Two Mediterranean neighbors: Egypt and Cyprus are each holding very different cards in the energy game. Cyprus promises offshore gas discoveries, but finds a major hurdle in the way: how to bring that gas to the market without building an entire export system from scratch. Egypt, with a massive liquefied natural gas (LNG) infrastructure that once thrived on domestic output and still has capacity to spare, seems to be the answer.

When the governments of Cyprus and Egypt signed a Host Government Agreement (HGA) in February 2025 with Eni and TotalEnergies to export Cyprus’s Block 6 (Cronos) natural gas via Egypt, it was beyond just diplomacy. The step was a calculated economic move, and a continuation of their long-term energy collaboration, which also includes plans to develop the nearby Aphrodite field, Cyprus’s first major offshore discovery made in 2011.

The Cost Equation

For Cyprus, building an independent LNG export system would have required major investment. The 2023 Wood Mackenzie Energy Outlook estimated that constructing a single onshore LNG train with pipelines and processing platforms could cost $6-10 billion and take up to a decade to complete. For a small nation that is still developing its upstream capabilities, that was economically unfeasible.

So, Cyprus chose a smarter and faster path that involves exporting its gas through Egypt’s existing LNG network, which already has two large liquefaction plants: Damietta and Idku. Together, they boast a combined capacity of about 12 million tonnes per year (mtpa), as revealed by the Egyptian Natural Gas Holding Company (EGAS).

This strategy was formalized in October 2025, when Eni and TotalEnergies, operators of Cyprus’s Block 6 (Cronos), signed three commercial agreements in Limassol with Egyptian state partners EGAS, Petrobel, and IEOC, Eni’s local subsidiary.

According to the Middle East Economic Survey (MEES), the agreements included a Handling, Transportation and Processing Agreement (HTPA), a tolling contract, and a tariff agreement. Together, these agreements lay the commercial foundation for the project.

Under the HTPA, gas from the Cronos field, which was discovered in 2022 and estimated to hold around 3.1 trillion cubic feet (tcf), will be transported via one of the two 30-inch pipelines connected to Egypt’s Zohr field, which will now dedicate one line exclusively to Cronos gas.

Once processed at Zohr’s onshore facilities in Port Said, the gas will be delivered through a new pipeline (yet to be built) directly to the 5 mtpa Damietta LNG plant, which is 50% operated by Eni, bypassing Egypt’s domestic gas grid entirely, according to MEES.

Cyprus Mail reported that the country could begin exports by 2028, assuming a Final Investment Decision (FID) is taken by the end of 2025, which aligns with the timeline set out by Cypriot Energy Minister George Papanastasiou during the signing ceremony.

Financially, the project is designed to be sustainable for both sides. MEES reports that the Cronos partners will pay a tolling fee of around $1 per million British thermal units (mbtu) for liquefaction at Damietta, and a tariff below $0.50 per mbtu for the use of Egyptian infrastructure and regulatory facilitation. That structure ensures that Cyprus remains cost-competitive in global LNG markets, while Egypt earns steady revenues with minimal new capital expenditure.

As Eni Cyprus Limited’s Managing Director Alessandro Gelmetti noted during the Eastern Mediterranean Conference (EMC) in Limassol,Cronos is seen as the first brick in a much larger project; a bridge between two countries and two continents.

Earlier this year, Cypriot President Nikos Christodoulides said in an interview, “These projects will play a crucial role in ensuring the energy security of the European Union (EU) by providing an alternative and reliable source of energy through the Eastern Mediterranean. Cyprus and Egypt are uniquely positioned to make significant contributions to global energy markets, and these agreements are a clear signal of our commitment to this shared vision.”

A Win–Win Situation

For Egypt, the deal comes at an ideal time. Its flagship Zohr field, discovered by Eni in 2015 and designed to produce 3.2 billion cubic feet per day (bcf/d), has seen output decline to around 1.3 bcf/d. That is roughly 59% below its capacity, according to Reuters. The Cronos gas will not only help offset this shortfall but also generate new income through infrastructure tolling and LNG liquefaction fees. The setup transforms underused Egyptian infrastructure into a revenue-generating asset, providing an economic cushion at a time when Egypt’s domestic demand is rising and exportable surplus shrinking.

Furthermore, Karim Badawi, the Minister of Petroleum and Mineral Resources, said that the agreements with Cyprus consolidate Egypt’s position as a regional hub for natural gas trade and distribution in the East Mediterranean, while also supporting Cyprus’s efforts to make use of its natural gas resources and export them to global markets via Egypt’s facilities.

Sharing Egypt’s infrastructure with Cypriot natural gas brings both political and financial advantages.

Infrastructure deal, geopolitical ripple

The Cyprus–Egypt gas agreement is as much a geopolitical maneuver as it is an economic partnership. By channeling Cypriot gas through Egypt’s existing LNG infrastructure, both countries sidestep regional tensions and logistical bottlenecks while reinforcing their strategic alignment in the Eastern Mediterranean. For Cyprus, the deal offers a politically stable export route that strengthens its ties with Egypt and the EU, while avoiding the financial and diplomatic complexities of building standalone infrastructure. For Egypt, it’s a chance to convert underused assets into regional leverage—positioning itself not just as a transit state, but as a central broker in Mediterranean energy diplomacy. The agreement signals a shared intent to anchor energy cooperation in long-term political stability and mutual economic gain.