Posted on July 22, 2013

Recent natural gas discoveries make Cyprus the natural focal point for a new energy boom that would fuel an unprecedented economic recovery in Europe, and open the way to peace and prosperity for several countries bordering the Eastern Mediterranean, an industry veteran told a conference in Nicosia on Friday.

Speaking at the Second Annual Cyprus Natural Gas Conference at the Cypriot capital’s Hilton Park Hotel, Qatar-based analyst Roudi Baroudi predicted a new era for the region in general and Cyprus in particular.

“Cheaper gas supplies via Cyprus could do for Europe what shale formations are expected to do for the US: restore competitiveness and ignite a continent-wide recovery,” he said during his presentation. “Following years of crisis, we could be looking at nothing less than the reindustrialization of Europe.”

“No other region’s energy prospects have anything like the Eastern Med’s potential,” he added, “not just to jumpstart a revamp of EU energy policy that serves common interests, but also to rescue Europe’s floundering economy by using more affordable energy to regain competitiveness.”

Completing what he dubbed the “Peace Pipeline” would also offer a host of benefits for the producer nations, especially Cyprus.    

“All of the countries [with offshore hydrocarbon deposits] enjoy strong potential to reap considerable rewards from exports of natural gas and/or oil, but only one enjoys the unique combination of advantages that make Cyprus the clear choice to serve as the Eastern Mediterranean’s energy hub,” said Baroudi, who serves as CEO of Energy & Environment Holding, an independent consultancy in Doha.

“The reasons for this special status are many, and they stem from several kinds of considerations, from geography and geology to domestic and international politics,” he explained. “When it comes to determining a center of gravity for development of a new energy industry for the region, all signs point to Cyprus.”

Roudi Baroudi

Baroudi then listed several of these factors, among them the political independence afforded by Cyprus’ EU member status, the extent of its own recoverable and potentially recoverable reserves, and the legal, regulatory and institutional arrangements already in place or in the process of being implemented. In addition, he said, the island nation is well-situated physically, not just to be a shipping point to markets in Europe, Asia and Africa, but also to serve as a collection point for other regional countries expecting to start producing gas in the coming years.

Recent years have seen a series of geological successes in the Eastern Mediterranean, with large deposits indicated off the coasts of several countries, including Cyprus, Lebanon, Israel and Palestine. Given the economics of oil and gas development, many experts assume that all or at least some of them should share the infrastructure required to get these reserves to market. The core of this infrastructure would consist of the machinery and starting point for an undersea pipeline to Italy, and eventually a liquefied natural gas (LNG) plant whose output would then be shipped to customers in locations not served by this or other pipelines, particularly electricity producers.

As Baroudi explained on the sidelines of the conference, it is not just geography and institutional preparedness that make Cyprus the only realistic candidate to host that infrastructure: it also enjoys good relations with each of Israel, Lebanon and Palestine – something none of the others can say.

Apart from the economic benefits, Baroudi said both Europe and the region stood to realize major diplomatic, social and political gains as well.

“The Cypriots will be the go-betweens, working with all sides to make this work. When Cyprus is pumping both Israeli and Lebanese gas to mainland Europe, two countries that have been at war for six decades will become de facto – if indirect – partners,” he stated. “That alone will provide a powerful disincentive for them to resume armed hostilities and might even pave the way for reconciliation.”

The same phenomenon would set a good example for relations between other rivals in the region, Baroudi stated, notably Greece, a strong ally of Cyprus, and Turkey, which has occupied the northern third of the island since 1974.

“Provided the necessary goodwill and self-interest are forthcoming, there’s no reason why, one day, another pipeline could not be laid that would bring gas from Cyprus to Turkey,” he said. “Think about that. The Greece-Turkey-Cyprus row and the Arab-Israeli conflict have defined the region’s politics for decades – and now we have a chance to end both of them, or at least to defuse many of the tensions involved.”

Both during his speech and in comments afterward, Baroudi stressed that the Eastern Med would provide a huge increase for Europe’s energy security by “complementing – not competing with – existing and future supplies from Russia”.

“With its own reserves dwindling, the EU has long been searching for a way to reduce its dependence on Russian gas,” he explained. “Having a safe and reliable alternative passing through the territory of one of its member states is the perfect solution, especially when considers how much money will be saved, in the long run, by not having to pay transit fees to multiple countries along the route.”

On both the symbolic and practicable levels, Baroudi said Cyprus offered a unique opportunity to Europe if its institutions stepped up with the necessary political and financial support.

“For one thing, it would vindicate Cyprus for having remained inside the EU despite the hardship caused by its recent banking crisis. For another, it would signal Cyprus’ recovery from these travails and arrival as a major partner for Europe,” he said. “Perhaps most importantly, it would reinvigorate the Barcelona process and therefore the instinctive cooperation envisioned by the statesmen who founded the EU in the first place.”