Cyprus is in a transitional phase towards a more sustainable and cleaner energy future

Cyprus is in a transitional phase towards a more sustainable and cleaner energy future, Toula Onoufriou, President, Cyprus Hydrocarbons Company told CNA, noting it is the company’s obligation for Cyprus to become a supplier of cleaner energy in the region and beyond.

Referring to international prices, Onoufriou said that the repercussions of policies for energy transition and abandoning carbon emissions will significantly affect the natural gas market. However, she expressed the view that natural gas, which is the ‘cleanest’ of hydrocarbons together with the development of technologies to reduce emissions, will keep demand unchanged. This resilient, long term demand will enable Cyprus resources to compete as a source of supply at a regional and international level.

She also referred to the resumption of drilling at the end of the year as well as the setting up of a joint technical group between Cyprus and Egypt which will examine in detail ways to construct the pipeline from Block 12 to the Idku terminal of Egypt.

According to Onoufriou, the Cyprus Hydrocarbons Company is a state company with a mandate to act as the commercial arm of the Republic of Cyprus, marketing the island’s share of any future hydrocarbons production and holding the government’s share in oil and gas infrastructure projects. The company participates in evaluating proposed development projects to secure the maximum benefit for the Republic of Cyprus. The Republic, she stressed, does not directly invest in developing the blocks. These investments usually are undertaken by the licensees. With its technical and commercial knowledge, the company provides independent views to the Ministry of Energy about the risks in every step of planning with the aim to develop Cyprus’ hydrocarbon reserves.

Asked to evaluate the results of the exploratory programme for natural gas in Cyprus’ EEZ, Onoufriou said seven exploratory drillings have taken place so far in the island’s EEZ which led to the discovery of natural gas reserves. Bearing in mind that the average of success in such drillings internationally is one in four drillings, then one can say that Cyprus’ exploration has been successful.

She said one of the reasons for this success is the fact that the Republic of Cyprus has managed to attract large oil and gas companies with regional and global know-how in the exploration and development of deposits. Cyprus can even be considered a "frontier" area of exploration, where there is a lot of unknown information about our offshore geology. Therefore, she added, “any exploratory drilling involves significant uncertainty. At the same time, however, it has much to offer for understanding the geology of the Eastern Mediterranean region”.

To a question if the quantities of natural gas discovered can satisfy the island’s needs and what would be the prospect to export natural gas quantities, Onoufriou said it was not a question if we can cover the island’s needs which are small (less than 2bcm) but whether we can do this in a competitive manner to yield real benefit for Cyprus' energy consumers. Natural gas exploitation from deep waters is significantly costly, she said and for this reason the investor must produce and have available large quantities of natural gas. For Cyprus to benefit in the local market with competitive natural gas from its own reserves, the licensee who will invest in developing the block, must have sales agreements for the remaining natural gas quantities that will be produced.

Asked when drilling for natural gas will resume, Onoufriou said scheduled drilling in licensed blocks have been suspended due to the pandemic and have been rescheduled for the end of 2021.

Asked if the drop in the international price of natural gas negatively affects the Republic’s planning, Onoufriou said the CHC, is closely monitoring and evaluating all aspects which affect the course of the natural gas prices. The value of natural gas is affected by the regional and international dynamic of supply and demand in the market.

In terms of regulatory influence, she added, as with all hydrocarbons, the impact of energy transition and carbon emission policies will have a significant impact on the natural gas market. Onoufriou said there are several scenarios regarding the impact of the energy transition, however, for natural gas, which is the "cleanest" of hydrocarbons, and with the development of related emission reduction technologies, demand is expected to remain strong. Cypriot resources may have the opportunity to compete as a source of supply at regional and global level due to this resilient long-term demand.

To a question when will Cyprus be able to start exploiting its hydrocarbons, Onoufriou said that for the exploitation of Cyprus’ natural gas resources, significant investments of billions of dollars by the licensees have to take place. The Final Investment Decision (FID) for the first natural gas production project on the island will be the most important milestone for Cyprus so far in the field of hydrocarbon activities, she said.

Speaking about the Aphrodite block, the licensees have in their possession the first exploitation license granted by te Republic of Cyprus. There is a lot of preliminary work needed as far as the consortium is concerned and this is mainly about technical studies. There will be a detailed planning and right before the FID, all factors will be taken into consideration, for instance the current oil prices internationally, reviewed forecast, markets and conditions in the oil and natural gas industries. After the FID, the construction will take up to three years to be able to start production. A recent development regarding block 12 from Idku terminal in Egypt are the guidelines set by the ministers of Energy of Cyprus and Egypt where they decided to set up a joint technical working group which will examine in a lot more detail the ways to construct the pipeline.

Cyprus, she said, is really at the forefront of regional initiatives and cooperation in the field of energy. Regarding hydrocarbon, she said the CHC actively participates in the Gas Industry Advisory Committee of the East Mediterranean Gas Forum, (EMGF) which includes the governments of Cyprus, Egypt, Greece, Jordan, Israel, Italy and Palestine, working to develop common policies and strategies that will contribute to the viability and competitiveness of production and supply of natural gas.

Asked how optimistic the CHC is for the island’s energy future, she said the Cyprus energy sector is at a transitional stage. With the start of imports of liquified natural gas in 2022 and the continued penetration of renewable energy sources, Cyprus is well on its way to a sustainable and cleaner energy future which will benefit both individuals and industry consumers.

As far as the CHC’s activities are concerned and the future production of our own natural gas resources, “we believe that it is our obligation to add value to the domestic energy ecosystem of Cyprus, and also for Cyprus to become a supplier of cleaner energy in our region and beyond”.