Cyprus & World News

ENERGY: ‘World’s longest pipeline’ MoU signed

06 December, 2017

 * EUR 6 bln natgas pipeline from Leviathan to Italy will allow Israel to export gas to Europe *


Officials from Cyprus, Greece, Israel and Italy have signed a memorandum of understanding to plan a 2,100 kilometre underwater pipeline linking the natgas-rich offshore Leviathan field directly to Europe, boosting equities on the Tel Aviv Stock Exchange prior to the deal.

The Ministers of Energy of Cyprus, Greece and Israel, and a senior diplomat from Italy signed the MoU in Nicosia which paves the way for Israel to export its natural gas to Italy via the EastMed project, bypassing Turkey.

Having made significant gains, driven by energy stocks, the TASE eventually lost ground on Tuesday, dragged by pharmaceutical and tech stocks.

The MoU follows the first ‘quadrilateral’ meeting in tel Aviv in April and the four energy ministers will meet again to discuss the principles of the final agreement, which should be signed in 2018.

The pipeline, that will cost EUR 6 bln and will be completed by 2025, aims to ensure energy security for the EU, similar to the EuroAsia Interconnector, the Israel-Cyprus-Greece cable that will transmit 2,000MW of electricity from natgas-fuelled power stations in Israel.

Cypriot Energy Minister Yiorgos Lakkotrypis said “today, we have completed a very significant milestone, which is the signing of Memorandum of Understanding, which outlines the political commitment of the four countries to pursue this project, supported wholeheartedly, because we all consider it to be a very important pillar for what we call the eastern Mediterranean natural gas corridor to the European Union.

“We consider this project to be a very important pillar in being able to support the security of supply of the European Union, as you are very well aware, is looking for ways to diversify its energy sources,” Lakkotrypis said.

“We also had the opportunity to discuss the status of the project and the consortium was able to present its timelines in order to proceed to more detailed technical studies which are required.

On his part, the Greek Minister of Environment and Energy, George Stathakis, said that “today we are making a major step forward in a project that Greece supported right from the beginning, considering it to be strategically very important for Europe,” as it will bring benefits to both producers and consumers in Europe.

Noting that the EastMed pipeline project is financially and technically feasible, Stathakis added that Greece can also become a potential producer as “there is a development on new contracts for exploration and a new tender process has been initiated”.

The Greek official announced that the upcoming third ministerial meeting will take place either in Athens or in Crete.

The Israeli Minister of National Infrastructures, Energy and Water Resources, Yuval Steinitz, said, “it looks like a fantasy, as a dream, because there is no parallel, there is no such a long and deep underwater gas pipeline in the world, and now, we can understand that this is possible, viable and a good project.”

The planned pipeline will allow Israel to sign long term deals to export gas to Greece, Italy and other European markets, Steinitz said.

Andrea Cavallari, the Italian Ambassador in Cyprus, who represented the Italian Energy Minister who was unable to attend due to airline difficulties, confirmed Italy’s full support to the development and implementation of the EastMed pipeline project, which is considered strategic, both from national and regional point view, he said.

Italy is looking forward to the future development of the project with the objective of signing an inter-government agreement within 2018, Ambassador Cavallari noted.

EU representatives estimate that Europe will need to import 100 billion cubic meters of natural gas annually more than it imports today because of falling North Sea production. Europe sees Israel and Cyprus as a safe source of future natural gas supplies.

Even though there are still differences of opinion about the economic feasibility of the project, according to Israel’s Globes, Steinitz has been enthusiastically pushing ahead with the pipeline. Greece based IGI Poseidon has been investigating the economic feasibility of the project with research support from the EU, which recognises the project as a Project of Common Interest (PCI).

The planned pipeline will connect Israel’s Leviathan gas field and run via Cyprus’s Aphrodite gas field through the waters of Crete, mainland Greece and Italy. The  pipeline will be able to convey 12-16 billion cubic meters (BCM) of gas annually. If further large fields are found in Israel or Cyprus, a double pipeline conveying 30 BCM annually could be laid.

Such a project will involve complex engineering to lay the pipe at a depth of 3,300 meters underwater in the deepest sections between Greece and Cyprus. Any subsequent damage will be extremely difficult to repair.

Another potential obstacle is the economic feasibility. Gas prices were $5.4 per thermal unit over the past year, while average price of gas contracts signed in Israel were $5.3 per thermal unit. To justify the cost of laying the pipeline, a price $2-3 higher per thermal unit will have to be charged.

The project could become more profitable if Israel finds additional major gas fields, thus lowering costs.