Cyprus 2021 by Diplomacy&Commerce magazine

Cyprus

DI PLOM ACY

COM M E RC E

ENERGY POLICY

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PR E S E N T S

CYPRUS

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Sustainable Economic Development

In the broader energy security scheme, the vision of Cyprus in the field of hydrocarbons is to become part of the energy map of the Eastern Mediterranean region and acquire a decisive role in energy developments

F O R E WO R D

ignificant gas discoveries in the Eastern Mediterranean region during the last decade have attracted worldwide attention, whilst hydrocarbons exploration activities have intensified. These discoveries are expected to be developed sooner or later. On the other hand, the goals of the climate agenda for Energy Transition are not expected to be achieved from one day to the other. They require significant investments, technology improvements and time; in other words, they need a transition period. During this transition, a “bridge-fuel” will be necessary; there is a wide agreement that natural gas is the “bridge fuel”. Moreover, natural gas is used in hydrogen production, which is expected to have a leading role in Energy Transition. Lastly, for some sectors such as transport, Energy Transition will be more difficult and slower; therefore, natural gas can play a vital role as it is undoubtedly the most environmentally friendly conventional fuel. In the broader energy security scheme, the vision of Cyprus in the field of hydrocarbons is to become part of the energy map of the Eastern Mediterranean region and acquire a decisive role in energy developments. At the same time, the oil and gas industry aim at contributing to sustainable economic development and, ultimately, to the prosperity of Cyprus's citizens. In this context, Cyprus and Serbia could cooperate in Energy Efficiency

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H.E. DEMETRIOS THEOPHYLACTOU Ambassador of Cyprus to Serbia

Hydrocarbons are a key component that could lead the wider area toward an era of peace and prosperity

and Renewable Energy Sources (RES), especially in the deployment of solar energy, for instance, via exchanges of extensive experience and know-how regarding application and installations of thermal energy, solar systems as well as photovoltaic systems. Furthermore, the Applied Energy Laboratory could participate in an exchange of know-how / experiences and on practical aspects concerning the testing of solar thermal collectors and systems. The sector of innovation and research is steadily developing activities and synergies through several universities and research centres between the two countries, in areas such as RES, energy efficiency, electricity management, energy storage and hydrogen.

The East Med region has huge potential to supply the EU and international markets with natural gas. Since the Tamar discovery in 2009, around 2,100 BCM (Billion Cubic Meters) have been discovered between Cyprus, Israel and Egypt. By creating synergies to utilise new and existing infrastructure, neighbouring countries in the east Med region may create strong alliances to create the «East Med gas corridor» to Europe, consisting of different gas sources, routes and export facilities, thus enhancing the energy security of the countries themselves, of the region and Europe more broadly. In this respect, hydrocarbons are a key component that could lead the wider area toward an era of peace and prosperity.

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State of Play

Cyprus is a small isolated energy system, highly dependent on oil products for its energy needs

ore than 90% of Cyprus energy inland consumption comes from oil products and the rest from renewables. The introduction of natural gas via Liquefied Natural Gas (LNG) imports, the development of the necessary infrastructure to import natural gas to Cyprus by early 2022 (via the “CyprusGas2EU” project of common interest) as well as the two other projects of common interest, the “EuroAsia Interconnector” and the “EastMed Pipeline”, will end the current energy isolation, contribute to the security of supply dimension and the diversification of Cyprus’ energy sources. Cyprus imports approximately 2.5 million MT per year (2018) of refined oil products, mainly imported from neighboring countries, e.g., Greece and Israel. The ability to diversify the current energy supply is very limited because of the small amounts of petroleum products imported to Cyprus as a result of the size of its internal market, the lower transport (shipping) costs from neighboring countries, and the availability of suitable petroleum products with the required specifications due to similar climatic conditions. Regarding Renewable Energy, in

Cyprus imports approximately 2.5 million MT per year (2018) of refined oil products

