Entering the ‘gas era’. What next?

Entering the ‘gas era’. What next?


Natural gas is gaining ground as the ‘preferred’ conventional energy fuel for the coming decades, eventually replacing oil. In an interview, Solon Kassinis said that many parameters are changing and so are the traditional gas suppliers, while at home, the government needs to introduce more incentives for the wider use of natural gas.

 

How would you describe the New Energy Era? Do you believe that soon the world will be flooded with oil and gas?

In the beginning of the industrial revolution, coal and lignite were mostly used as conventional fuels for energy, which were then partially replaced by naphtha and crude oil around the 1980s. Nowadays, one can safely assume that we are entering a ‘gas era’. Coal and lignite plants are being shut down, while existing conventional power stations using fuel oil are replaced or modified to use natural gas. Natural gas is gaining more and more ground as the ‘preferred’ conventional energy fuel for the coming decades, due to its characteristically more efficient and cleaner combustion. It has though yet to become the next most utilised fossil fuel, eventually replacing oil. What comes next… perhaps the fuel cells, or hydrogen, era? It all depends on two parameters – market dynamics and technological evolution.

Some of the most significant trends we can observe today is a rise in indigenous gas production in the U.S. (mainly from shale), a ‘reboot’ in Japan’s nuclear energy industry, a drop in the internationally traded oil prices and most importantly, new players (producers) coming into the scene and novel technologies coming online.

Although the oil suppliers and the traditionally large gas consumers remain more or less the same, the gas suppliers are changing. We observe today that countries of the Middle East and North Africa (mainly Egypt), which traditionally were net suppliers of gas, nowadays struggle with their own local supply and import gas to satisfy the additional demand (i.e. they turned into net importers of gas), while countries such as Israel and the US, which used to import gas for decades, are moving on with gas/LNG export infrastructure projects (i.e. they are becoming net exporters of gas). What is more, slumping oil prices caused many of the running and planned oil production projects to be put on hold, while at the same time the demand for gas seems to remain steady and subsequently, any planned new gas projects, unaffected. Russia still remains at the forefront as a major oil and gas supplier (especially for Europe, which energy-wise is dependent on Russia).

 

What needs to be done in order to attract the energy industry in Cyprus? What are the challenges/opportunities?

First of all, we need to introduce natural gas to the local industry – this should most preferably be from our own indigenous resources (for socioeconomic reasons, as well as for political reasons). Opportunities for utilising natural gas exist both in electricity generation and the manufacturing industry, such as the case of methanol production. The challenges mainly concern the price of the gas and its onshore supply. Therefore, the government needs to provide the necessary incentives and support in order to encourage the development of large industrial plants in Cyprus, thus creating a critical demand volume for gas in the local market.

These developments will create the necessary elements for attracting energy industries involved in the sale of energy and the production, utilisation, distribution and export of natural gas. Although countries with developed energy industries usually consume large amounts of fuel, the energy industry is a crucial part of the infrastructure and maintenance of society for almost all countries. Expanding on this, the energy industry comprises not only of the petroleum industry and the gas industry, but also the electrical power industry and the renewable energy industry (and in some cases the coal industry and nuclear power industry), so each of these sectors will need to be encouraged, promoted and supported accordingly.

 

With the global crude and natural gas prices still pressed for the time being, is this the right time for Cyprus to conclude future contract prices?

Any interim option for the supply of natural gas to Cyprus should consider the whole time horizon of gas deliveries and the possible scenarios regarding oil price fluctuations (gas prices in long term contracts are most usually based on prevailing oil prices), in order to assess the commerciality and viability of such plans based on a significant reduction in electricity generation costs. There will also be in place the so called price re-opening and re-negotiation clauses for any such contracts made.

Nevertheless, if a contract is to be concluded nowadays, when the oil prices are low, then the future prices will have a lower base reference than what could have been achieved before, when the oil prices were on the rise and above the 100 dollars per barrel mark. However, the situation differs slightly in the case of local supply of gas from indigenous sources since this case is governed-regulated by the relevant clauses in the Production Sharing Contract signed with Noble Energy.

 

Do you believe that Cyprus has the potential to become a regional supporting services hub?

