Remarks by H.E. Georgios Lakkotrypis, Minister for Energy, Commerce and Industry of the Republic of Cyprus



Remarks by H.E. Georgios Lakkotrypis, Minister for Energy, Commerce and Industry of the Republic of Cyprus

Hosted by the AJC Transatlantic Institute and the Hanns Seidel Foundation, H.E. Georgios Lakkotrypis, Minister for Energy, Commerce and Industry of the Republic of Cyprus, spoke to a select audience of Ambassadors, EU diplomats, and journalists. Below is the transcript of his remarks: 

Excellencies and Ambassadors, distinguished guests, dear David, dear John, for those of who you have travelled from afar, dear Markus, dear Daniel,

Let me start by thanking the Hanns Seidel Foundation and the American Jewish Committee for the honor of addressing the audience today. 

And I'll take it from where Markus left it, he mentioned that it takes two thousand years to get here, right in geological terms, because hydrocarbons were formed forty or fifty million years ago, it's just a second away, so better late than never.

And as one example of what has happened in the Eastern Med because of the oil and gas industry is what we got us together here today, I very much doubt that we would be having this discussion had it not been for the events that happened since 2009 at the Tamar field. So let me give a very brief introduction about what is happening because I really look forward to the conversion, I will take about 10-15 minutes.

So what is the opportunity? The opportunity here what has been predicted by the EU as geological survey. In 2010, the Eurogeological survey predicted that the Levantine Basin, which is basically if you look at a map, Cyprus and Israel on the East of Cyprus and Israel, hold about  122 trillion cubic feet of natural gas. It also predicted that in the Nile Delta Basin, which is basically the area West of Israel and Cyprus, the area hold about 223 trillion cubic feet. And some of these numbers are actually being proven over the years. Because the discovery of natural gas in the Eastern Med is nothing new, it has been happening outside the Nile Delta since the 50 and the 60’s, it’s just the Tamar discovery in Israel in 2009 showed that the sentiments from the Nile Delta Basin, actually migrated as North as they did, and since 2009 has been a new play, if I could call it this way, we had the Tamar discovery in Israel, we had the Leviathan in Israel, the Aphrodite discovery in Cyprus, we had the Zohr discovery in Egypt, again a nez geological play, we have the Calypso discovery in Cyprus and the Glafcos discovery in Cyprus.

So just to put the numbers into perspective, let me tell you that since 2009, the Tamar Discovery discovery, there had been about 2 100 billion cubic meters of natural gas discovered, among the three countries, Israel, Cyprus and Egypt. And again to put that into perspective, Europe in 2018, consumed about 450 BCM, so you can easily how the numbers are undeniable, exactly to position the Eastern Med region as an alternative source of supply and route of natural gas to the European Union. Yes, a lot of those quantities discovered would be used regionally, right to cover the security of supply for the countries, for example the Tamar and Leviathan fields are already producing, Tamar are already producing, Leviathan will be producing soon, to feed the Israeli market, Zohr is producing to feed the Egyptian market, because there is a really high demand there. The Aphrodyte field will be producing soon, and that will be mostly shipped to the Egyptian and LnG terminal for export but potentially a small part of that would also cover the domestic market of Cyprus. So you can see even today with all of these productions and discoveries, and there is still more to come, we have about between the two countries Israel and Cyprus, 400 bcm of natural gas to be exported. And a lot of discussion have happened in the past and are still going on, what are the optimal ways of exporting, of monetizing that gaz, and as it was mentioned before, the Eastern Med is not an easy region, it’s a geopolitically challenging region, not to mention the technical difficulties drilling in ultra deep waters, some of these discoveries already are between 4.500 to  5.000 meters in depth so you need super crucial expertise in order to get there and extract the gas, expensive, and not to mention also the commercial challenges which exist in a low price oil environment is the one we are going through today. 

So, in order for the Eastern Med as a region and this is what has been amazing for the Eastern Med to surcome some of those challenges, we created the countries the East Med gas forum, which not only the tripartite between Cyprus, Greece, and Israel which initiated everything and everything but to add to that Egypt, to add to that Jordan, to add to that Italy, and to add to that Palestine as well. So here you have seven entities, seven countries who could be consumers who could be producers who could be transit countries working together to resolve any potential differences that we have and on the technical level to discuss technical solutions: How do we transport the gas to the European markets? And more fundamentally perhaps, how do we make the Eastern gas competitive in the global markets?  We are not alone, Russian gas has been producing for years and dominating the European markets, U.S. is shipping LnG in an ever increasing number. So the countries came together to find ways how to make the gas of the Eastern Med more competitive. And the initial part that we have selected is that we would sit down and actually utilize the existing infrastructures that we have today already built. I mentioned at the beginning of my speech that Egypt has been producing gas for decades now right, so that they have got a lot infrastructures in places which has been sitting idle, this is why you are seeing the Leviathan parties, now selling gas to Egypt using the ING pipelines through the Sinai which has been dormant for many many years for security reasons. So there’s been enough security assurance apparently that will enable to make a project commercial.

You are seeing Cyprus now and we signed off the first face of the agreement a couple of weeks ago you see Cyprus agreeing to send the Aphrodite gas to Idku, the LnG plant in Egypt. It will be sent by pipelines, liquefied and then from there, in a liquid form sent to the European markets which is the ones that Shell is primarily serving.

So here you have a first example of the creation of what we called the East Med gas Corridor to the European Union. So imagine a cargo of liquified natural gas leaving Egypt, the Egyptian LnG terminals, going to Greece, Revithoussa who has a receiving terminal, a regasification terminal or in Alexandroupolis, where there is one under construction now or in Croatia for that matter which is also building one, re-gassyfing the gas and supplying it into the European Union. This is what we call the corridor. And it implies a number of solutions. A lot of talks happen over the years about the East Med pipelines, a lot of talks has happened, about an LnG plant in Cyprus greenfield projects, challenging projects, ambitious projects, I have to admit, but at the same time as countries we we have to be ready for future discoveries. Already Cyprus has a Glafcos and Calypso we would be appraising very soon for discoveries. We would be looking for ways how to ship the gas and certainly having  few solutions if you combine the fields with maybe neighboring countries such as Israel and Egypt, we could be finding common solutions. So, what we have said first and foremost: let’s utilize whatever infrastructure we have now to make our gas competitive, let’s look at greenfield projects for existing and future discovering that haven’t yet found their way to the market and the moment has encountered for us to choose. We might choose all solutions simultaneously, East Med gas pipelines and LnG terminals even floating LnG in order for us to be ready when time comes to make the right choices. 

So as you can see with  the example of this East Med Gas Forum, the countries are coming together, exactly to achieve their common goal: stability, you are having conversations that could not have been imaginable, because of the traditional rivalries between the countries, you could have not imagine that before just few years ago. 

With one exception: two, two exceptions: one is Lebanon, of course, with the known issues, that Lebanon has been invited but certains influences do not allow him for the time being to participate in the East Med Gas Forum, and Turkey, and I couldn’t complete my introduction without having a specific mention on what is going on with Turkey, because the region is not only about opportunities but I have described them very clearly it also about challenges. And certainly the East Med Gas Forum has not been created to isolate anyone on the contrary, has been announced many times over and over again, that every country is welcomed to participate as long of course, as it is committed, of course, to international law, as long as it is committed to respect international law. We have not been seen that with Turkey. And it is not by coincidence that its relationships are straint not only with Cyprus but with almost anyone who participates in the East Med Gas Forum. And very briefly, let me say not just what it means for Cyprus, but also what it means for the region at large, right, because Turkish claims, abstract claims, with a very weird interpretation of international law, don’t affect just Cyprus. For example, if we accept the Turkish version of Cyprus EEZ we will be left with 31 per cent of what we have today. All of our discoveries will be falling in different countries. All of the discoveries, so the pretext of protecting the rights of Turk-Cypriots, excuse my French, Mambo Jambo, how do you protect the rights of Turkish-Cypriots if you take away 69 per cent of their reserves, at the end of the day right? 

But fundamentally for the region, let me give another perspective which hasn't been very well known: if we accept the Turkish version of an EEZ, it means that the Mediterranean basin becomes a Turkish lake. Let’s take the East Med pipelines for example: if we accept the version of Turkey in terms of the EEZ, it means that if the moment comes, we will have to lay the pipelines, we will have to go and ask for permission from Turkish authorities: do you realize what kind of power that would be? And of course, Turkey is the only one who stands alone on this: very recently just a few days ago, they signed an MOU with Libya about the intentions of delimiting. Now, imagine the map for a minute, and think where is Turkey and where is Libya? How come they have common sea borders because they ignore completely Crete, and the fact that Crete has an Exclusive Economic Zone. Exactly because  they do not respect or actually agree with the UN convention for the law of the sea, they have not ratified, they signed it yet. But neither has the US by the way, in the end, the U.S. respects the provisions of the enclosed: let’s take for example US and Cuba: Cuba is an island, much smaller,  less coast, much smaller Coast, and it still even though the agreement has not been ratified, the U.S. respects the enclosed provisions. 

I’ll close it off year, so we can actually go into the discussion. And to say that indeed, as the organizers have mentioned in their introductions, the Eastern Med provides both opportunities and challenges. Opportunities not only for countries that have traditionally not been talking to each other, or have had an animosity to come together to find common solutions, common prospects for their people, for their energy security, for their prosperity. But also for the commercial prosperity of each of its countries, and for advancing the cause of the Eastern Med, we have challenges as well, and I have outlined just a few of them, but what I can firmly say is that the Eastern Gaz Forum, the countries that I mentioned, with the core pillar of Israel, Cyprus and Greece, are committed to resolving them, in a fashion which is appropriate to democracies, liberal democracies and rule of law. 

Read more