2019, the share of RES in the total final energy consumption reached 13,84%, exceeding the mandatory national target of 13% RES in 2020, under the RES Directive 2009/28/EC. Also, the share of the RES in electricity generation reached 10,16%, in the heating and cooling sector 35,10% and 3,3% in the transport sector. In the year 2019, the primary energy consumption was 2.54 Mtoe. Although the initial forecast was for indicative primary energy consumption in 2020 at 2.23 Mtoe, the latest devel-

opments for the delayed arrival of natural gas for use as a fuel in electricity generation late in 2022, consumption in 2020 maintained at 2.5 Mtoe, and the national final energy consumption was at 1.91 Mtoe. National energy saving commitments include, inter alia, measures to improve energy efficiency in the production, transmission, distribution, metering, pricing and end-use of energy, guided by the requirements of the relevant European Directives fully implemented at the national level.

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RES/Energy Efficiency

Cyprus is committed to increase the share of Renewable Energy Sources (RES)\ and improve energy efficiency for 2030 long with other EU member states’ efforts to meet the EU targets toward the green transition, Cyprus is committed to increase the share of Renewable Energy Sources (RES)\ and improve energy efficiency for 2030. Achievement of these goals by strategy and design make Cyprus’ transition to climate neutrality attainable based on the comprehensive National Energy and Climate Plan (NECP prepared in January 2020). Taking action on that is expected to affix for Cyprus an increase in the share of Renewable Energy Sources (RES) to 23% of the total gross final energy consumption and to 26% of the total gross final electricity consumption, as well as to maintain 39% in heating and cooling and 14% in the transport sector for 2030. Respectively, the quantitative targets for improving energy efficiency are to be applied as obligatory targets to achieve cumulative energy saving of 243,04 ktoe during 2021-2030, by applying measures over and above of those set by EU legislation, reaching final Energy Consumption of 2,0 Mtoe in 2030 (representing 13% reduction in final energy consumption)

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and maintaining Primary Energy Consumption of 2,4 Mtoe in 2030 (representing 17% reduction in primary energy consumption). The key policies and measures to achieve the aforementioned RES shares and improve energy efficiency include a variety of schemes aiming to assist households, enterprises, municipalities, communities, and the wider public sector and NGOs in implementing energy efficiency and renewable energy investments (e.g. installation of countable RES and Energy Efficiency technologies in Public Buildings), digital one-stop shop to streamline RES projects permitting and to facilitate energy renovation in buildings, enhance the uptake of sustainable construction materials and increase resource efficiency. Transport sector is a major contributor to greenhouse gas emissions, and thus, measures focused on promoting RES and improving energy efficiency in this sector are essential to their reduction. In this regard, such measures include promoting electrification in road transport through the development of the necessary infrastructure. Extension of planning through complementary measures directed towards

the development of public transport, the promotion of alternative fuels, the promotion of low emission buses and vehicles and the implementation of the sustainable urban mobility plans. Moreover, the promotion of biofuels and the use of electricity will contribute to reducing emissions in the transport sector. A key element to increase the production of electricity from renewables and reduce the price of electricity for consumers is the liberalisation of the electricity market in Cyprus, which is expected in 2022. The Project of Common Interest “EuroAsia Interconnector” for the electricity interconnection between Cyprus, Israel and Crete, planned to operate by 2025, seeks to integrate Cyprus Electricity Marker with other EU Member States' markets into a single market. Simultaneously, Cyprus will achieve the minimum level (for 2030) of the interconnection of 15% of the installed power capacity. Accomplishing both electricity storage and electricity interconnection are critically important for increasing renewable energy penetration. For storage, the relevant legal framework is under preparation while funding schemes are in the pipeline. Having the right market mechanisms in place and allowing for faster penetration of renewable energy sources will enable Cyprus to achieve its RES targets. More specifically, it can ensure the promotion of exports to neighboring countries whilst being in abundance due to their intermittent nature (statistical transfer).

