Op-ed: The EastMed project and dilemmas over energy strategy

by Yannis Maniatis

The unprecedented energy crisis unfolding in Europe is a result of the European Union’s stubborn and one-sided preoccupation with the Green Deal (which is important in its own right). The bloc has, at the same time, shown a blatant disregard for two equally important aspects of sustainable energy, which are namely: a) energy security – i.e. an adequate supply of natural gas for its member-states; and b) the fight against energy poverty, which, even before the crisis, affected 54 million European citizens.

The crisis caught Europe completely off guard. It has cost European households and companies an estimated 1 trillion euros, a huge amount of European wealth which is going into the pockets of natural gas producing countries and firms. Also, it has a knock-on effect on electricity prices. This is approximately the sum spent by all national recovery and resilience funds, along with other support mechanisms.

Meanwhile, the crisis opened the door to the inclusion of nuclear power and natural gas in the EU’s “sustainable finance taxonomy,” a rulebook that restricts which activities can be labeled climate-friendly investments. These were excluded before the crisis broke out.

Failure to deal with the crisis is aggravated by the inability of the European Council and EU energy ministers to find a common line on the issue. They continue to ignore a proposal submitted in 2014 by Greece, which was then at the helm of the EU presidency, for the creation of an EU-wide mechanism for hedging against steep gas price fluctuations across the bloc in the context of community solidarity.

At the same time, the EU’s main suppliers (Russia, Norway, the US and Qatar) keep raising their share and revenue from energy-thirsty and import-dependent Europe. The continuing underinvestment by Western companies (ExxonMobil, Total, BP etc) in oil and gas creates the conditions for more crises by 2050, during which natural gas will be used as a transitional fuel. Meanwhile, the increasing revenues and geopolitical influence of state oil companies (Aramco, Gazprom, China Petroleum etc) will naturally impact the geostrategic equilibrium.

The crisis has showcased Europe’s energy security as a major growth priority along with the necessary measures against energy poverty. Finding new supply sources and supply routes for natural gas has emerged as a fundamental pillar of strategic autonomy. The natural gas shortfall in 2021 in the EU, which generated the energy crisis, amounted to 40 billion cubic meters (bcm), according to the International Energy Agency (IEA). This underscores the need to construct the EastMed gas pipeline for Europe (and Greece).

A fully operational EastMed could supply the EU with 20 bcm/y – that is 50% of the EU’s shortfall in 2021 – and help bring down the exorbitant gas rates from $25/MMBtu to $5/MMBtu which is the rate for industries in countries like Israel and Egypt.

The US State Department’s non-paper with which Washington distanced itself from the construction of EastMed (much to the satisfaction of Turkish President Recep Tayyip Erdogan, who saw a chance to revive talk about a pipeline that would run through Turkey, a prospect that has been averted until now) and the numb reaction from the governments that have supported the project mandate a sensible debate around the nascent aspects of Greece’s national energy strategy. Also, they call for answers to a number of legitimate questions:

1. Why was the State Department non-paper issued in 2022, the year that the EastMed study is set to be complete? How are the Eastern Mediterranean Security and Energy Partnership Act (East Med Act) and the 3+1 cooperation scheme (Greece-Cyprus-Israel + US) related?

2. Was there any previous cooperation with the allied governments and partners of Greece, Cyprus and Israel that back the project? If so, why was there no public reaction?

3. Can the US express its reasoning behind its opposition to both the NordStream 2 gas pipeline – because it increases the dependence of Germany and the rest of Europe on Russia – and EastMed, which is the only new pipeline that could reduce dependence on Russia while supplying Europe from a new source and via a new route?

4. What is the reason for publishing a non-paper when the US has not asked to finance the project, which is funded by the EU and the joint venture between Greek utility DEPA and Italy’s Edison?

5. Is there a single feasibility study that questions the viability of the project? Has any such study surfaced? The answer is no. In fact, at the latest Economist conference in July 2021, the company behind the project presented a study that showed the project would be financially viable and directly competitive with all LNG options.

6. Why is EastMed being compared against the prospect of regional electricity interconnectors, such as the EuroAsia Interconnector, when Greece had actually been planning both projects since 2013 and identified them as Projects of Common Interest (PCIs) – i.e. key infrastructure projects aimed at completing the European internal energy market?

Greece has since 2014 ranked sixth worldwide with regard to per capita production of green electricity via photovoltaic units, and sixth in Europe in electricity generation through wind energy. Like its European peers, Greece is in the midst of an ambitious green energy transition program. However, the big question remains: How can we move ahead with the green transition in the absence of a smooth supply of cheap natural gas in the coming years? And we still need to answer the question of what Greece’s energy options are today in tapping the undeniably rich resources south of the island of Crete.

Greece pays 6 billion euros per year to import hydrocarbon products, and this is expected to rise to 10 billion in the coming years. This raises key questions around its national strategy at a time when countries such as Norway, the UK, Denmark and others are saying that they will exploit the sum of their hydrocarbon resources.

Professor Yannis Maniatis is the former minister of environment, energy and climate change.