Egypt, Greece, & Cyprus team up for natural gas

Dec 11, 2015, 4:45 PM EST
The Maersk Discoverer drilling in Egypt
Source: BP Images/flickr

In the game of natural gas geopolitics, Egypt, Greece, and Cyprus are teaming up with grandiose visions of shared future prosperity. On Wednesday Egyptian President Abdel Fattah El-Sisi signed an agreement with his Cypriot counterpart Nicos Anastasiades and Greek P.M. Alexis Tsipras to establish a “standing Joint Committee of Cooperation” that will focus on tourism, investment, and energy projects related to the three countries.

The agreement also addressed terrorism and illegal immigration, while promoting mutually beneficial economic projects, including a plan to take full advantage of the region’s hydrocarbon resources. After Italian oil firm Eni discovered the supergiant Zohr natural gas field in Egypt’s offshore waters in August, energy dynamics in the region have been in an excited flux. Zohr is estimated to hold up to 30 trillion cubic feet of gas -- 5.5 billion barrels of oil equivalent --, potentially meaning decades of natural gas self-sufficiency for power-hungry Egypt as well as exports abroad. Natural gas has been found in the waters off of Cyprus, although in much smaller amounts (so far). The three leaders discussed potentially linking Egyptian gas to Cyprus and then onto Greece and the rest of Europe, although the economics are uncertain given today’s low energy prices.

However, difficulties with two other players in the game could reduce the impact of the nascent Egypt-Cyprus-Greece alliance. The largest stumbling block to regional economic harmony in the eastern Mediterranean is Turkey, due to its occupation of the northern third of Cyprus since invading in 1974. That prompted a tense division between the ethnic Greek south and the ethnic Turkish north, and since Cyprus accession to the E.U., the dispute has been an insurmountable hurdle for Turkey’s long-running effort to follow suit. But recent negotiations to reunite the island are reportedly making good progress, although the details have not been publicized yet.

The secondary source of friction regards Israel, but it is limited to an economic dispute between Cairo and Jerusalem. On Sunday the International Chamber of Commerce ruled that Egypt must pay Israel $1.76 billion over Cairo’s early termination of a natural gas supply contract to its neighbor in 2012. Incensed, Egypt said it would appeal the verdict as well as suspend current negotiations on plans for it to import gas from Israel’s huge offshore gas fields in the Mediterranean until the dispute could be resolved.

But even though Israel won’t waive the tab in the name of friendly diplomacy, this is not a long-running irreconcilable conflict, and it will pass. (This week P.M. Benjamin Netanyahu said that developing Israel’s offshore gas fields is vital to the country’s security and survival, by boosting stable economic ties with its neighbors.) As an indication of where things may be headed, Tsipras visited Jerusalem in late November and proposed linking Israeli gas fields with Cypriot and Egyptian ones, then into Greece. He maintained that the E.U. would consider taking part in the construction of the new pipeline networks together with the necessary gas export terminals.

The summit this week was the third since November 2014. If Turkey and Israel join the next one -- to be held in Cairo in 2016 -- on an equal footing, then these schemes just may come to fruition.