Cyprus-Egypt agreement on the export of gas through a subsea pipeline

Cyprus-Egypt agreement on the export of gas through a subsea pipeline

Agreement between Cyprus and Egypt expected to benefit both countries hugely

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Background

In 2011 Noble Energy discovered a large gas field, later named Aphrodite, off the coast of Cyprus. It is approximately 106 miles south of Limassol and whilst plans for development were submitted to the government in Cyprus in September 2015, to date the site is still awaiting development.

It is estimated that Aphrodite contains 4.54 trillion cubic feet of gas and there are hopes that further as yet undiscovered reserves of gas maybe found off the coast of Cyprus in coming years.

Memorandum of understanding

In 2015 Egypt and Cyprus signed a memorandum of understanding in which they committed to increasing levels of cooperation between them, in order to develop and exploit Aphrodite to the benefit of both countries.

This memorandum of understanding (MoU) included a promise that the Cyprus Hydrocarbons Company (CHC) and the Egyptian Natural Gas Holding Company (EGAS) would work together to investigate ways in which the gas could be transported directly from the gas field in Cyprus to Egypt, by utilizing the existing infrastructure in Egypt and a direct marine pipeline.

Agreement signed

On August 31st, 2016 an agreement was signed by Tarek El Molla, the Minister of Petroleum and Mineral Resources of the Arab Republic of Egypt and Georgios Lakkotrypis, the Minister of Energy, Commerce, Industry and Tourism of the Republic of Cyprus, in which they formally agreed to the transportation of the gas between the two countries via a subsea pipeline. The agreement permits Egypt to then either use the gas as part of its own domestic consumption, or re-export it elsewhere.

The Cypriot government said: “Cooperation in the oil and gas sector between the two countries will further deepen the excellent relations between Cyprus and Egypt to the mutual benefit of the peoples of Cyprus and Egypt, and will also further unlock and promote the potential of the Eastern Mediterranean as a whole,”.

Mutually beneficial

Further detailed negotiations still need to take place as part of the commercial agreement but the sale of natural gas from Cyprus, with its ailing economy, to Egypt, with its energy challenges, will no doubt benefit both countries hugely.

The recent discovery of a vast gas field off the coast of Egypt called Zohr has not diminished the country’s need for gas, as their population continues to grow and in turn their domestic demand continues to increase.

Bidding begins

Qatar petroleum and ExxonMobil, the US giant, are two of the eight large energy companies currently bidding for the contract, with other bids coming from a range of other countries including Britain, Norway, France, Italy and Israel. A number of these companies are not only vying for the contract to exploit Aphrodite but are also seeking permission to explore other areas off the coast of Cyprus for further, as yet undiscovered reserves of gas.

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