International Consulting – Solon , Executive Managing Director – Cyprus
The executive managing director of a new Cypriot consutancy that counts the prime minister of Greece amongst its clients discusses Cyprus‘s development efforts around oil and gas, and explains why he thinks the eastern Mediterranean should be thought of as the second North Sea.
You have a track record of 32 years as a high level civil servant, part of that time as the Director of Energy within the Ministry of Commerce, Tourism and Energy. You were also appointed to lead the world’s youngest national oil company, then known as KRETYK, but resigned after a brief stint. Why was that?
KRETYK started out as Cyprus’ National Oil Company (NOC), but nowadays can no longer be as an oil company in the traditional sense. When the government placed the implementation of the proposed LNG facility at Vassilikos on hold and started diluting the functions of the company, I immediately tendered my resignation. For KRETYK to assume its rightful place as a state entity for the nation’s reserves, the current management must set about hiring engineers and other skilled personnel capable of handling technical issues related to the hydrocarbons exploration and production. The orientation of the current board of directors is more theoretical than practical and much broader than disciplinary focused, and the company itself has been reduced to little more than a marketing mechanism for Cypriot gas. Any functions regarding hydrocarbons exploration and exploitation remain firmly rooted within the ministry and, even there, there is a distinct lack of political will to proceed with the LNG terminal which should form the centerpiece of any coherent national hydrocarbons strategy. Without it, hopes for revitalizing the national economy through the wealth accrued from oil and gas will remain unfulfilled.
What would attract real investment into Cyprus is not so much the reserves themselves, but rather the regional function that the country can play by virtue of its unique geographical positioning and political status as an EU member state. The island has the potential not only to be a natural gas player in its own right, but actually to serve as the primary market outlet for LNG for the entire Eastern Mediterranean region. It is precisely this latent potential that we risk squandering if we fail to invest in the Vassilikos LNG project.
For me, the Eastern Mediterranean should be regarded as a ‘Second North Sea’ The Israelis claim to have discovered 37 Tcf, while Cyprus anticipates an estimated 60 Tcf in blocks that only represent a fraction of our exclusive economic zone. Then there is the reserves potential of Greece, Lebanon, Palestine and Egypt to add to the mix. All of these interests will need to be serviced from somewhere and Cyprus is by a long way the best location for situating such a hydrocarbons service hub. The Egyptians have already signed an MOU for the Leviathan field because they recognize the potential value to be gained from servicing a region-wide hydrocarbons industry. They are seeking to source gas to feed two average-sized LNG production plants already in existence. Having the different regional stakeholders working together would also be a win-win situation for all, because we have much to learn from each other. Egypt, for example, has yet to explore its own deep water horizons and would most likely require external expertise and technology to be able to do so.
In your expert opinion, then, the LNG terminal is absolutely critical to being able to properly monetize Cyprus’ hydrocarbons wealth?
Absolutely! It is the only credible option on the table for harnessing Cyprus’ full energy potential. There is, of course, a plethora of other exciting proposals that would also greatly benefit the national interest, but these must be regarded as complements to the LNG terminal, not substitutes or alternatives. During my time as Director of Energy within the Ministry, a number of excellent ideas were floated. One proposal was for a long-haul electricity interconnector linking Israel with Cyprus and onwards with Greece and Italy. The electricity transmitted across that connector would be generated not only from natural gas, but also from renewable energy sources. The beauty here is it circumvents the storage problems traditionally associated with most forms of renewable energy. Being a small island, there is only so much electricity that the Cypriot network can tolerate at a single point in time, but the connector would instead channel any spare capacity towards meeting demand in mainland Europe, enhancing at the same time the security of energy supply in the region.
Another proposal is for the country to acquire refining and processing capabilities with a view to producing petrochemicals and developing a methanol plant. Already an Israeli company has conducted feasibility studies for the construction of such a facility, for the production of methanol from natural gas. Meanwhile the EU has been evaluating energy infrastructure projects of common interest to Member States including the proposal of a fixed pipeline from offshore Cyprus to mainland Europe via Crete. Each of these proposals demonstrates the transformative impact a well-managed development of the country’s hydrocarbon resources could have.
To what extent are we in a race against time to secure the financing for Vassilikos in view of the fact that global natural gas prices are changing and there is a window of opportunity for action?
It’s a peculiar situation. When I was leading KRETYK, stakeholders like Deutschbank were keen to go ahead with the financing, but our government fell asleep. They hide behind the poor excuse that we don’t yet have sufficient quantities of hydrocarbon reserves for the project to be economically viable. I contest this vigorously. The original estimation of the US geological survey was that there are a likely 1.76 billion barrels of oil between Cyprus and Egypt and 1.68 billion barrels of oil between Cyprus and Israel, Lebanon and Syria. This figure has now been revised upwards with Noble Energy declaring 3 billion barrels of unrisked oil potential in Cyprus and Israel at a conference in Houston last December. Furthermore Noble’s figure for natural gas is 4tcf based on their drilling in block 12. Noble are listed on the NYSE and cannot claim such vast quantities without having genuine grounds for doing so and without possessing technical studies to support their claims. In block 9, which comprises an altogether larger structure, conservative estimates cluster around the 17 Tcf mark. In short, there are already ample reserves to justify going ahead with the first train of the Vassilikos LNG terminal and to start marketing it. Global natural gas prices are indeed undergoing changes so there is a need for us to get our act together and get on with it as soon as possible. There is absolutely no justification for the current idleness. We have already lost roughly two years when we could already have been making a lot of headway.
Since leaving KRETYK you’ve launched your own oil and gas consultancy firm. Could you please introduce Kassinis International Consulting outlining the scope of its activities today and client base?
