CHARALAMBOS [CHARLES] ELLINAS - CHEVRON'S NEW FEES LIMIT CYPRUS' PROFITS FROM ''APHRODITE'' -Filenews 19/10
Cyprus' profits from the "Aphrodite" field will be low, if the new fees requested by Chevron and its partners for the use of the pipeline to Egypt are accepted, Charalambos (Charles) Ellinas told KYPE. He described Nicosia's negotiating position as difficult, estimating that the American company is not pressured to proceed with production, as it prioritizes other, more profitable projects.
At the same time, he expressed the assessment that there are good chances that the electricity interconnection between Crete and Cyprus will proceed, while he warned of pressures on Europe's energy sufficiency if the winter is severe and wind energy production is limited.
Chevron's Fees and Impact on Revenue
According to Mr. Ellinas, Chevron and its partners are asking for $3 per million British thermal units (MMBTU) for the use of part of the pipeline from Cyprus to Egypt. As he mentioned, this charge significantly affects the revenues of the Republic of Cyprus from the reserve.
"It reduces Cyprus' revenues by $3 and makes Cyprus' position very difficult," he said, underlining that "if we retreat our profit from 'Aphrodite' will be low."
He added that additional costs may arise if the negotiations with Israel for the joint "Aphrodite-Isai" field do not reach a positive solution.
Mr. Ellinas compared the case with that of the "Kronos" field, arguing that Cyprus accepted greater risks, which the Italian Eni asked to undertake, in order to proceed with its exploitation. In his estimation, Cyprus' profits from this deposit will be "meagre".
Why Chevron prioritizes "Leviathan"
Asked about Nicosia's choices, Mr. Ellinas said that the pressure is on the Cypriot side, as Chevron has large projects in other regions of the world, which it places higher on its priorities.
As he explained, the company has decided to make a large investment in the Israeli "Leviathan" field, increasing production and doubling exports to Egypt.
This project, according to him, is more profitable than "Aphrodite", as the cost per unit corresponds to about 60% of the cost of the Cypriot deposit. Under these circumstances, he estimated that Chevron can wait until Cyprus retreats.
He also referred to the company's large investments in Guyana and Venezuela, stressing that the Cypriot side needs to weigh the cost and benefit of its choices.
The possibility of utilization through an LNG terminal
Mr. Ellinas raised the question of whether Cyprus should wait for the results of ExxonMobil's investigations in Cypriot and Egyptian plots.
As he mentioned, if the exploration succeeds and the company's reserves are doubled, the goal is to create a liquefied natural gas (LNG) export terminal, to which natural gas from "Aphrodite" could also be channelled.
He argued that it is not worth proceeding with the exploitation of the deposit just to complete the project, without substantial benefit for Cyprus.
Positive assessment for the electrical interconnection
Regarding the electricity interconnection between Crete and Cyprus (GSI), Mr. Ellinas expressed the belief that there are good chances of implementation.
He interpreted the intervention of the US Secretary of State and the statement of the US ambassador to Cyprus that he "sees light at the end of the tunnel" as indications of behind-the-scenes efforts by the US, France and Greece to find a solution with Turkey.
"Turkey, although it takes a tough position, has not gone to the point of no return," he said.
He added that Greece must proceed with the issuance of NAVTEX by the end of October, estimating that, if it is issued and Turkey does not intervene, the chances of subsequent problems will be limited.
Referring to the benefits of the project for Cyprus, he argued that the negative position of the Minister of Finance, Makis Keravnos, is not based on studies. He added that the serious study will come from the European Investment Bank.
He also called the Turkish demands "absurd and unfounded", saying they are rejected by the European Union and supported only by Turkey and the Tripoli government in Libya.
"Turkey and Libya forgot that there are islands in the Aegean and that there are Crete and Cyprus and they drew a line that divides the Mediterranean in two," he said.
Risks to Europe's energy sufficiency
In relation to high energy prices, Mr. Ellinas estimated that Europe will face an energy crisis if a severe winter with calm conditions and insufficient wind energy production are combined.
As he mentioned, European reserves are quite low and replenishing them is difficult, as Europe and Asia compete for smaller quantities of LNG available.
According to him, about 20% of LNG exports from Qatar and the United Arab Emirates no longer reach their destination, which intensifies competition and keeps prices high.
He estimated that the situation will become more difficult next year, when it will be necessary to replenish the stocks that will have been consumed during this winter.
"Prices will remain high and the cost of energy in Europe will be high," he said.
Mr. Ellinas also criticized Europe's decisions on climate change, arguing that the targets set burden its energy costs and competitiveness.
Citing electricity costs of 8 cents per kilowatt hour in China, 18 cents in the US and 28 cents in Europe, he wondered how the European economy can compete under these conditions. He attributed the difference to European climate decisions, noting that, according to the data he cited, Europe accounts for 6.5% of global pollutants.