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Applied Energy Laboratory The Laboratory performs tests for hot water storage tanks (EN12977-3) and for electric heat tanks (prEN50440) for compliance purposes with Energy labelling and Eco-design he Applied Energy Laboratory is a government organization that operates under the Energy Service of the Ministry of Energy, Commerce and Industry. It is one of the 24 EU solar thermal labs. The Applied Energy Laboratory is an accredited laboratory under CYS EN ISO/IEC 17025:2017, recognized by European Certification Bodies, authorized by European Committee for Standardization to certify thermal solar tech-

nologies, according to specific international standards (EN12975-1, ISO9806, EN12976 and ISO 9459). The Laboratory performs tests for hot water storage tanks (EN12977-3) and for electric heat tanks (prEN50440) for compliance purposes with Energy labelling and Eco-design. Government departments and semi-government organisations utilize it, as well as solar thermal systems manufacturers in Cyprus, organisations participating in

research programs but also non-Cypriot customers and importers. It contributes, inter alia, to the formation and optimization of the technical specifications of solar thermal systems manufactured and marketed in Cyprus, it provides certification services to the industry, assistance to the local industry in developing more efficient products, while allowing the government to rationalise criteria for solar thermal incentive programs.

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CYPRUS

Areas of Cooperation between Cyprus and Serbia Cooperation should be in the field of Energy Efficiency and Renewable Energy Sources (RES), through exchange of experiences and expertise

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yprus and Serbia could cooperate in Energy Efficiency and Renewable Energy Sources (RES), especially in the deployment of solar energy, for instance via exchanges of extensive experience and know-how regarding application and installations of thermal energy, solar systems as well as photovoltaic systems. Furthermore, the Applied Energy Laboratory could participate in an exchange of know-how / experiences and on practical aspects concerning the testing of solar thermal collectors and systems. The sector of innovation and research is steadily developing activities and synergies through several universities and research centres between the two countries, in areas such as RES, energy efficiency, electricity management, energy storage and hydrogen.

HYDROCARBONS The vision of Cyprus in the field of hydrocarbons is to become part of the energy map of the Eastern Medi-

terranean region and acquire a decisive role in energy developments in the region. At the same time, the oil and gas industry aim at contributing to sustainable economic development and, ultimately, to the prosperity of Cyprus's citizens. In this regard, the strategic goal of the Hydrocarbon Service and the Cyprus Ministry of Energy, Commerce and Industry (MECI) is the optimal and sustainable development of the hydrocarbons potential of the country, the maximization of revenues, and the development of the economy for the benefit of the society and future generations. The promotion of exploration and the development of the hydrocarbon sector in Cyprus can attract investments and create new jobs throughout the entire industry chain, further strengthening the country's economy. For this to be achieved, the MECI is assessing the local labour force's needs and developing the appropriate education and training programs to obtain the relative skills, knowledge and expertise.

Natural gas will be a necessary and integral component for the Cypriot economy to achieve this transition, with all the benefits through imports of Liquefied Natural Gas and, subsequently, the supply of our natural gas from the gas discoveries in Cypriot EEZ.

ACTIONS

In addition, Cyprus, being a full Member State of the European Union (EU), by developing hydrocarbon resources within its Exclusive Economic Zone (EEZ) and building the necessary infrastructure, will enhance the European Union's energy security supply. Cyprus can contribute towards the transformation of the eastern Mediterranean region into an area of sustainable and balanced economic development, by enhancing political stability and improving bilateral relationships, building on synergies emerging from the exploitation of hydrocarbons in the region. Last but not least, we must not forget that natural gas is expected to play an essential role in the energy transition to a green economy and net-zero emissions, as it is more environmentally friendly than other conventional fuels. Therefore, natural gas will be a necessary and integral component for the Cypriot economy to achieve this transition, with all the benefits, such as reducing gas emissions, cleaner environment, green jobs, etc. The main goal of the MECI is, therefore, the supply of natural gas in Cyprus, something that is already on track

