WHY CYPRUS IS THE ONLY OPTION FOR A

SUSTAINABLE ENERGY HUB IN EASTERN

MEDITERRANEAN.

Energy Hub
Sub-sea Pipelines

By Frixos Thalassetis
December 2014
MBA Oil & Gas Management
M.A. Management
Email:frixosthalassetis@hotmail.co.uk
Tel: 99488165

Preface
This study is made to highlight the importance of establishing Cyprus as the energy
center of global significance and benefits for all countries of the Eastern
Mediterranean region and the reasons that make Cyprus the only country in the region
who can create the conditions for peace, security, cooperation and prosperity for all
countries, through an energy center.
The study consists of three parts:
In the first part the prerequisites for the establishment of an energy hub are discussed
as well as the factors that prevent the creation of an energy hub.
The second part lists the factors and data that make Cyprus as the ideal location for
establishment of the energy centre of Eastern Mediterranean, but also discuss the
benefits that would be earned by each of the partner countries in the region and
beyond.
The third part refers to the impact of non-creation of an energy hub in Cyprus, as well
as comments and concludes.

PART ONE
Regional Clusters
In recent years the concept of regional cluster is recognized as an essential part of
regional development strategy. Governments of countries, local authorities, industry
clusters in various sectors in the private sector are created and those who have dared
to unite in an effort to improve areas and the competitive position of their regions,
achieved remarkable results. This is evident from the activity of supranational
organizations like the EU and the World Bank which finances 309 active regional
projects (World Bank data 2013). The concept of regional cluster took its present form
in the early 1990s, after the work of Michael Porter The competitive advantage of
nations (Porter, 1990) which discloses some of the competitive advantages that arise
as a result of geographical proximity collaborations which reduce the cost of outputs
and contribute to the development of a common base for supply of raw materials,
uniform processing / production, exports and transfers, sales promotion etc. and
contributes to the availability of skilled labour, the diffusion of expertise, work and
knowledge experience of a particular industry to all participants.
2

Prerequisites for the Creation of A Regional Energy Center are:

The common desire of hydrocarbons exploitation between neighboring
countries which have resources to develop concluding to bilateral agreements
which clearly define the relationships and terms of cooperation.
Respect among participating countries as their interests obligations and rights
always in accordance with international law.
Acceptance of all cooperating countries in determining the location of the
energy center processing and storage of hydrocarbons. The location must be
strategically selected to be offered for easy and cost-effective transportation of
hydrocarbons from all partner countries to the energy center which also needs
to be offered as the ideal location for exports of liquefied natural gas and other
derivatives. The location of the energy center must geopolitically give
comparative advantages over other options in the other partner countries.
The joint decisions on treatment infrastructure (technical specifications, and
construction schedule) which will be built with a joint financial participation and
decisions regarding the allocation of profits, as well as marketing and
transportation of finished products in international trade.
The joint participation in guarding and security of the installations of the energy
center.

Deterrent factors of an energy centre creation are:

Desire of countries that could be involved in a peripheral hub to develop
individually (national) hydrocarbon reserves, regardless of the opportunities
arising from the energy centre.
Inability devising a common interest agreement between the potential
participants in the peripheral cluster.
Failure to protect the energy centre of hostile action, terrorist attacks or
sabotage.
Inability to attract participation of key neighbouring countries in the joint
development operations of hydrocarbons and the creation of an energy centre.
Do not find sufficient quantities of hydrocarbons.

CYPRUS ENERY CENTRE PLAN

Participants
Identification

Planning
Front-End Agreements
Joined Business Plan

Factor Conditions

Governments Roles

Forecasting
Demand Conditions, Costing

Production Structure

Procurement
Suppliers location
Way of procuring raw
materials and
components

Processing
Location of processing facilities
Technology of processing units

Finished products
Type
Storage & Inventory keeping
Distribution channels
Distribution logistics

