Russia's Novatek mulls bid for
Cypriot gas By Robert M Cutler
MONTREAL - Novatek, Russia's largest
independent natural gas producer, is considering
applying for a license to explore for gas offshore
from Cyprus when Nicosia opens a second round of
bidding for its exclusive economic zone (EEZ)
later this year.
The announcement follows
the opening of negotiations between Russia's
Gazprom and an Israeli gas exploration consortium
for marketing of gas from Israel's offshore Tamar
field (and probably also the nearby Dalit field),
estimated to contain close to 300
billion cubic meters (bcm).
Gazprom is also reported to be interested in such
a bidding for a Cypriot gas exploration license,
as well as the American firm ExxonMobil and the
French company Total.
Late last year,
US-based Noble Energy announced it had discovered
between 180 and 285 bcm in Block 12 of Cyprus's
EEZ, now called the "Aphrodite" strike. Noble is
also the lead company in a different consortium
that has made a separate strike in Israel's
offshore EEZ, not far from the Aphrodite deposit.
This "Leviathan" deposit is estimated to hold over
450 bcm of gas, possibly with another 250 bcm at a
lower depth, plus 4.2 billion barrels of oil.
Israel is reported to be considering as
many as five possibilities, not necessarily
mutually exclusive, for the utilization of its own
gas. These include one conventional natural gas
pipeline, two options involving liquefied natural
gas (LNG), and two options involving electricity
production.
The conventional pipeline
option would involve the laying of a pipeline to
Greece, presumably with the participation also of
Cyprus, and then from Greece onwards to markets in
the European Union by way of Italy. This option
would presumably be based on the Interconnector
Greece-Italy (IGI) pipeline, a still unbuilt
segment of the Interconnector Turkey-Greece-Italy
(ITGI) pipeline.
The ITGI project had
sought to transit natural gas from the Shah Deniz
Two deposit in Azerbaijan's Caspian Sea offshore
to European markets but lost out to the
Trans-Adriatic Pipeline (TAP) as a potential
"western route" to them. The Shah Deniz Two
consortium is now deliberating between two other
alternatives for the "northern route" (in the
Southeastern Europe), following which it will
choose finally between the "western route" TAP and
the "northern route" alternative.
The IGI
was to have been half-owned by Greek public
utility DEPA, which is however now set to go on
the auction block as the Greek state sells off its
holdings as a result of fiscal crisis related to
the financial crisis of the eurozone.
Now,
however, Gazprom will put in a bid for DEPA as
part of the Russian state's long-standing strategy
to gain control of energy infrastructure in other
countries. In the case of Greece, it would give
Gazprom access to the IGI project, which it would
presumably seek to use as an onwards branch from
Russia's South Stream project underneath the Black
Sea.
Greece already receives two-thirds of
its natural gas from Russia. The snap general
election announced this week in Greece for May 6
could possibly enable such a political decision,
which the present technocratic government would
not take, to be made.
The IGI includes a
projected undersea segment at the bottom of the
Ionian Sea, which would be called the Poseidon
pipeline. It would be constructed jointly by DEPA
and Italian Edison. According to the Greek
newspaper Kathimerini, the Greek government has
now solicited expressions of interest for
conducting seismic research to identify
prospective undersea natural gas deposits in the
Ionian Sea west of the Greek mainland.
The
two LNG options that Israel has been considering
are to create a floating LNG station close to the
gas fields and to create LNG stations in both
Cyprus and Israel in order to supply the world
market. Between these two alternatives, Israel has
made a preliminary choice in favor of creating a
floating LNG station because of anticipated "not
in my back yard" objections from residents near
the place where such an onshore station might be
built in Israel. The technology for a floating LNG
station does not yet exist, and Israel has
partnered with the South Korean firm Daewoo to
explore this possibility.
The two options
that Israel has been considering for electricity
production are to transfer the gas to Israel for
this purpose or to use all the gas for generating
electricity and at the same time to create a
high-voltage cable connecting Israel, Cyprus and
Greece, all of which would consume the electricity
(and presumably for onwards export later if there
is any subsequent surplus).
An Israeli
government commission appointed for the purpose
has made preliminary recommendations subject to
revision, according to Jerusalem Post, that Israel
retain at least 400 bcm of its offshore natural
gas for domestic use. This appears to be an
attempt to strike a balance between the insistence
by participants in the exploration and development
consortia that export is necessary for economic
reasons (also invoking unspecified geopolitical
advantages) and the needs of the domestic economy
and requirements for security of energy supply.
According to some estimates, Israel will
require 540 bcm of natural gas between now and
2040. Some experts insist that Israel's energy
security requires refraining from exporting any
new natural gas at all. The failure of the
Egyptian government to live up to the requirements
of its gas export contract with Israel following
the overthrow of president Hosni Mubarak is only
one argument in favor of this position.
The option of constructing a high-voltage
cable for exporting electricity would probably not
be realizable until the end of the current decade
but would still be easier than laying undersea gas
pipelines. Nevertheless, according to Associated
Press reports, Greek energy ministry officials
have said that unspecified trilateral energy
cooperation with Cyprus and Israel is close to
agreement.
From a strictly geopolitical
standpoint, any such trilateral cooperation would
represent a nucleus for stability and for
enlarging security in a region that will for the
foreseeable future be extremely tumultuous.
Dr Robert M Cutler (http://www.robertcutler.org),
educated at the Massachusetts Institute of
Technology and The University of Michigan, has
researched and taught at universities in the
United States, Canada, France, Switzerland, and
Russia. Now senior research fellow in the
Institute of European, Russian and Eurasian
Studies, Carleton University, Canada, he also
consults privately in a variety of fields.
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