London — The leaders of Greece, Cyprus and Israel on Wednesday reaffirmed their support for the planned 1,900 km EastMed gas pipeline to bring gas from the East Mediterranean via Cyprus and Crete to Greece by 2025, but stopped short of announcing a formal intergovernmental agreement.
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The EastMed pipeline -- under development by a 50:50 joint venture between Italy's Edison and Greece's DEPA -- would link into other planned pipeline projects in Europe so that Cypriot and Israeli gas could be piped onward to Italy and southeast European markets.
An intergovernmental agreement on the project -- estimated to cost around $8 billion -- could still be announced in the coming days, according to reports.
"We are planning to lay the EastMed pipeline from Israel, through Cyprus, through Greece, to Europe, something that will benefit our economies greatly and provide stability for the region," Israeli Prime Minister Benjamin Netanyahu said late Wednesday.
Netanyahu was speaking ahead of a trilateral meeting with Cypriot President Nicos Anastasiades and Greek Prime Minister Alexis Tsipras, a summit also attended by US secretary of state Mike Pompeo, underlining the US's commitment to helping Europe wean itself off its dependence on Russian gas imports.
"We think [the pipeline] would diversify energy supplies to Europe," Netanyahu said.
Tsipras said the establishment of the EastMed pipeline could "help both security dialog and economic development of the region," while Pompeo said the development of a gas corridor to Europe was "incredibly timely."
In a joint declaration late Wednesday following the summit, the four countries said only that they had agreed to "increase regional co-operation, support energy independence and security, and defend against external influences in the Eastern Mediterranean."
The EastMed pipeline project has not yet reached a final investment decision and it remains to be seen whether the pipeline will be built given the technical, economic, political and commercial challenges it still faces.
Building large-scale gas pipeline infrastructure could prove especially problematic given the varied geopolitical interests of the countries in the region, with Cyprus in particular in a difficult position given that it remains divided between Greek and Turkish Cypriots, complicating maritime area claims.
The pipeline would also have to compete with other export options, including in the form of LNG, with Egypt's two underused LNG export facilities also seen as a way to export Cypriot and Israeli gas resources in the East Mediterranean.
Analysts have also cast doubt on the EastMed project. Charles Ellinas, analyst at the EC Cyprus Natural Hydrocarbons Company, said Thursday he did not think the pipeline would proceed despite the political support from Israel, Cyprus, Greece, the European Commission and the US.
"These political developments are not enough for the implementation of the project," Ellinas said.
"EU governments and politicians do not invest in such projects and in the purchase and sale of gas. This is done by companies for profit. And this pipeline is not a profitable at today's gas prices," he said.
Ellinas said that in Israel, the gas would already cost around $4.50/MMBtu before it enters the pipeline, so by the time it reaches Europe and connects to the European gas grid, the price it will need to make the project economically viable would not be able to compete with prices in the European market.
In addition, the fact that the pipeline is technically challenging "makes it risky," Ellinas said.
The Edison/DEPA JV -- called IGI Poseidon -- sees the pipeline as key to enhancing European gas supply security through the diversification of both routes and sources.
The project is currently designed to have an initial capacity of 10 Bcm/year of gas to be sourced from the Levantine Basin offshore Cyprus and Israel.
The pipeline would also feed Cyprus' own market with an additional 1 Bcm/year.
It comprises four sections: a 200-km offshore pipeline stretching from Eastern Mediterranean sources to Cyprus; a 700-km offshore pipeline connecting Cyprus to Crete; a 400-km offshore pipeline from Crete to mainland Greece; and a 600-km onshore pipeline crossing western Greece.
The pipeline has EU support -- in 2015 it was included by the European Commission in the second Projects of Common Interest list, giving it access to EU funding. It was also included in the EU's latest Ten Years Development Plan (TYNDP).
Pre-FEED studies have confirmed the project to be technically and economically feasible, IGI Poseidon says on its website.
Development activities are currently focused on marine surveys along the route in order to improve routing accuracy and to finalize preparation of the tender packages for initiating the development phase, which would allow the project to reach FID status.
-- Stuart Elliott, Stuart.Elliott@spglobal.com
-- Edited by Alisdair Bowles, email@example.com