The MECI, during the last 15 years, has taken targeted actions to achieve its hydrocarbon strategy. Firstly, it reached an agreement with the neighbouring countries of Egypt, Lebanon, and Israel on the delimitation of the

EEZ. After that, it launched and successfully concluded three Licensing Rounds in 2008, 2013, and 2017. As a result of these procedures, there are in force nine Exploration Licenses (for Blocks 2, 3, 6, 7, 8, 9, 10, 11, and 12). The Licensing Rounds (especially the 2nd and 3rd) attracted significant interest from major companies of the oil and gas sector, such as ExxonMobil, ENI, and Total, which shows the prospective of this frontier area.

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Gas Exploration Activities in Cyprus’s EEZ

The discovery of the giant Zohr field in Egyptian EEZ, just a few kilometres away from Cyprus Block 11, revealed a new geological play and highlighted the perspective of the area

he subsequent discoveries in Cyprus EEZ confirmed that the geological model extends more widely in the Eastern Mediterranean region. These results bode well for Cyprus and the region, adding to its reputation as an emerging gas region. Considering the other discoveries in the East Med region, they attracted great attention amongst major players. This attention has been captured lately through the interest of major players to acquire new licences. ExxonMobil has already been granted licences for blocks southwest of Crete and Egypt during the recent licensing rounds. It is eyeing more prospects, including opportunities in Israel. Chevron has also extended its interest in Egypt, gaining rights to three offshore blocks, as well as in Cyprus and Israel, by taking over Noble Energy’s shares in the Aphrodite, Tamar and Leviathan gas fields. The Exploration activities of the Cyprus licensees led to the discovery of three gas fields, namely Aphrodite in Block 12 (2011), Calypso in Block 6 (2018) and Glaucus in Block 10

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(2019). For the Aphrodite field, Cyprus granted its first exploitation license in 2019. According to the approved Plan of Development, the gas that will be produced from the “Aphrodite” field will be transported to Egypt through a subsea pipeline and be liquefied in the Dike LNG plant to be exported via LNG (Liquified Natural Gas) carriers to Europe and other markets according to demand. To facilitate these plans, Cyprus and Egypt have concluded the discussions and agreed on the text of an Intergovernmental Agreement (IGA) concerning a direct submarine natural gas pipeline from Cyprus to Egypt in 2018. The Agreement aims to promote the transport of natural gas from Cyprus to Egypt via the development, construction, and operation of a direct submarine pipeline across the respective EEZs of the two countries for re-export to Europe in the form of LNG. The other discoveries (Calypso and Glaucus) are currently under appraisal. The consequences of the COVID-19 pandemic had a negative impact to the oil and gas industry worldwide last year, and have delayed the exploration program of the

The East Med region has huge potential to supply the EU and international markets with natural gas

licensees. Exploration activities are now progressing, and more discoveries are expected in Cypriot EEZ. The East Med region has huge potential to supply the EU and international markets with natural gas. Since the Tamar discovery in 2009, around 2,100 BCM (Billion Cubic Meters) have been discovered between Cyprus, Israel and Egypt. Once countries in the region began hydrocarbon exploration and production activities, it was only a matter of time before reaching the common realization that the only way to monetize East Med offshore gas discoveries sustainably was through regional cooperation and coordination. By creating synergies to utilise new and existing infrastructure, neighbouring countries in the east Med region may create strong alliances to create the «East Med gas corridor» to Europe, consisting of different gas sources, routes and export facilities, thus enhancing the energy security of the countries themselves, of the region and Europe more broadly. In this respect, hydrocarbons are a key component that could lead the wider area toward an era of peace and prosperity.

