Another major gas find made off Cyprus
Italy’s Eni and France’s TotalEnergies have announced making a significant gas discovery off the coast of Cyprus, touting as a potential provider of extra supply to Europe at a time when the bloc is scrambling to reduce its dependence on Russian gas.
Preliminary estimates indicate that the discovery is around 2.5 trillion cubic feet (71bn cubic metres) of in-place gas in size, Eni said in a statement on August 22, adding that there was “significant additional upside that will be investigated by a further exploration well in the area.”
The Cronos-1 well at Block 6, 160 km off Cyprus’ coast, was drilled in a water depth of 2,287 metres. It encountered a gas column in a carbonate reservoir sequence of fair to excellent properties, Eni said, with data acquisition demonstrating an overall net pay of more than 260 metres with intervals owning excellent permeability.
Eni said that studies on fast-track development options were already ongoing, adding that the discovery “can unlock additional potential in the area and is part of Eni’s successful effort to provide further gas supply to Europe.”
Cronos-1 is the second find to be made at Block 6, following the discovery of the Calypso-1 field in 2018, assessed to be 6.4 tcf in size. Several more significant finds have been made off Cyprus over the years, including ExxonMobil and QatarEnergies’ 2019 Glaucus field, assessed at 5-8 tcf in size, and the earlier 2011 Aphrodite find, assessed to hold 4.5 tcf of gas. However, infrastructure constraints and geopolitical disputes have stifled the development of these resources. There currently exists no way of dispatching this gas to mainland Europe, and meanwhile, Turkey does not recognise Cyprus’ right to exploit these resources and has sent drillships to the contested waters in the east Mediterranean in moves that have been widely condemned internationally as provocations.
With the EU now more committed than ever before to diversifying its energy imports, there could now be a fresh impetus to provide the necessary political and financial support to bring Cypriot gas to Europe. Primarily, this would involve support for the EastMed gas pipeline, which would run from Israel, carrying gas from the giant Leviathan field, and run through Cypriot waters to Greece.
The idea for EastMed first emerged in 2012 and was included by the EU as a project of common interest (PCI) three years later. At that time, the price of gas in Europe was around $10 per mmBtu, indicating that the project had a clear economic basis. But from then until 2019, prior to the COVID-19 pandemic, the price fell to only $6 per mmBtu. There were also increasing concerns about whether Europe really needed extra gas, in light of the aggressively green policies that have been pursued by the European Commission under the von der Leyen presidency over the past three years.
In January this year, in spite of the surge in gas prices in the prior six months as a result of the emerging energy crunch in Europe, the US government issued a statement saying it was in effect abandoning support for the pipeline. Washington had previously been one of the most vocal supporters of the initiative. In its statement, the US government said it “remained committed to physically interconnecting East Med energy to Europe,” but was “shifting [its] focus to electricity interconnectors that can support both gas and renewable energy sources.” The US had effectively taken this position in light of the EU’s green policy.
At that time, it was assumed that soaring energy prices in Europe might be short-lived, potentially easing back by 2023. However, Russia’s invasion of Ukraine in February and subsequent cuts to European gas supply, as well as the EU’s own commitment to eliminating Russian energy imports within the next few years, has irrevocably altered the outlook.
EU policymakers are no doubt looking at EastMed far more favourably now, with the bloc currently contending with gas prices approaching $3,000 per cubic metres and a clear shortage of import alternatives to Russia. But there will need to be a concerted policy shift to make the pipeline project a reality. The EU should start by fast-tracking the feasibility studies for the project, currently due for completion by the end of this year. This would provide it funding sooner from the EU’s Connecting Europe Facility, which it has access to as a PCI. Next, the EU should consider loosening the conditions for what it deems as sustainable gas investments in its taxonomy. The current conditions have been criticised by the gas industry as being overly strict, essentially ruling out most investments in gas infrastructure. However, given that the taxonomy has only just been updated, this summer, it looks unlikely that Brussels will reopen the discussion on what should be considered sustainable investment anytime soon.