RCEM: Views on Energy News

A conference organized jointly by Natural Gas Europe, the Greek Energy Forum, ESCP Europe, RCEM and the European Economic and Social Committee (EESC) and entitled "2030 EU Energy Security, the Role of the Eastern Mediterranean Region" took place on December 10th at the premises of the European Economic and Social Committee, in Brussels, Belgium. The President of the EESC, Henri Malosse, opened the conference.

In his keynote speech, Malosse highlighted EU's priority to tackle the problem of high energy costs for the industry by implementing an integrated policy. Malosse stressed on the importance for the EU to support the energy transition for businesses, cost sharing between businesses and public authorities and the improvement of interconnections across European territories to ensure territorial cohesion, reduce energy costs for the consumer and increase price competitivity. The promotion of renewable energy by the investment in research and innovation will ensure renewables are accessible at a reasonable price, Malosse said. The fight against climate change remains a top priority for the EU, he added. He also explained that the EU must explore new economic models and engage in a dialogue with the citizens so that they gain an understanding on the reasons why the EU is promoting such initiatives. He concluded his speech by emphasizing the need for the EU to discuss with all its neighbours in its quest to diversify its sources and routes of supply, including the Mediterranean region.

The Energy Minister of Greece, Ioannis Maniatis, reiterated the importance for the EU to achieve territorial and social cohesion through all its decision. Energy security and the diversification of energy supply options remain goals of high priority for the EU, said Maniatis. He added that the East Med can play a vital role in providing an answer for the EU's energy security problem and that the Ukrainian crisis supports this position. Maniatis said that the role of the East Med was discussed at the council and that this region could contribute in assisting the EU in finding new sources of supply was discussed the day before the conference, on December 9th at the EU council for energy ministers.

Europe will need an extra 100 bcm of natural gas in the next 15 years, and in light of Europe's increasing dependence on imports to fulfill its energy needs, the EU must find a sustainable model to ensure it is a competitive economy. Given the unpredictability of energy trends, such as shale gas in America and the geopolitical instability in the Middle East, North Africa and Ukraine, new countries are likely to become energy hungry and no country can thrive for a solution by itself. Energy efficiency, the promotion of renewables and the focus on climate change, the latter being the most pressing issue are some of the EU's top priorities, said Maniatis.

The EU needs to reduce external dependence, increase efficiency, diversify its sources and routes of supply, and improve interconnectors, he added. Fully connected energy grids, greater transparency, good governance and a thorough understanding of global events should also be the focus of the EU according to Maniatis. He explained that Greece's importance is growing. The East Med pipeline pitched by Israel, Cyprus and Greece and that would run from Israel and Cyprus via Greece to italy and then to the rest of Europe is a technically feasible and attached to attractive prospects said Maniatis. He told the audience that the results of a feasibility study on the East Med pipeline will be released next year and that it would serve as a new source and provider of natural gas comparable to the Southern Corridor. The attractiveness of the East Med Pipeline, said Maniatis, is that unlike the Southern Corridor, it would pass exclusively through four member states and hence deserves strong EU backing for its materialisation.

The onshore LNG terminal at the coastal area of Vassilikos in Cyprus is a complementary project of extreme importance that is still on the table, said Maniatis. He informed the audience that Greece will be beginning explorations and that it is committed to strongly participate in regional cooperation through the  respect of the principles of International Law. Maniatis reiterated the universal character of UNCLOS (The United Nations Convention on the Law of the Sea) and the importance of respecting the sovereign rights of states to explore their own waters, condemning Turkey's intervention in Cyprus' Exclusive Economic Zone. For Maniatis, regional cooperation begins with the signing/ratification of agreements on the delimitations of Exclusive Economic Zones and close bilateral and trilateral cooperations (such as inaugurated by the Cairo Declaration signed between Greece, Egypt and Cyprus and pledging energy cooperation extending to environmental issues). Maniatis ended his speech with the hope that the East Med will emerge as a net natural gas exporter and become a reliable and secure source of energy for Europe.

Cyprus' Minister of Energy Yiorgos Lakkotrypis summarized Cyprus' strategy to become an energy center in the Eastern Mediterranean by emphasizing its three major pillars: The first pillar as explained by Lakkotrypis is the development of services and logistics in the entire value chain by attracting companies such as Halliburton and Schlumberger to choose the island as the base of their Eastern Mediterranean activities. The second pillar is the exploration and exploitation of Cypriot natural gas and the continued search for oil and gas prospects. The third pillar is building a knowledge-based economy around the oil and gas industry so that Cyprus becomes an exporter, not only of natural gas, but also of skillful experts. The third point is of particular importance given that hydrocarbon resources are exhaustible but expertise is transferable to future generations.

Lakkotrypis summarized Cyprus' progress in natural gas explorations by exposing the various phases in Cyprus search for natural gas. The island underwent two licensing rounds to date, and awarded a licence to Noble Energy (later joined by Israeli companies) that made the Aphrodite discovery in Block 12 of Cyprus' EEZ estimated at 3.6 to 6 Tcf of natural gas. TOTAL and ENI/KOGAS were also licensed to drill in blocks 2, 3, 9 and 11 of Cyprus' waters. ENI/ KOGAS began exploratory drilling off Cyprus coast in the third quarter of 2014 and the results of their activities are expected to be released before the end of the year.