Cooperation Cyprus and Serbia could cooperate in Energy Efficiency and Renewable Energy Sources (RES), especially in the deployment of solar energy, for instance via exchanges of extensive experience and know-how regarding application and installations of thermal energy, solar systems as well as photovoltaic systems. Furthermore, the Applied Energy Laboratory could participate in an exchange

of know-how / experiences and on practical aspects concerning the testing of solar thermal collectors and systems. The sector of innovation and research is steadily developing activities and synergies through several universities and rresearch centres between the two countries, in areas such as RES, energy efficiency, electricity management, energy storage and hydrogen.

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Photo: Diyana Dimitrova / Shutterstock

CYPRUS

Commitment Along with other EU member states’ efforts to meet the EU targets toward the green transition, Cyprus is committed to increase the share of Renewable Energy Sources (RES)\ and improve energy efficiency for 2030. Achievement of these goals by strategy and design make Cyprus’ transition to climate neutrality attainable based on the comprehensive National Energy and Climate Plan (NECP - prepared in January 2020).

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European Energy Security The production of indigenous gas in Cyprus EEZ, when materialized, will allow the construction of the necessary infrastructure for exports, such as subsea pipelines, liquefaction facilities, and others espite the obvious direct (e.g., economic revenues, economic development) and indirect (e.g., security of supply, jobs) advantages for Cyprus, this will also enhance the geostrategic position of Cyprus in the region and could contribute to the EU’s security of supply and diversification of routes. Through these export facilities, gas from the Eastern Mediterranean region will be transferred to European countries and contribute to supply diversification. The abovementioned plans for the monetization of the Aphrodite field could allow for the transport of the first molecules of East-

ern Mediterranean gas to the EU, thus contributing to the European Union’s security of supply and diversification of sources and routes. The Republic of Cyprus, in the context of its external energy policy, has promoted in recent years trilateral as well as quadrilateral cooperation between Cyprus and countries such as Greece, Israel and Egypt. Moreover, in the context of regional cooperation, which the Republic of Cyprus promotes and actively supports, the East Mediterranean Gas Forum (EMGF) was founded by seven countries of the region. The founding members are Egypt, Cyprus, Greece, Israel, Italy, Jordan and

When assessed from a different perspective, in order to achieve its goals regarding hydrocarbon exploration and exploitation activities, Cyprus will need a skilled local workforce

Palestine, while France was approved to join in March 2021. The Forum enjoys the full support of both the European Union and the United States of America. It is a platform for structured dialogue on technical and trade cooperation between importing, exporting, and transit countries to the natural gas pathway. The Forum also aims to create a regional gas market, while also exploring possible mechanisms to make the Eastern Mediterranean competitive in the global gas market. EMGF activities include the development of a Long-Term Strategy (LTS) for the EMGF and two new initiatives on “Gas Decarbonization” and “LNG as a fuel for vessels”, in line with global environmental trends. Finally, when assessed from a different perspective, in order to achieve its goals regarding hydrocarbon exploration and exploitation activities, Cyprus will need a skilled local workforce. In this respect, MECI has funded specialized training programs for public servants dealing with hydrocarbon issues, in order to improve their professional skills. For the private sector, MECI has funded scholarships for undergraduate as well as post-graduate degrees. In brief, the mid-term strategy of Cyprus is to develop a local workforce capable in supporting the expected expansion of the oil and gas industry.

SPECIAL EDITION

CYPRUS

The vision of Cyprus in the field of hydrocarbons is to become part of the energy map of the Eastern Mediterranean region and acquire a decisive role in energy developments in the region. At the same time, the oil and gas industry aim at contributing to sustainable economic development and, ultimately, to the prosperity of Cyprus's citizens. 68

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By creating synergies to utilise new and existing infrastructure, neighbouring countries in the east Med region may create strong alliances to create the «East Med gas corridor» to Europe, consisting of different gas sources, routes and export facilities, thus enhancing the energy security of the countries themselves, of the region and Europe more broadly. In this respect, hydrocarbons are a key component that could lead the wider area toward an era of peace and prosperity.