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Sunday, 23 September 2018

Fate of natural gas pipeline from Cyprus hinges on Nicosia’s talks with Aphrodite field partners

Fate of natural gas pipeline from Cyprus hinges on Nicosia’s talks with Aphrodite field partners: Construction of an underwater pipeline linking Cyprus’ Aphrodite natural gas field with liquefaction facilities in Egypt will reportedly start in 1Q2019, just as the final contracts for the project are signed, Oil Ministry sources claimed to Al Mal on Thursday. Work on the pipeline should take at most two and a half years to complete, they added. Oil Minister Tarek El Molla had signed an agreement last week with his Cypriot counterpart Yiorgos Lakkotrypis under which both countries are meant to collaborate on establishing the USD 800 mn-USD 1 bn pipeline. Details on the timeline had not been provided, but Lakkotrypis had said last month that he expects Royal Dutch Shell’s liquefaction plant in Idku to begin processing gas from Cyprus by 2022. The output should be used both locally and re-exported back to Europe as part of a plan to turn Egypt into a regional energy hub.

Tough talks ahead? Last week’s intergovernmental agreement was but the “first link in the chain…[which] by itself does not guarantee gas sales,” said state-owned Cyprus Hydrocarbons Company CEO Charles Ellinas. Shareholders in the Aphrodite field are looking to revise their profit-sharing agreement with Cyprus, and the talks “are still to start and will take some time, with no certainty that they will be completed successfully,” Ellinas told New Europe. He explained that the consortium made up of Noble Energy, Israel’s Delek, and Shell was asking to flip the profit-sharing agreement, which currently gives the Cypriot government c. 60% and the partners around c. 40%. Cyprus has also been studying a separate proposal to export gas from Aphrodite to Europe through a pipeline that would carry natural gas from Israel’s Leviathan field to Italy through Greece, he noted.

Selling gas to Egypt is likely on the table either way, according to Ellinas. Tapping the potential of liquefaction facilities in Idku and Damietta could open the door for gas exports to Asia, as well as Europe, he said, hinting that the Cypriot government would continue to pursue a pact with Egypt, especially as it expects to make more EastMed gas discoveries in the time to come.

More European demand for East Med gas: This comes as Germany’s RWE looks towards African markets as potential sources of LNG for its new import terminal near Hamburg, the company’s Chief Commercial Officer for Supply and Trading, Andree Stracke, tells Bloomberg. RWE is already in talks with players in the region, Stracke said. He did not reveal the identities of the companies, but Qatar Petroleum and Nigeria LNG both confirmed they had opened talks. “Some African LNG is very likely to show up in Europe, therefore why not allocate it?” He said..

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