Feb 13 2018

Cyprus gas find raises political stakes – analyst

Eni’s announcement of a new gas discovery in Cyprus – named Calypso – raises the political stakes on the Mediterranean island and may help unify its Greek and Turkish communities, divided along ethnic lines for more than four decades.

The Italian firm announced the discovery on Feb. 8, saying it “confirms the extension of the ‘Zohr like’ play” into Cyprus, a reference to the massive Zohr field found in Egypt in 2015”, Nikos Tsafos, a senior associate for the Center for Strategic and International Studies, said in a report. The company has promised additional studies to assess the extent of the find.

A smaller find – Aphrodite – has failed to alter political balances on the island and may not be developed for years, rendering it a victim to, rather than a catalyst for political developments, he said.

“Calypso brings more value to the table, but whether this helps or hinders a deal for unifying the island will depend on how talks go more broadly,” Tsafos said.

The discovery is also likely to sharpen Europe’s focus, with Brussels set to redouble its efforts, politically, financially and diplomatically, to ensure the gas is developed, he said.

 

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  https://www.csis.org/analysis/what-does-calypso-mean-cyprus-and-eastern…

What Does Calypso Mean for Cyprus and Eastern Mediterranean Gas?

Facts On February 8, 2018, Eni announced a gas discovery, Calypso, in Cyprus. Per the company, the find “confirms the extension of the ‘Zohr like’ play” into Cyprus, a reference to the massive Zohr field found in Egypt in 2015. The company did not release estimates on how much gas might be in place but promised “additional studies” to delineate the resource and assess its options. If confirmed, this would be the second major discovery in Cyprus, the first being Aphrodite, made in December 2011. It would also mark a reversal for Cyprus’s hydrocarbon fortunes after some bad news; previously, appraisal drilling had led companies to reduce how much they thought Aphrodite might hold, and earlier exploration wells either came up dry or led only to a “small gas discovery” (as per the operator). Opinion Since 2009, there have been several large gas discoveries in Israel, Egypt, and Cyprus, triggering a wide-ranging conversation that centered on two questions: what could these discoveries mean for the region, for Europe, and for global energy markets; and might this gas act as a catalyst for regional cooperation? A decade later we have some preliminary answers to these questions. First, the gas has struggled to cross borders or leave the region: none of the grand plans for a multicountry grid has materialized or, even, progressed much. The two fields that are producing were both developed to supply local, rather than regional or global, markets. A third field, Leviathan in Israel, will supply some gas to Jordan in addition to selling gas within Israel. Small and simpler has beaten big and complicated so far, chiefly because the technical, political, and commercial risks involved in these grander schemes have been unresolved. Second, energy has not reshaped regional politics. Clearly, energy created some new links: for instance, it brought Cyprus and Egypt closer, or Greece and Israel. But, mostly, gas reinforced whatever tensions or rapprochement existed anyway. It is easier to see the relationship between Israel and Turkey impacting the prospects for a gas deal rather than the reverse. The same is true in Cyprus: it is the tenor of the talks for reunification that shapes whether gas is seen a problem or a solution, not the opposite. This experience is largely in line with how gas has affected bilateral political relations elsewhere. How does Calypso change things? First, it makes it more likely that Cypriot gas could be developed. Aphrodite has always been too small to be developed on its own, and it thus needed to be aggregated with non-Cypriot gas, with all the complications that this entailed. A major find in Cyprus could revive and make compelling the idea of exporting liquefied natural gas (LNG) from Cyprus, either from an onshore facility or from a floating one (similar to the one Eni will deploy in Mozambique). And, of course, we can expect exploration interest to spike, leading, possibly, to further discoveries in Cyprus and elsewhere. Second, Calypso brings new players to the picture. The major challenge for any gas development is to find a good balance between risk and reward for each of the sponsors and stakeholders involved. It is the failure to find that balance that is most responsible for the slow development in the region. New players bring new opportunities for win-win solutions, especially since Eni is also in Zohr and has a long track record developing offshore gas pipelines. There are still major hurdles for developing Eastern Mediterranean gas, but every option looks a bit likelier today than it did before. Third, Calypso raises the political stakes for Cypriot gas. Aphrodite was a card with unclear political value—it was hard to argue over or to trade when it was widely understood that it may not be developed for years. Calypso brings more value to the table, but whether this helps or hinders a deal for unifying the island will depend on how talks go more broadly. At the same time, we can expect Europe to sharpen its focus too. There are still many obstacles before gas from this region could be sold in Europe, but Europe is likely to redouble its effort—politically, diplomatically, and financially—to help this gas be developed.