Egypt’s inter-connector deal with Cyprus part of historic strategy

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Egypt’s inter-connector deal with Cyprus part of historic strategy

By Dr. Cyril Widdershoven – Berry Commodities – Global Head of Strategy & Risk

After more than two decades, a real step forward has been made by Cyprus and Egypt, supported by Greece, to set up the first ever North African-European power inter-connector.

This is not new, as several projects have been started with the goal to connect the Southern Mediterranean with Europe. After decades of sub-sea gas pipeline projects, the Egyptian-Cypriot agreement is a major step forward.

Last week the Egyptian Electricity Transmission Company (EETC) signed an agreement with EuroAfrica Inter-connector to implement the electricity interconnection project between Egypt, Cyprus, and Greece.

The project has been set up after feasibility studies supported by Cyprus and Egypt.

The inter-connector, however, is just one major step in a long-term energy strategy of Egypt, now supported by the offshore gas boom in the East Med.

Already at the end of the 1990s, Cairo had set its sights on supplying gas to the European market, as part of the so-called Arab Peace Pipeline Project, connecting Egypt, Jordan, Syria and Turkey/EU.

This, however, was stopped by the Arab Spring and the Syrian civil war.

Still, the dream of connecting and linking Egypt?s energy future and potential to its most prominent markets in Europe has survived even the removal of president Husni Mubarak and the reign of the Muslim Brotherhood president Morsi.

The unexpected success of Egypt?s offshore gas exploration, combined with Israeli and Cypriot adventures, put the idea again on the table.

The ongoing discussions on a so-called East Med offshore gas pipeline connecting Israel-Cyprus via Greece to the European mainland can be seen as fitting into the Egyptian strategy also.

The latter has however not really addressed the participation of Cairo in the pipeline project.

Egypt?s drive to push forward the power interconnection with Cyprus and Greece show that energy security and security of energy supply is of the utmost importance not only to Egypt but also for the East Med region.

Linking up to the European electricity network is a strategic decision for Cairo, as it can choose out of several options to guarantee its own energy security.

At present, Egypt and several GCC countries, such as Saudi Arabia and the UAE, are setting up the same ?onshore? electricity interconnection too.

Some are indicating that Egypt wants to become a real energy hub, connecting power and gas grids between Europe and the Middle East, and maybe in future also East Africa.

By becoming the spider in the energy web, it not only will secure its own energy supply, as local demand is booming but also links its geographical and geopolitical position to energy.

By linking all, Cairo is becoming one of Europe?s most important energy hubs, as electricity and natural gas are playing a major role in the continent?s energy transition strategy.

It also can open up new inroads to monetize Egypt and MENA?s proposed multi-GW solar and wind projects.

With an expected energy thirst in Europe, especially in the Balkans, a market will become available which can be readily supplied.

Another possible political reason is behind the Egyptian push for the inter-connector.

By proposing Egypt?s position as a major energy transit hub, Cairo will become the main competitor of Turkey?s existing drive to become Europe?s main energy supply transit route.

Cairo can deliver vast volumes of natural gas, LNG and now also be the partner of choice for renewable energy supplies.

Still, not all has been dealt with yet. The Egypt-Cypriot interconnection entails a 310-kilometre (195-mile) cable under the Mediterranean to export electricity to Europe, valued at around EUR2 billion.

The cable will need to deal with immense subsea challenges, while construction needs to be finished with 36 months.

Phase 1 entails a capacity of 1,000 MW which can be upgraded to 2,000 MW at a later stage.

Even that politicians on both sides are keeping quiet, it can be expected that Cairo will want a quid-pro-quo deal, in which Cyprus and Israel will send their gas to Egypt to enter its LNG liquefaction plants.

Cairo will not support the deal if it is a one-sided deal, Cyprus will need to realize that.

Geo-strategically the deal is sound and should be implemented. Even if costs are high, the rewards of setting up the first real East Med power supply grid will be higher.

By increasing the overall interconnection, the first step towards real regional energy cooperation is established.

The next cornerstone will be to get a functional offshore gas production and transportation grid, taking advantage of regional demand while not locking in production to an offshore pipeline project to the Greece/Balkans. LNG will be a more attractive and viable road to take.

Power, gas and security need to be interlinked, to confront regional challenges and global energy demand.

The hope is now that the inter-connector will support gas cooperation between all.

Alexander the Great will be smiling that after more than 2000 years, his dream is becoming reality, a new Greek/Ptolemaic cooperation, not built on arms but on culture and energy.

By Dr. Cyril Widdershoven for