By Karen Ayat, Natural gas of Europe

On April 29, 2015, the leaders of Cyprus, Greece and Egypt met in Nicosia, Cyprus, where they pledged cooperation in the fields of finance, security and energy. The President of Cyprus Nikos Anastasiades, the Prime Minister of Greece Alexis Tsipras and the Egyptian President Abdel-Fattah el-Sissi participated in a summit meeting and discussed ways to enhance cooperation between the three countries. The three leaders addressed the issue of rising security concerns in the region, including Yemen, Libya, Syria and Iraq, and the imminent need to collaborate in the face of terrorism.

 Collaboration in the field of energy was a key component of the discussion. The meeting tackled in particular the importance of establishing the delimitation of the three countries’ respective exclusive economic zones (EEZ), and the problem of the division of Cyprus.

Since the discovery of the Aphrodite field in Block 12 of Cyprus’ Exclusive Economic Zone by Texan Noble Energy in 2011, the island of Cyprus has been studying various options to monetize its offshore resources and secure a customer for its natural gas. Estimated at 4.54 Trillion Cubic Feet (Tcf), gas from the Aphrodite field will be mostly allocated for exports. Given the modest quantities of gas discovered offshore Cyprus, the island’s original plan to build an onshore LNG terminal on its Vassilikos coast seems off the agenda. The island is now focusing on regional markets, including exporting the gas from the Aphrodite field to Egypt.

The discussion between the three countries spurred the discontent of Turkish Foreign Minister Mevlut Cavusoglu who declared “invalid” any agreement over natural gas exploration offshore Cyprus. Tensions between the Government of Cyprus and Turkey had been renewed following Cyprus’ exploration efforts off its shores. Turkey accuses the Greek Cypriot Government of “unilateral” drilling that violates the rights of the Turkish Cypriots occupying the Northern third of the island. Despite statements by Greek Cypriots officials confirming that hydrocarbon riches would benefit both communities living on the island, the natural gas discoveries in Cyprus’ EEZ diminished hopes for a settlement. Talks aimed at reuniting the island were interrupted by President Nikos Anastasiades in October 2014 following the Turkish Government’s NAVTEX note announcing its plans to carry out seismic surveys within offshore blocks of the Cyprus’ EEZ already licensed through international bidding.

Sir Michael Leigh, Senior Advisor to the German Marshall Fund of the United States, told Natural Gas Europe: “The US and the EU have recognized the right of the Republic of Cyprus to develop hydrocarbon resources in its Exclusive Economic Zone. The Nicosia Government is entitled to enter into agreements with Greece and Egypt. Exports to Egypt through a future undersea pipeline will provide revenues from which all Cypriots will benefit. Such benefits should provide an additional incentive for progress in the recently re-opened Cyprus settlement talks.”

The UN-led peace talks, interrupted since October 2014, are expected to resume in the days to come. Dr Charles Ellinas, previous Executive President of the Cyprus National Hydrocarbons Company Ltd, Cyprus, told Natural Gas Europe: “As far as gas exports from Aphrodite to Egypt are concerned, the ongoing discussions at this stage are confined to MoUs, i.e. declarations, and pre feasibility studies. These are still far from the stage of discussing gas sales agreements. Cypriots and Turkish Cypriots are about to restart discussions on the Cyprus problem. Should a solution be found this year, hydrocarbons will come under the Federal government. This would also include any gas sales to Egypt, if they happen.”

Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Karen is also a co-founder of the Lebanese Oil and Gas Initiative (LOGI). She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut