After a year of on and off announcements, Greece, Cyprus and Israel signed the inter-governmental agreement for the EastMed gas pipeline on January 2 in Athens. Predictably this has been welcomed in the three countries with euphoric statements and many and varied claims and expectations. But what is this agreement actually about, and what is the future of this pipeline?
Pushing this through now is primarily a political response by Greece, Cyprus and Israel to Turkey’s challenges, posed through its agreement with Libya – which is incompatible with the internationally recognised law of the seas, Unclos. The EastMed pipeline agreement constitutes a 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.
Italy, where the pipeline will end up, did not participate due to active resistance from communities near potential pipeline landing sites and increased resistance from environmental activists – as was the case with the TAP pipeline. But Italy has confirmed its support for the project. The agreement sets the legal framework for the possible construction and operation of the EastMed gas pipeline, if implemented, but by itself it will not lead to its construction. This requires securing buyers of its gas in Europe and companies to invest in the pipeline.
The signature of a letter of intent between Greece’s public gas supply company DEPA and Energean, earlier on 2 January, to supply 2 billion cubic meters/yr (bcm/yr) of gas to the pipeline from Energean’s gas-fields in Israel, is a good start in terms of securing the required gas supplies. It is very likely that others, such as Noble Energy operator of the Leviathan gas-field and possibly ExxonMobil operator of the Glafkos gas-field in Cyprus, may follow suit at some stage. Such deals could secure enough gas for the first stage of the project, which requires 10bcm/yr. If built, by 2025 the pipeline would take gas from Israel and Cyprus to Crete and from there to the Peloponnese and then to western Greece. An additional leg would take the gas to Italy.
According to the study performed by Greece’s DEPA and Italy’s Edison, with part European Commission (EC) funding, the cost of the 1900km pipeline to Greece could be between $6-$7billion at a unit cost of $3.50/mmbtu (per about one thousand cubic feet). Including the cost of taking the pipeline to Italy, experts consider this to be optimistic, with the total cost likely to be $8-$10billion and higher unit costs. The pipeline is technically challenging but constructible.
Source: Cyprus Mail