Christopher Coats, Forbes
As much of Europe spent the last month worrying about what might happen if
Russia decided to shut the valve on its gas supply, Athens has apparently
decided the time is right to push a new energy role.
This week, Greece’s Energy
Ministry launched an international tender for a pipeline project that would
transport about 8 billion cubic meters of gas into the European market from
offshore fields controlled by Cyprus and Israel. According to a Reuters report,
the project would link Israel’s Leviathan natural gas field to Europe by way of Greece through the IGI-Poseidon pipeline, managed by Italy’s
Edison and Greece’s state-backed utility, DEPA.
For Israel, the pipeline would provide the country’s first long-distant
export option. Israel has recently announced a series of export agreements for
its offshore efforts, 40 percent of which is allotted for sale outside of the
country. However, so far, they have all been local, including sales to Jordan,
Palestinian utilities and talks with both Egypt and Turkey. For Greece, a
successful pipeline would help them carve out a long-sought energy role in the
area.
Over the last three years, Athens has made a concerted effort to lay claim
to the Eastern Mediterranean’s recent energy rush, both as a potential
transport hub for Israeli and Cypriot gas reserves and as a producer itself.
The latter role, which has included studies suggesting offshore reserves near
Crete, has failed to catch fire beyond political rhetoric. Meanwhile, after
this week, it appears the country’s transport aspirations may have some
potential.
Europe’s Diversification Key?
The transmission line would create a direct line between the Eastern
Mediterranean’s vast offshore reserves and a European market in need of energy
diversification – a goal that has become central to the region’s energy policy
since 2009. That year saw Russia halt natural gas imports to Ukraine in the
cold winter months, leading to shortages across East Europe.
In the years since, Europe has set out to establish new import options,
increase domestic production alternatives, encourage renewable options – all
meant to ease dependence on Russian reserves. While moderately successful,
these efforts have suffered from a series of setbacks, including a downturn in
renewable financial support and unrest in North African producing countries
like Libya and Algeria. The region’s progress grabbed the spotlight this month
as tension between Moscow and Ukraine highlighted just how dependent Europe is
on Russian reserves.
Months before the most recent flare-up with Russia, the proposed pipeline received a vote of confidence from the European
Commission when it was selected as one of their Projects of Common Interest
(PCI). This 2013 plan designated 248 energy infrastructure projects across the
EU that would receive their support as well as give them access to $8.13
billion in available funds. It was chosen as one of Cyprus’ three PCI projects.
However, despite such support and the recent attention diversification efforts have
gotten since Russia began moving troops toward the Crimea, the pipeline is not without its
challenges. First
and foremost the pipeline could extend into contested waters between Greece and
Turkey. Already frustrated with Cypriot progress towards exploration and
gas production in the region, Ankara could prove difficult to win over,
especially if the project sidelined proposed Turkish transport alternatives.
Recent reunification talks between the Republic of Cyprus and the Turkish
held north side of the island have allowed some hope that the issue of sharing
regional gas benefits to bed, though bringing the 40 year old dispute to an end
soon could be wishful thinking.
The Greek-led pipeline could
also face a significant challenge when it comes to financing. While access to the EC fund could provide some support, paying for what
promises to be an
incredibly expensive endeavor (especially considering the pipeline depth),
could be difficult. Both Greece and Cyprus remain weighed down by years of
economic turmoil. In the case of Greece, now entering its sixth year of
recession, attracting
needed investment partners will be difficult, bordering on impossible without firm support from Europe and other
global lenders.
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