Cyprus, Greece and Israel sign EastMed gas pipeline deal: An Analysis

Cyprus, Greece and Israel sign EastMed gas pipeline deal: An Analysis

Greece, Israel and Cyprus have signed an agreement, on the 2nd January 2020, to build a subsea pipeline that could supply Europe with approximately 10 per cent of its natural gas needs (http://www.ekathimerini.com/248073/article/ekathimerini/news/greece-israel-cyprus-sign-deal-for-eastmed-gas-pipeline).

The agreement was concluded by Greece`s Environment and Energy Minister, Mr. Costis Hadzidakis, Cyprus’ Energy Minister, Mr. Giorgos Lakkotrypis, and their Israeli counterpart Mr. Yuval Steiniz, in the presence of Greece`s and Israel`s Prime Ministers, Mr. Kyriakos Mitsotakis and Mr. Benjamin Netanyahu, respectively, as well as the President of the Republic of Cyprus, Mr. Nicos Anastasiades (https://cyprus-mail.com/2020/01/02/historic-deal-signed-in-athens-for-eastmed-pipeline/).

The circa USD 6 – 7 billion EastMed pipeline, with length of 1,900 kilometer (1,300 miles), is intended to provide an alternative gas source for energy-hungry Europe, which is largely dependent on supplies from Russia and the Caucasus region (https://www1.cbn.com/cbnnews/israel/2020/january/greece-israel-cyprus-sign-deal-for-eastmed-gas-pipeline).

It will transfer up to 12 billion cubic metres a year, from offshore gas reserves between Israel and Cyprus to Greece, and then onto other countries in southeast Europe (https://www.euronews.com/2020/01/02/israel-greece-and-cyprus-sign-deal-for-eastmed-gas-pipeline).

Specifically, the pipeline would run from Israel’s Levantine Basin offshore gas reserves to Cyprus, the Greek island of Crete and the Greek mainland. An overland pipeline to northwestern Greece and another planned undersea pipeline would carry the gas to Italy (http://www.ekathimerini.com/248073/article/ekathimerini/news/greece-israel-cyprus-sign-deal-for-eastmed-gas-pipeline).

The project could also accommodate future gas finds in waters off Cyprus and Greece, where exploration is under way.

The countries hope to reach a final investment decision by 2022 and aim to have the pipeline completed by 2025 (https://www.rferl.org/a/greece-cyprus-israel-eastmed-gas-pipeline-russia-ukraine/30358166.html).

Greece’s Public Gas Corporation (DEPA) signed a letter of intent with Energean, a gas producer with a focus on the Eastern Mediterranean, to buy two billion cubic meters of gas, annually, from Energean’s gas fields off Israel, via the planned pipeline (https://cyprus-mail.com/2020/01/02/historic-deal-signed-in-athens-for-eastmed-pipeline/) (https://www.haaretz.com/israel-news/business/.premium-britsh-greek-company-energean-to-join-eastmed-pipeline-1.8346954).

The signing of the EastMed pipeline comes weeks after Turkey and Libya struck an accord on sea boundaries in the Mediterranean, a move which Greece, Cyprus and Israel opposed. (https://www.reuters.com/article/us-greece-cyprus-israel-pipeline/greece-israel-cyprus-sign-eastmed-gas-pipeline-deal-idUSKBN1Z10R5).

The EU condemned Turkey’s demarcation memorandum saying: “It infringes upon the sovereign rights of third states, does not comply with the Law of the Sea and cannot produce any legal consequences for third states” (https://www.forbes.com/sites/arielcohen/2020/01/08/turkey-libya-maritime-deal-upsets-mediterranean-energy-plan/).

On a different note, it has been said that the idea that the EU is seeking energy security and supply diversification has been debunked by developments over the last few years. This is demonstrated by the fact that Europe has well-diversified supplies, receiving most of its gas through pipelines from Russia, Norway, Algeria and Libya and as LNG from Qatar, Nigeria, the US and others (https://cyprus-mail.com/2020/01/06/changing-priorities-threatens-viability-of-eastmed-gas-pipeline/).

Also, an EU official stated that the Commission has so far “not signed” up to the pipeline, but only to a study exploring its feasibility further (https://www.euractiv.com/section/energy/news/eu-welcomes-eastmed-deal-but-highlights-further-cost-benefit-analysis/).

On parallel lines, although DEPA and Energean deal is a good first step, the EastMed pipeline project will need to find other companies to finance the project. And even then, the companies must first secure buyers.

Another vital factor that should be taken into consideration when evaluating the feasibility of the pipeline, is the uncertainty of the price of natural gas in 2025, when the pipeline is scheduled to finish.

The significance of the political tripartite deal is reflected when the Greek Prime Minister, Mr. Kyrikos Mitsotakis, stated that “Today we did not simply sign a beneficial agreement. We sealed our resolve for a strategic connection between our countries in a region that now more than ever needs growth and security” (https://www.aljazeera.com/news/2020/01/greece-israel-cyprus-move-build-east-med-gas-pipeline-200102181235607.html).

The Greek Prime Minister recently proclaimed that the EastMed is a very important energy but also geopolitical project, which will allow Europe to have access to new hydrocarbon reserves to be discovered in the Eastern Mediterranean (https://cyprus-mail.com/2020/01/06/eastmed-very-important-energy-and-geopolitical-project-greeces-premier-says/).

The EastMed pipeline agreement constitutes a political milestone in terms of East Med politics, and it certainly strengthens relations between the three countries at a critical time for the Eastern Mediterranean, promoting closer cooperation. It also has the support of the EU and the US (https://cyprus-mail.com/2020/01/06/changing-priorities-threatens-viability-of-eastmed-gas-pipeline/).

It has been said that the EastMed gas pipeline will contribute to increasing energy security by diversifying gas supply sources to Europe, while strengthening the geostrategic role of Cyprus as an energy bridge to Europe.