One of my top clients is actually the prime minister of Greece. Having divided the areas from Crete to the Ionian Sea into twenty blocks, the Greek government will soon be commencing the tendering process and we will be advising on the formulation of the relevant lease agreements.
Secondly, I am acting as consultant to a range of private sector companies involved in both upstream and downstream hydrocarbons activities. There is the Israeli company that is progressing with the establishment of a methanol plant. We are also advising companies from Norway and the US that are positioning themselves to provide pipeline and port / offshore services facilities. The geophysical enterprise PGS represents another big name client account.
We have established a broad regional focus providing consultancy services for the entire Eastern Mediterranean Basin which explains why we have a number of Israeli and Egyptian companies on our books. We also cover the renewables segment and provide counselling to the American Medical Centre (AMC) for upgrading Europe’s first zero-emissions, carbon neutral hospital. Many of the firms I now work with today actually already know me well from my participation in the international forums and foreign delegations to promote hydrocarbon exploration offshore Cyprus and to delineate Cyprus’ Exclusive Economic Zone (EEZ). They are well aware that I have always been an enthusiastic promoter of the region’s hydrocarbon industry and have a much more holistic perspective of what is going on.
You have also advocated leveraging energy policy to promote regional stability. Tell us about that.
I am a firm believer that this regional energy concept can be utilized to improve people’s lives and calm a region that has been beset by instabilities for many years. The same can be said for Cyprus’ own impasse with Turkey. I am myself a refugee from the occupied area of Cyprus and strongly believe that our hydrocarbon wealth can be a force for change in helping to unite the island.
Turkish Cypriot academic professors have even approached me with a view to delivering some seminars on energy policy at their universities. My reply to them was that I am very willing to do so provided that the Cyprus Problem is first resolved and then could sit down together and assist them in evaluating the hydrocarbon potential in the whole of Cyprus’ EEZ. At the moment there is zero activity in the Western, Northern and Northeastern parts of the EEZ and we don’t even know the hydrocarbon potential.
Turkish Cypriots need to believe in themselves and their own country, Cyprus. They need to understand the value of such resources and how they can be harnessed as an instrument to enhance livelihoods. Moreover, they must be wary of the dangers of gifting everything on a plate to Turkey. All Cypriots alike could potentially sell gas to an energy hungry Turkey at market prices. This would represent a win-win situation for everyone, even Turkey, but can only be applicable once the Cyprus Problem is first resolved.
What synergies can be harnessed with a view to Cyprus becoming an energy hub to service the region?
Our geographical placement makes us the obvious candidate to assume the position of regional hub. We could for example bring in the natural gas from Israel and Lebanon to liquefy it and then channel it onwards to European markets. They would still have the ownership of the gas and only pay a tolling fee for the liquefaction services depending on the throughput of gas processed, stored and exported. We could also act as a base for the oil field service companies and a centre of expertise delivering both professional services to the hydrocarbons industry such as accounting and legal counsel, and technical support. Egypt, for example, needs assistance in exploiting deep water plays at a time when a sub-optimal pricing policy had led to the rapid diminishment of their shallow water reserves.
There is even the prospect of supplying Egypt with natural gas and then examine the potential to supply gas to other Middle Eastern markets also, including both Jordan and Oman who have recently voiced an interest. In the interim period we could serve them using Compressed Natural Gas (CNG). This is a technique that has never been commercially tried in the region, but which theoretically should work. The Mediterranean Sea is after all not so rough, with maximum wave heights of 8 metres. The same method could also be used to serve Lebanon and the Greek Islands until the point where they can develop and extract their own reserves.
You are now the President of an “Energy Training School & Research Center” within the Institute of Professional Studies of UCLan Cyprus. What is the role of this center and how important is it for the future success of the Island?
The idea was to establish a vocational school dedicated towards training up Cypriot technicians to be involved in the regional oil and gas industry. Previously I had conducted an evaluation of the preparedness of the national workforce to service what is for the island an entirely new industry and have assisted in the preparation of a published white paper on the issue. The first year we had around 67 students enrolled and this year the numbers are expected to be more or less the same. We are about to set-up a laboratory for practical training in four disciplines – electrical, mechanical, drilling and rig services, welding and pipe fitting – and shall shortly be adding a sixth module for HSE. We will be bringing in experts from abroad to teach them and conduct the necessary number of hours of practical exposure for them to get their professional certificates. A welder for example, aside from passing his or her exams needs a minimum 320 hours of practical experience prior to attaining certification. If we are to embed the proceeds of Cyprus’ hydrocarbon wealth back into the local community, it is going to be of paramount importance to have Cypriots carrying out these sorts of tasks rather than just relying on parachuting in foreigner expatriates. The same can be said for any LNG liquefaction plant. The operators of these facilites should be people from the local area.
Are you done with your career as a public servant? Could you be tempted back to the public sector in the future?
I have done my time. That chapter is now closed. I very much enjoyed contributing from within the system, especially when I look back at all that we achieved – such as extending the boundaries of the EU when negotiating an ambitious and radical delineation of the EEZ in 2003, in addition to putting Cyprus on the global hydrocarbons exploration map. Nevertheless my future input will be from the private sector. Having said that, I am always ready and willing to help the country realize its energy future and possess a letter from the incumbent President promising to utilize my expertise. Currently I am acting as the advisor to the government for the master plan for the LNG terminal and as representative of the local communities.
What final message do you have for our international readers?
Expect to see the LNG terminal up and running within six years. For my part, I will continue to push hard for the country to make full use of its natural endowments and to realize what promises to be an incredibly bright energy future. I will also do all that I can to ensure these resources are harnessed for the benefits of Cypriots themselves and for the wider European Union family of which we are a member.
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