Egypt, Cyprus ink plans to export Cypriot gas via Egypt in future

Egypt and Cyprus signed off on agreements with Chevron and Eni, the leading partners in two Cypriot natural gas fields, paving the way for the two countries to collaborate on developing the gas resources for export.

The Cypriot president described the agreements as “game changers” for the region.

The agreements could support Egypt, which is facing a major energy deficit, to access some additional volumes of imported gas from the Cypriot fields and gain revenue from operating its natural gas facilities, according to a former official from the Egyptian General Petroleum Corporation who took part in the early phase of the negotiations with Cyprus and spoke to Mada Masr.

But development at both fields is still pending a final investment decision, energy platform MEES’s East Mediterranean editor Peter Stevension told Mada Masr on Monday, anticipating that neither is likely to produce gas before 2027 at the earliest.

The first agreement between Egypt and Cyprus concerns the Cronos field. The host country agreement was signed on Monday by Cairo, Nicosia and the head of Eni, the lead partner working the Cypriot concession. Eni’s partner in the Cronos field is France’s Total Energies.

The agreement lays out a framework for the gas to be transferred from the field to processing facilities in the Egyptian Zohr field, which is also operated by Eni, to be transferred from there to the Damietta liquefaction plant in preparation for export, according to a statement published by the company on Monday.

Eni also owns a 50 percent stake in the Damietta plant, while the Egyptian government holds the other share via the Natural Gas Holding Company (EGAS), which holds 40 percent. The remaining 10 percent is held by the Egyptian General Petroleum Corporation (EGPC).

The Cronos field was discovered in 2022 and is thought to hold around 70 billion cubic meters of gas, although more recent estimates suggest the volumes could be higher.

By way of comparison, Egypt’s Zohr was initially estimated at around 850 billion cubic meters. 

Partners at the Cronos field are yet to submit and gain approval for a development plan for the field, Stevenson noted to Mada Masr on Monday, though the Cypriot government is hopeful that the field could start producing by 2027.

The second agreement signed on Monday was a memorandum of understanding that laid out a framework for gas from Cyprus’s Aphrodite field to be sent to Egypt for processing as well, according to Reuters.

Cyprus’s government finally gave its agreement on Friday to a development plan for the Aphrodite field, submitted by the consortium at the field which is led by US multinational energy corporation Chevron.

The agreement would require an investment worth around US$4 billion and would see the partners dig four wells and build a floating processing station, as well as a subsea pipeline connecting the field to Egypt’s liquefaction stations in order to produce around 800 million cubic meters of gas per day.

Cyprus’s government had previously rejected a development plan submitted by Chevron on the grounds that it would not support the degree of economic benefit the Cypriot government wished for.

The earlier plan would’ve seen a comparatively meager investment of just $198 million dollars, the construction of just one well, and did not support the construction of a floating processing station.

Although the development plan has been approved, four or five years will be required to build the necessary infrastructure and begin production, according to an estimate published by the Washington Institute.

A final investment decision for the development plan is also required before it can move forward, according to Stevenson, who said that it could be as late as 2031 before the field starts producing gas.

Aphrodite is Cyprus’s largest gas field and was discovered in 2011, with reserves estimated at around 127 billion cubic meters.

The Cypriot government granted development and production rights six years ago to a consortium led by Chevron, with a 35 percent stake, the Dutch Shell, which holds a matching stake, and Israeli company NewMed Energy, which holds 30 percent of the field.

A former Petroleum Ministry official speaking to Mada Masr on Monday anticipated that the agreement with Eni would likely support Egypt gaining access to Cypriot gas for domestic use when needed.

The former EGPC official likewise considered the agreement as one which would potentially support Egypt’s diversification of natural gas sources. 

Egypt has faced a major natural gas deficiency over recent years, as domestic production has declined in the face of rising domestic consumption.

As a result, Egypt’s government has introduced rolling cuts nationwide during summer, when demand is high, and has turned to expensive liquid natural markets since 2023 for additional import volumes. 

Egypt is also largely dependent on regular imports from Israel, which it has agreed to increase over the coming years.

The deficit has represented a challenge for Cairo, which announced plans as early as 2018 to become a regional gas hub, signing a $15 billion import agreement with Israel as well as its first framework agreement with Cyprus for a pipeline from Aphrodite at the time.

The development of Aphrodite was delayed for years, however, the Petroleum Ministry official noted, mainly due to disputes regarding who would front the investment cost of building the subsea pipeline to connect the field to Egypt to facilitate its export.

Egypt’s dreams of being a regional export hub rely on building a set of agreements that would support its importing surplus quantities of gas from fields in various countries in the East Mediterranean to supply any production deficit it faces from its own fields. 

At the same time, the plan was for facilities at Damietta and Idku to support the option of liquefying any surplus for export.

The decline in local gas production has had an impact on electricity generation, as last summer saw waves of power outages that extended to 12 hours in some Upper Egypt villages.

The government is currently struggling to secure fuel sources that will ensure that the electricity crisis that fueled widespread social unrest last year does not recur.