Control and Evaluation

PART TWO
Factors and data which make Cyprus the Ideal Location for Creation of the
Regional Energy Centre
Safety
Cyprus is an oasis of safety in turbulent Eastern Mediterranean region, as is probably
the only country in the region which has not been involved in any kind of aggressive
act of war and has not been attacked since 1974. Also Cyprus has never moved
aggressively against any country and has no conflict with any country other than
Turkey, unlike other countries in the region which very recently have been involved in
various types of military operations resulting in the death of many people and
damages of several billion in buildings and energy installations. It is worth mentioning
the fact that safety is the key factor for selecting a country once as has repeatedly
been observed, such facilities are the first to suffer from attacks of various terrorist
4

groups resulting in high risk that forbids the creation of an energy centre in areas of
action of such elements.
Political Stability
Since the 80s Cyprus enjoys political stability and mutual respect among the political
parties. Cyprus is an EU member since 2004, is a member of the United Nations, part
of the euro zone and is a well-governed democracy. It is very important to note that
the above features are essential to the creation of an energy centre for reasons such
as reliability and creation of conditions for cooperation between countries that would
not collaborate in other circumstances.
Neutrality
Cyprus has always maintained excellent relations with all neighbouring countries and
proved that in times of need. Through this attitude of consolidated long-term
relationship and trust with neighbouring countries, managed in many cases to mediate
and assist peace between them. Cyprus also manages to maintain friendly relations
with three superpowers, China, Russia and the United States, which maintain a keen
interest in the Eastern Mediterranean region.
Transparency
The Republic of Cyprus has always been marked by open and realistic approach and
positioning in international issues. In its agreements with other States and all
international obligations always behave without prejudices and with respect for
international law.
As a member of the European Union, Cyprus is susceptible to checks concerning
transparency, through very strict framework and regulations thus ensuring energy
centre operation in the country with transparency and conformity to international laws.
Recognition
The Republic of Cyprus is an independent state since 1960 and a member of the EU
since 2004. Joined the Euro zone in 2008 and is a permanent member of the United
Nations.
Geopolitical Position
Cyprus is located between three continents Europe-Africa-Asia and is the eastern
border of Europe. Located near the Suez Canal is geographically ideal for the creation
of an energy centre since the position of Cyprus favours cooperation with
neighbouring countries without the need of each partner country to intervene outside

its Exclusive Economic Zone (EEZ) and the EEZ of Cyprus, and without requiring
approval and passage rights of third countries.
The EU could act as a catalyst in the creation of an energy centre in Cyprus after the
enormous interests that would be created for the EU and its ability to control and
enforce European standards that ensure transparency and proper functioning. The
creation of such a project in Cyprus, a country member, imposes EU involvement and
investment.
Ability for Creation of Partnerships
The Republic of Cyprus because of friendly relations with neighbouring countries and
the substantial and practical assistance provided in emergency circumstances, has
the potential to create a collaborative environment, security, prosperity and peace for
all neighbouring countries since the countrys reliability, impartiality and the European
background can guarantee to each participating country that its interests are
safeguard.
Characteristic of the above is the tripartite agreement between Cyprus - Egypt Greece, the planned tripartite agreement between Cyprus - Israel - Greece and the
interest shown by Lebanon and Jordan in cooperation with the Republic of Cyprus.
It is worth mentioning that the possibility of making Cyprus the actor for decisive
peace and security in the region is of enormous importance for all countries in the
region and world peace.

Benefits of each country by the creation of an energy centre in

Cyprus
Israel
The country's proven oil reserves are 11.5 million barrels of crude oil and 10.1 trillion
cubic feet of natural gas though is expected to hold much more.
Israel is proceeding with the development of hydrocarbon deposits and seeks how to
export since already have been decided by parliament (Knesset) to export 40% of
underwater deposits. Israel for security reasons and social reaction to environmental
issues does not want to become energy centre and needs cooperation with a reliable
partner such as Cyprus, which can be a bridge to other countries in the region to
create conditions for cooperation and common benefits for the countries of the region.