Lakkotrypis said Cyprus was exploring various ways to export its newfound wealth, including by FLNG, pipeline to Jordan and Egypt, and via compressed natural gas (CNG). The island is also considering evacuating the gas through the Idku and Damietta terminals in Egypt. The island will only consume a small proportion of the gas discovered and the rest will be allocated to exports. Lakkotrypis informed the audience that technical evaluations were being conducted to assess the commercial attractiveness of a deal with Egypt and that commercial terms are yet to be discussed between Cyprus and Egypt.

Lakkotrypis stressed on the importance of the Eastern Mediterranean region in offering a new possibility for security of supply in the EU. He added that Cyprus could constitute a bridge between the EU and the region. He urged the EU to look closely at ways to support regional developments with the necessary infrastructure given the high hydrocarbon potential in the Levant basin. Cyprus has made the Aphrodite discovery and is still undergoing hydrocarbon searches for the purpose of encountering additional resources that may justify the commercial viability of an onshore LNG terminal in Vassilikos.

Neighbouring countries are also pursuing hydrocarbon activities: Israel has discovered substantial amounts of natural gas mainly in the Leviathan (approx. 21 Tcf) and Tamar field (approx. 10 Tcf), Lebanon is on the verge of opening its first licensing round and Egypt will potentially be a customer for Cyprus and Israel due to the severe energy crisis the country is undergoing; Egypt may also help deliver the gas to Europe. Cyprus has excellent relationships with all its neighbours, Lebanon, Palestine, Egypt, Jordan and Israel said the  minister, adding that it is Cyprus' top priority to create an environment of collaboration and trust appropriate for multi-billion dollar investments such as the East Med pipeline - that he considers feasible technically and commercially - and possibly an LNG storage onshore Cyprus.

Shaul Zemach, Former Director General of The Ministry of National Infrastructures of Israel, opened his speech by saying "Ask not what the East Med can do for the EU, but what the EU can do for the East Med" adding that it is a mutual interest for the EU and East Med collaborate. Zemach added that the East Med is a politically challenging region but nevertheless a region with huge natural gas and oil potential. He explained that the region has a modest need for natural gas, sometimes too small to justify the the huge investments required the develop the resources. The paradox of large resources but small needs demands a holistic perspective that involves collaboration with other parties added Zemach. Zemach made a parallelism between the North Sea on one hand and Lebanon, Cyprus and Israel on another to highlight that the East Med has a larger potential that the reserves in the North Sea as long as the potential is turned into proven reserves. For the latter to happen, large investments, a high level of cooperation and extensive work must be implemented, added Zemach.

There are various ways to export the natural gas from the Levant basin, said Zemach. Geopolitical considerations must be taken into account, he added, and the export options are LNG, which is expensive, FLNG, which is not yet a mature technology and pipelines (to Cyprus, Turkey, the Palestinian Authority, Jordan and Egypt). Zemach stressed on the need for an EU backing without which the significant potential in the Levant basin will not be fully exploited. Demand is the main driver for optimal development he said. Once demand is established, explorations will lead to discoveries which in turn will lead to developments. Of course there are risks to mitigate, he added, including environmental, political, and the EU can contribute reducing such risks by playing an active role through a proactive attitude. By assisting the East Med, the EU will be creating its new sources of supply, he says. He summarized his speech with three words: activity, creativity and deliverability.

Mechthild Wörsdörfer, Director for Energy policy in Directorate General for Energy of the European Commission, said in her speech that energy policy, climate policy and security of supply were top priorities for the commission. The three objectives for energy policy, she added, are security of supply, competitiveness and sustainability. Energy prices have gone up in all member states, she added. Therefore, the need for a new strategy, triggered by the Russia-Ukraine crisis, has become imminent. Europe imports 50% of the energy it consumes, she said, and this fact will not change until at least 2020.

Ms. Wörsdörfer mentioned however that energy dependency should not be perceived as a negative fact; instead, dependence on a single supplier should be avoided. Six member states are 100% dependent on Russia, she added. Italy and Germany are highly dependent on Russia and suffer the risk of natural gas cuts. The focus on diversification of routes and sources by engaging in discussions with potential suppliers and adopting regional approaches is key, she stressed. The EC will develop a new strategy in 2015 with a particular focus on innovation and communication according to Wörsdörfer, approaching the issue from a regional approach beyond the national focus. Solidarity with countries like Hungary, Slovenia, Austria and Italy, vulnerable because of the dependence on a single supplier is very important, she added. The completion of the internal energy market remain a high priority project to ensure all member states are well connected and energy islands are eliminated. Energy demand must be moderated because the less energy is consumed, the less imports are required. The development of indigenous resources is also to be encouraged. Finally, Wörsdörfer said that investments will be allocated for research to achieve the EU  high priority goals.

Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. She reads International Relations and Contemporary War at King's College London focusing on Natural Resources and Conflict. She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat

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