Keynote by the Democratic Rally President Mr. Averof Neophytou
7th Oil & Gas Conference 2016
“Geopolitical Challenges and Commercial Realities”
Tuesday, 1st March 2016, Λευκωσία, Hilton Cyprus 14:30
Dear Honorable Speakers,
Your Excellency, Ambassador Doherty,
Ladies and Gentlemen,
Dear Friends,
I am deeply honored to be addressing the 7th Oil and Gas Conference as the Keynote Parliamentary Speaker.
The spotlight of the world is still on this geostrategic corner of the Eastern Mediterranean a year since we last met. The necessity for stability in the region of the Eastern Mediterranean is now even more prominent.
During these times, Cyprus enjoys excellent relations with nearly all the neighboring countries of the region, such as Egypt, Israel, Lebanon, Jordan and Greece, reflected in the significant Trilateral, Ministerial and Head of States meetings and agreements.
These provide the necessary framework to explore the option of regional exports of Cypriot natural gas.
Dear Friends,
The Eastern Mediterranean has demonstrated its natural resource potential with significant quantities discovered in Cyprus, Egypt and Israel. The discovery of Zorh reaffirms the important gas potential and attracts new interest for our region.
As Cyprus proceeds with launching a 3rd licensing round for oil and gas exploration, Total and the ENI/Kogas consortium continue with their exploration programs to identify drillable targets.
Realistically, the discovered quantities are important but not such as to constitute by themselves the alternative energy source for Europe. For Cyprus they remain important, as a means to lower the cost of electricity and potentially for exports to nearby countries such as Egypt and Jordan.
In fact, BG farm-in in Block 12 is an important step as BG is part of Group that holds ownership of the LNG export facility at Idku. Based on the existing verified gas quantities, the commercial realities highlight the development of pipelines to Egypt and Cyprus as the most commercially viable monetization option. Cypriot gas can be viably supplied to Egypt to fulfill its needs.
The geopolitical changes around us are a potential security catalyst on multiple levels. With a solution to the Cyprus issue, Cyprus gas can be sold to Turkey as well, to fulfill a part of its massive energy requirements projected to double by 2023.
Furthermore, there are two risks associated with the implementation of the South Corridor and the flows of Azeri Gas westwards to Greece, the Balkans and Italy.
One the one hand, the total cost of the South Corridor Project, including Shah Deniz II, TANAP and TAP is in the area of $40-$45 bln. When the entire Corridor was designed and the Investment Decision was taken, the gas prices were at a totally different level. International prices have since collapsed and at these prices, an investment of $45 bln cannot be justified.
On the other hand,Turkey receives 14-15 bln cubic meters of Russian gas through Ukraine-Romania-Bulgaria. If Gazprom discontinues transit flows through Ukraine after 2019 and these flows are not substituted, then Turkey will find itself short by 14-15 bln cubic meters of gas per year.
Moreover, Russia has frozen the Turkish stream plan to construct a new pipeline via the Black Sea to supply Turkey with additional 15 bln cubic meters of gas per year. In this scenario, Turkey may find itself short of almost 30 bln cubic meters of gas per year in 2020, which in practice cannot be covered by imports through Iran or LNG.
With this in mind, what is the likelihood that Turkey, will allow 10 bln cubic meters to transit through its soil and reach the Greek border to enter TAP? So, it is only logical to assume that there are significant risks that TAP could be delayed, cancelled or left without gas.
In all cases, we could consider the potential of the LNG (regazifigation) terminal in Alexandroupolis, to become a critical component for the supply of SE Europe. If TAP is delayed or cancelled, the volumes of Azeri gas aimed for the markets of SE Europe could be supplied through the Alexandroupolis terminal. If TAP is constructed, but left without gas, then the Alexandroupolis LNG terminal can supply TAP with over 60% of its required volumes.
In both cases, the LNG terminal in Alexandroupolis could probably be an important entry point for Cypriot LNG.
Once more I would like to thank you for the honor to speak at this prestigious forum and wish you every success in your proceedings.