Both recent and relatively past developments testify that the oil and gas sector can be a new booming industry for Cyprus, while the country has already attracted worldwide attention and serious international investment prospects exist. The discovery of substantial quantities of natural gas, in combination with the potential utilisation of other gas deposits and future gas findings in the area, opens up new perspectives and gives new impetus to the role of Cyprus in the global energy map and the European energy market.

To fully grasp this great opportunity, Cyprus still needs to swiftly proceed with the planning and development of the energy infrastructure and facilities required for the exploitation of natural gas reserves.

Such infrastructures include those necessary for servicing and supporting the offshore operations. Some shore-based services for the offshore industry already exist in Cyprus (at a quite small scale). Two oil and gas services companies (Halliburton and Schlumberger) have established bases in Cyprus, with their own facilities and operations (these are supported by local marine and engineering companies). There are also plans for a new port with large-scale shore base facilities to serve the offshore industry.

Such initiatives in Cyprus, which is a member of the European Union, strategically located in the Mediterranean Sea, can significantly contribute towards Cyprus becoming a regional supporting services hub. No doubt that these energy infrastructures will upgrade the geostrategic role of Cyprus in the Eastern Mediterranean region, yielding great benefits for the local economy and industry by generating a significant amount of new job positions, business opportunities and revenue, stimulating at the same time the rapid technological development within the manufacturing sector, as well as the development of new energy industries.

 

What are the necessities for the training and recruitment in the O&G sector?

The needs in human resources for certain specialisations and disciplines for large projects in oil and gas in Cyprus were first recognised since 2006. Since then, various activities unfolded towards empowering and educating people, through training programmes in the technical and managerial professions of the oil and gas industry.

Work at oil and gas facilities involves various disciplines and academic qualifications/diplomas (e.g. Welding Technician, Engineering Technician, Mechanical Engineer, Chemical Engineer etc.). More specifically, work at offshore platforms at most times requires people with specific skills and education and training, mainly at technical level programmes. In addition, this kind of working environment requires people with highly specialised and certified skills in the field and a responsible personality, bearing in mind that companies in the offshore industry are always on the lookout for proactive, hard-working, well trained and talented individuals.

Any individuals wishing to work in the offshore oil and gas industry must have completed their Basic Offshore Safety Induction Emergency Training (BOSIET) and Minimum Industry Safety Training (MIST) courses, although there is no guarantee that such individuals will be able to walk into a position immediately. In any case, working in the offshore industry is a unique experience of its own, that is gained gradually and in time through training and actual ‘hands-on’ work.

Considering the above, although current training programmes feature vocational education and some engineering specialisations for the oil and gas industry, they lack essential ‘hands-on’ practice in order to obtain specialisation and expertise in the oil and gas sector. Additional necessities in training therefore include: (i) the need for skills and expertise through relevant industrial practices training, (ii) the need for industry alliances and cooperation with large oil and gas services companies to gain ‘hands-on’ practical experience through internships of visiting students, and (iii) the need for creating a regional Training Centre for technical training in the Oil & Gas sector (potentially to be located in Cyprus).

 

 

Have we, once again, focused too much on LNG and forgotten about solar energy? Surely with a proper infrastructure and good incentives, Cyprus can export electricity produced from solar?

Cyprus has a great potential regarding Renewable Energy Sources (RES), which include solar and wind energy, biomass and the use of geothermal energy of low enthalpy. It is also true that, in the last few years, Cyprus has shown significant growth in RES projects, mainly solar (PV) and wind farms.

On the other hand, Cyprus remains to this day an isolated ‘energy island’ since it has no interconnections with the trans-European electricity or gas networks, neither yet the necessary infrastructure to be able to take part in the single European energy market.

Aside from focusing on gas exports, Cyprus is also promoting bilateral interconnection projects concerning electricity. A very good example and major infrastructure project is that of the EuroAsia Interconnector which incorporates a submarine cable for the transmission of electricity between Israel-Cyprus-Crete-Greece (mainland). This project, when implemented, can provide diversification and additional means for hydrocarbon exploitation (through the export of electricity generated from natural gas). In addition, the EuroAsia Interconnector project could provide an ‘interim solution’ for Cyprus (i.e. the supply to Cyprus of electricity generated from natural gas, until indigenous gas becomes available onshore) and security of energy supply to Cyprus, Greece and Israel, as well as transfer (export) of electricity generated in Cyprus from solar and other RES.


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