It is worth mentioning the importance of having the interconnector pipeline creation

between Cyprus - Israel - Greece - Europe (East Med) provided of course the technoeconomic studies demonstrate the technical and economic viability of this project,
something for which reservations and concerns have been expressed. The pipeline
would be an additional option for exports and would work alongside other facilities for
exporting hydrocarbons (LNG, GTL, and GTC etc.).
Israel will also benefit by establishing good relations with neighbouring states,
economic benefits and more substantially Cyprus may be for Israel a timeless, reliable
partner for cooperation on energy issues, economic, security issues in the region and
more.
Also Cyprus could create conditions for the countrys cooperation with countries that
could not be materialized otherwise because of the special role and relations that
Cyprus has with them. The political crisis in recent days resulted in the dissolution of
the government and the need for reconstitution on March 17, 2015 as planned, is
possible to vary the positions of Israel around the exploitation of hydrocarbons.
Egypt
Is the country with the highest consumption of energy in Africa. After the civil war, the
energy consumption increases and oil and gas production is reduced dramatically,
resulting in the country to require large supplies of hydrocarbons. Exploration for
finding new deposits is not intended to take place now. In September 2014 the country
launched its new degasification plant to import liquefied natural gas. Egypt would
benefit from the establishment of an energy centre in Cyprus since initially can be
supplied Cypriot gas from Block 12 through an offshore pipeline for local consumption
and if techno-economic studies demonstrate viability and profitability of natural gas
liquefaction at the liquefaction terminals of Egypt joint exports can be made with Egypt
until the completion of design, construction and operation of Cyprus facilities which
will allow the optimal exploitation of hydrocarbons coming from other sea plots in a
modern and efficient energy centre.
It is very important to mention that Egypt has not yet stabilized and any investments or
cooperation should be given a thorough investigation and examination due to multiple
risks involved in participation of Egypt in Cyprus energy centre. This cooperation will
ensure the supply of energy needed by Egypt and generate profits and opportunities
for cooperation and restoration of the country's relations with other countries in the

region. Very positive is considered the prospect of determining the EEZ of Egypt and
Greece in recent trilateral contacts.
Lebanon
Lebanon relies on imports to meet its energy needs. In 2010 made imports of 120,000
barrels of refined oil daily which was 90% of total requirements of the country.
Lebanon is trying to make its own exploration for finding hydrocarbons and has
separated ten sea plots for development .
Unfortunately, the country is often plagued by tensions and political turmoil.
Lebanon will directly benefit from the creation of an energy centre in Cyprus since is
dependant on hydrocarbon imports. Proximity of Lebanon to Cyprus can secure
energy supply for the countrys needs through building a subsea pipeline Cyprus Lebanon. In the event that explorations into the Lebanese EEZ prove recoverable
hydrocarbon reserves, then the above mentioned pipeline will be used to channel
Lebanese gas to Cyprus energy centre, for processing and export. Through the
energy centre in Cyprus, Lebanon could strain Lebanon - Israel relations to the issue
of determining the EEZ between the two countries and create additional opportunities
for cooperation and prosperity.
Syria
The production of both oil and natural gas has declined drastically since March 2011
when the civil war and sanctions were imposed in the country. The production during
the years 2008 - 2010 amounted to 400,000 barrels, and today is only 25,000 barrels.
It seems that the creation of an energy centre in Cyprus will benefit Syria by means of
hydrocarbons supplies from the energy centre for purposes of coverage of energy
needs and exploit its own new reserves when conditions permit that.
It is worth mentioning the importance of having the alignment of Syria with
international law and the participation and cooperation of Syria with the Cyprus Energy
Centre and neighbouring participating states.
Turkey
The country has tried with little success to find its own hydrocarbons (only 3% of the
countrys demand) and has enormous energy needs.
After just and lasting resolution to the Cyprus problem, restoration of the relations with
the Republic of Cyprus and respect to all states in the region and international law
8

