Energy, Commerce and Industry Minister Natasa Pilides as saying she and Israeli Energy Minister Yuval Steinitz had agreed upon a framework to resolve the issue, and guidelines would be passed on to the companies involved in the project.
“The framework will be set out in a joint letter which is being prepared. We are both very satisfied we are now at this point after nine years of discussion,” Pilides told reporters as Steinitz, who was in Cyprus to sign an accord to create a subsea power cable which will cross the Mediterranean and link their electricity grids, prepared to depart the island, Reuters reported.
Steinitz said there was a fair chance of an eventual resolution. “Nothing is certain, but there is a good chance that this might lead us to a solution of this little but significant obstacle in the wonderful relations and cooperation between Cyprus and Israel on energy and on many other issues,” the Cyprus News Agency quoted him as saying.
Asked if the export of Cypriot gas is more viable now, Ellinas told New Europe it makes it easier to enter into gas sales agreements, but does not necessarily make it more viable.
“This requires a firm agreement to sell the gas to the Idku liquefaction plant in Egypt,” he said, adding that negotiations for this are ongoing, but low liquified natural gas (LNG) prices in the global markets are a challenge.
Meanwhile, Steinitz reportedly said he expects Israel’s gas exports in Egypt to double. The Israeli minister who started a visit to Cairo on March 9 to attend the meeting of the Eastern Mediterranean Gas Forum (EMGF) reportedly said Tel Aviv and Cairo will support the undersea pipeline in order to double the amount of gas that can be sent to Egyptian facilities.
Steinitz said he anticipates the construction of the second 10-billion-cubic-meter pipeline to take a year or two to complete. He added that the capacity of the pipeline could increase in the future.
Ellinas said this is a political statement. “Israeli gas exports to Egypt can double if gas sales agreements can be secured, by no means a foregone conclusion,” the Cypriot expert said.
Turning to the memorandum of understanding (MoU) to facilitate the construction of the underwater cable from Israel to Cyprus and Greece signed on March 9 in Nicosia, Ellinas noted that part of this project is progressing well.
“That is the inteconnector between Cyprus and Crete. It has been approved as an EU project of common interest (PCI) and is eligible for EU and EIB funding. However, the cable between Cyprus and Israel does not qualify as a PCI and will require investment from the two governments and other investors, which makes it more challenging,” Ellinas also said.
Asked if all these projects signal an energy boom in the region after a long period of talks, Ellinas said, “Not really. But there is reawakened political activity, with a greater push to get regional energy projects off the ground”.
He noted that this is perhaps due to a realisation that with renewable energy projects advancing rapidly and increasing commitments for net-zero emissions by major energy-user countries, the window of opportunity to sell East Med gas is closing fast.
“However, the shift to clean energy has led to natural gas and LNG supply capacity available to global markets exceeding demand and, as a result, low prices – to stay with us in the longer term – making it difficult to find buyers for the expensive East Med gas,” Ellinas said, adding, “For any of these projects to progress to realisation they require firm gas sales contracts, something that is proving to be challenging”.
Follow on twitter @energyinsider