By Thanasis Gavos – London
The Cypriot government has now entered the Cyprus issue negotiation mode, having previously set in motion a series of reforms which it hopes will lead to an economic recovery. At the same time the energy project has been set on its path, with the only question pending the one about the extent of the island’s future economic benefit.
The details that will determine this, however, are not trivial. Dr Kostas Andriosopoulos, Executive Director of the Research Centre for Energy Management (RCEM) at ESCR Europe was the organiser of a recent energy conference in London which examined the developments in southeastern Mediterranean. Many analysts present at the conference shared his view on how Cyprus should exploit its natural gas reserves.
“Apart from the strategic importance for the concerned countries, a gas pipeline has a number of advantages over an LNG terminal for Cyprus. A pipeline could potentially make economical future, but smaller in size, natural gas offshore findings that could potentially be connected directly to the existing pipeline,” Mr Andriosopoulos told IBNA.
What he noted was that an LNG solution would mean that the seller would be more exposed to the global developments in energy markets, which means that prices would be much more volatile and thus risky. “For example, if the shale gas revolution that the USA is experiencing at the moment, that pushed USA gas prices to historically low levels and led the USA to become an exporter of LNG and coal, is repeated in other parts of the world – say in central Europe and/or East-Asia, then the global LNG map would have to be drawn again, as it would not be certain whether the natural gas prices would be sufficient enough to cover for the high transportation costs,” he said.
Despite all that, the economic benefit for Cyprus is undisputed; even if the full economic potential of the gas reserves will not materialise before around the beginning of the next decade. “Indirectly however, we have already started observing some impact in the local economy of the island, through the creation of more jobs and more funds pumped into the whole supply chain, from construction to transportation, engineering and business services, legal, accounting and other counselling services, and lodging and real estate among others,” remarked the Greek energy management executive.
Furthermore, the supply of domestic cheap gas and electricity flowing into the Cypriot market will boost the competitiveness of energy-intensive companies such as refiners, chemicals and manufacturers to take advantage of low energy costs and cheap natural gas liquids as well as electricity.
But the Cypriot along with the Israeli hydrocarbons discoveries are significant in a much wider geopolitical sense. “For the first time we have a situation where oil and gas export flows could be envisaged outside an Arab controlled area. This promising outlook will strengthen the two countries’ geopolitical role and could prove pivotal for the long term financial stability and economic growth, which is not unconnected to EU’s prospects for economic recovery,” pointed out Dr Andriosopoulos.
Which is all good for Europe’s energy security: “Based on recent estimates, the potential natural gas reserves in the six licensed blocks in the Cypriot EEZ are about 1.1tcm (trillion cubic meters), which are significant not only in terms of size, as they are of comparable size to Azerbaijan’s gas deposit, but also in terms of geopolitical significance. With the exception of Turkey, the SE European region is directly linked with the EU either through membership (i.e. Greece, Cyprus, Bulgaria, Romania and Croatia) or through participation in the ‘Energy Community’, which is the case for the West Balkan countries. That means that energy policy and gas policy in particular is governed by relevant EU decisions, directives and commitments to energy security and sustainable growth targets,” explained Dr Kostas Andriosopoulos of RCEM.