Turkey could benefit from the creation of an energy centre in Cyprus by means of gas
supply through constructing a subsea pipeline from Cyprus, if techno-economic
studies demonstrate viability of the project and Turkey undertake the construction
cost. It is also understandable that Turkey will have additional benefits from
cooperation and creation of relations with countries in the region.
It is worth mentioning that despite the aspirations of Turkey itself and recent
placements of Russia thereof to make Turkey the energy centre of the region, this is
impractical because the country maintains bad relations with all its neighbours due to
its expansionist intentions therefore demonstration of trust by neighbouring countries
is unlikely in this, although is an essential element for the creation of an energy centre.
Greece
Greece with little proven oil and gas reserves is now trying to make its own new
exploration and exploitation of hydrocarbons. The country imports large quantities of
hydrocarbons to meet its needs. If and when there is technical feasibility and
commercial viability as well as security for the construction of a gas pipeline from
Cyprus to Greece in order to supply Europe as adjunctive method of exports from the
energy centre alongside exports of liquefied natural gas. The pipeline Israel - Cyprus Greece interests the EU and is one of the possible programs that would be subsidized
together the setting of electricity interconnection cable and construction of liquefaction
terminal.
Recent tripartite agreements between Cyprus - Greece - Egypt will help Greece to fix
its own EEZ with Egypt and Cyprus, but also the planned tripartite agreement Cyprus Israel - Greece will help Greece to obtain further cooperation with countries in the
region, creating more benefits.
United States of America
After the discovery of large reserves of shale gas is in the process of creating
liquefaction facilities for exports on a large scale. The chosen form of utilization of US
natural gas is liquefaction and transportation in special tankers for export due high
costs of extraction of shale gas. It seems that cooperation arising between the US and
Cyprus energy centre would be beneficial for the Great Power as already US interests
are participating in exploration and development of block 12 of the Cyprus EEZ by US
interests Noble Energy as the operator with participation of 70% the remaining 30%
purchased by Israel's Delek Drilling (15%) and Avner Oil Exploration(15%). Also the
9

fact that this cooperation with the energy centre could have benefits of alternative
product delivery method, which minimizes transportation cost for the US and
increases clientele. The US would have great benefit from the establishment of peace
in the region after having spent a lot of money for this purpose through funding and
military interventions. It also would create better relations with the EU, which would
become a partner on energy issues.
Some believe that US supports the creation of an energy centre in Turkey. But it is
now widely known that Turkeys relationship with all its neighbouring countries are
poor and those countries are potential participants in the energy centre. The
expansionist ambitions of Turkey and the challenges and tension created throughout
the region leave no room for such plans as nobody is able to trust Turkey for such a
serious investment, therefore Cyprus is the only option as a sustainable regional
energy centre with global significance.
Russia
Russia has the largest natural gas reserves in the world, is the second largest natural
gas producer of terrestrial reserves and third largest petrol producer in the world.
If Russia either acquire sea plot in Cyprus EEZ or invest in the construction of the
energy centre will have multiple benefits as cooperation with Cyprus energy centre will
be an extra element that would enhance the global presence of Russia in energy. Also
Russia will probably ensured mooring rights for its fleet at Cyprus ports and use of
military air bases for servicing Russian airplanes due to the protection of Russian
interests in Cyprus and the general protection of the energy centre. Another benefit
would also be the opportunity for closer relations with the US and the EU.
The participation of Russia in Cyprus energy centre ensures participation in profits
resulting from the energy centre which will supply the EU with hydrocarbons, thereby
reducing the potential losses that would arise from independence of the EU from
Russia in energy.
It seems that the settings for creating Russian gas pipeline to Turkey are not
establishing Turkey as an energy centre, but merely supply Turkey with gas due to the
abandonment of Russia's plans to build the South Stream pipeline to supply Europe.

10

European Union
Rising energy acquisition trends and production gap with hydrocarbon demand,
especially in the EU, puts the creation of an energy center in Cyprus as an enjoyable
challenge for the EU. The creation of the energy center will be held in the territory of
the EU, which has already demonstrated its interest and intention of financing various
energy projects such as the interface of electricity cable Israel Cyprus, East Med
offshore pipeline construction for gas transportation Cyprus - Greece -Europe and
natural gas liquefaction terminal in Cyprus.
EU invests a lot of money for world peace and this project will demonstrate EU's huge
project to build good relations with neighboring countries.
The creation of the Cyprus Energy Center will help EU to become more independent
from traditional suppliers in what this entails and the possibility of South Stream
pipeline abortion, creates a new media option for energy within an energy center
which can control. It offers options and possibility of multiple forms of hydrocarbons in
installations such as GTL, GTC, Urea plant etc.
The EU benefits of the control that can be exercised and will be available in many EU
countries. Of particular importance is the fact that companies from two European
countries, Italy and France are involved in exploration and development of Cyprus
hydrocarbons. Interest in financing Cyprus energy center has already been
demonstrated by European banks such as the Deutsch Bank.
For the EU, Cyprus, Greece, Italy and France are the European countries of the South
so supporting Cyprus energy center will contribute to combating poverty, improving
living standards, fighting against unemployment and creation of infrastructure.
United Kingdom
Even though United Kingdom had been one of the largest oil and gas producers in
Europe, today need to import both oil and natural gas to meet its energy needs. The
interests of British oil company BP which operates internationally in 80 countries,
making business across the spectrum of activities related to hydrocarbons. It seems
that in the case of participation of the United Kingdom through BP in the energy center
of Cyprus, will be very beneficial for the UK because of the relationships with the
Republic of Cyprus, military bases, and the possibility of surveillance and protection of
interests and the resolution of disputes in the region.

11

An additional economic benefit would arise from participation in financing the creation
of Cyprus energy center with a share in the profits.
France

Italy

North Korea

Due to the participation of the above countries with state companies licensed for
exploration and development of hydrocarbons in Cyprus EEZ, will benefit by acquiring
further expertise in energy centers, the negotiability of hydrocarbons from the Cyprus
Energy Centre and strengthen their presence in hydrocarbons sector worldwide.
For example, North Korea is the largest LNG buyer in the world and would be supplied
with large quantities of liquefied natural gas from the energy center of Cyprus
Cyprus
Cyprus has proven natural gas reserves of 4.5 trillion cubic feet, while it is estimated
that the total reserves may reach 60 trillion cubic feet, excessive amount for Cyprus
needs ,which imposes export of big quantities. The Republic of Cyprus has great
benefits from the creation of an energy center in the country since it would maximize
the benefit from the exploitation of hydrocarbons and would acquire great geopolitical
importance and value to many countries, with all that this entails. Multiple benefits
would be generated for Cyprus economy and conditions for a realistic, fair and lasting
solution to the Cyprus problem would be create, as the solution of the Cyprus problem
will occur only when the benefit from the solution of the Cyprus problem is larger than
the non-solution for Turkey.
It is worth mentioning that the creation of an energy center in Cyprus and the high
dependence of Turkey in energy will consequently push to the normalization of
relations with all countries in the region in order Turkey receive the benefits that would
arise from this. Additional benefits for the Republic of Cyprus would be the acquisition
of expertise, jobs creation, the upgrading of international relations, the creation of new
business activities and economic recovery.

PART THREE
Consequences of non-creation of an energy center in Cyprus
The creation of the energy center will create huge benefits for all partner countries,
both economically but also in establishing good neighbor relations and enhancing

12

good relations between them. Unfortunately factors such neighboring countries

causing tension as well as interests of third parties and other factors may lead to noncreation of an energy center in Cyprus and hence anywhere else in the region since
no other country in the region have the necessary features (security, ability to form
partnerships, stability, etc.) resulting in the continuation of tension and lack of
cooperation between countries of the region and with additional risk hydrocarbons
cause more tension and conflict between the countries of the region.
Additional consequences would be:
Failure to successfully meet the needs of each country as some countries need to
exploit their hydrocarbon reserves while others have the need to be supplied with
hydrocarbons to meet their energy needs would cause besides challenges across
countries and political crisis, internal tension and popular reaction.
The economic consequences of non-creation of an energy center in Cyprus will be the
loss of large profits from the inefficient use of hydrocarbons of countries in the region,
jobs losses, experience in cluster exploitation of hydrocarbons.
Some of the countries with hydrocarbons reserves may not be able to exploit the
reserves due to lack of options and will have to delay their recovery. The cooperation
of countries will not take place in hydrocarbon issues and will not promote expansion
of economic cooperation in trade, tourism, natural resource management, would not
promote conclusion of development agreements, setting EEZ and entrepreneurship.
As a result of not establishing an energy center in Cyprus some countries will not
develop their hydrocarbons while others may extrude to make wrong exploitation
choices for hydrocarbons with loss of profits or compromise options with the risk of
exploitation failure of their natural resources.
Continued tension between the countries causes superpowers often having to
intervene in the areas for peace between the rival countries in the presence of
warships and aircrafts, which has a high cost for them. The cooperation of the Eastern
Mediterranean through an energy center will resolve many of these issues.
Commentary and Outcome
The hydrocarbon sector is highly profitable and can yield huge benefits if the
exploitation of hydrocarbons is made in a modern, efficient and effective energy
center.

13

The creation of an energy center in Cyprus will have the features of security, political
stability, neutrality, transparency, recognition, geopolitical position and partnerships
creation potential to have huge and multiple benefits for the countries of the region
and beyond, such as economic benefits and profits recovery of economic crisis,
cooperation and peace among themselves, establish trade and business relations and
tourism, geopolitical interests, defense agreements and collaborations, meet their
energy needs, etc.
A unique opportunity turns up for peace, security cooperation and prosperity in
troubled Eastern Mediterranean that everyone should take very seriously as it can be
done in a climate of generating profits and interests for all (win - win).
It is very important to be able to evaluate and predict the implications of any new
hydrocarbon discoveries in Cyprus and Israel explorations as well as future Lebanon
and other neighbors explorations and the resulting need for mass utilization in various
ways. Such options are the liquefaction of natural gas in land terminals LNG *, the
transport of natural gas via subsea pipelines, the conversion of natural gas into liquid
fuels (gasoline, diesel, kerosene, etc.) in GTL facilities ** and conversion of natural
gas into various petrochemical products in GTC facilities.
It is very important to mention that the above methods of recovery can coexist if there
are sufficient reserves to be used in an energy center and further their coexistence
would create more profit and options for the energy center and the participants and
the potential use of larger volumes of natural gas to more profitable choices of use
and accessibility to many different markets selling oil products through a variety of
products that would be able to produce.
LNG*=Liquefied Natural Gas Read more about LNG in the study of Frixos
Thalassetis' CYPRUS LIQUEFACRION TERMINAL, INSTALLATIONS SECURITY
AND ADDITIONAL OPTIONS' accessible at www.cyprus-hydrocarbons-frixos.com
GTL ** = Gas to Liquid Read more about GTL in the study of Frixos Thalassetis
'Three Suggestions About Cyprus Hydrocarbons Offered for Foreign Investors'
accessible at www.cyprus-hydrocarbons-frixos.com
References
U.S. Energy Information Administration web site: http://www.eia.gov/naturalgas/

14

Wood T., 2007 The Natural Wealth of Nations: Transformation of Oil-and GasProducing Economies Cisco
http://www.cisco.com/web/about/ac79/docs/wp/Transforming_Energy_0629b.pd
Salhani C., October 2014 http://oilprice.com/Geopolitics/Middle-East/How-Safe-AreTurkeys-Oil-And-Gas-Pipelines.html
McKillop A., 2014 Oil and Gas Geopolitics: Why the EU Has No Leverage Over
Russia in The Ukraine Stand-off
http://globalresearch.ca/oil-and-gas-geopolitics-why-the-eu-has-no-leverage-overrussia-in-the-ukraine-stand-off/5372094
Engdahl W., 2012 Israels Levant Basina new geopolitical curse?
http://www.voltairenet.org/article172827.html
Klare M., 2012 The Geopolitics of Oil: Old and New Presentation accessible at
http://www.aspo2012.at/wp-content/uploads/2012/06/Klare_aspo2012.pdf
Thalassetis F., 2013 Cluster Logistics in Oil and Gas Midstream Sector: Planning
Cyprus Supply Chain MBA Dissertation -Coventry University London Campus

15