Eastern Mediterranean Energy Sources Sunk by Political Waters
In a perfect world, Eastern Mediterranean energy resource discoveries would create regional cohesion, bolster Israel’s security, boost the Palestinian economy, normalize politics and economics in Cyprus, meet growing energy demands for both Turkey and Europe, and reduce the scale of Russia’s energy monopoly in Eurasia.
But in the real world, the discovery of new gas sources in the Mediterranean has sharpened existing tensions between Turkey, Cyprus, and Israel. While nobody can impose any clear and distinct solution to these existing conflicts, it is clear that “a paradigm shift is needed” for all stakeholders, as Hugh Pope, the project director for Turkey and Cyprus at the International Crisis Group (ICG), put it in discussing his April 2012 report “Aphrodite’s Gift: Can Cypriot Gas Power a New Dialogue?”
In order to contribute to the solution making process, the Atlantic Council Energy and Economic Summit, held in Istanbul on the 15th and 16th of November, dedicated a roundtable to Eastern Mediterranean gas and its transit. The discussion was handicapped from the beginning however, as no Turkish representative attended the roundtable.
Initially, the Atlantic Council invited one speaker to represent each Mediterranean country’s point of view – Israeli approach was to be represented by Amit Mor, the CEO of ECO Energy, Turkish by Süreyya Yücel Özden, chairman of the executive board of the Turkish National Committee at the World Energy Council, and Cyprus by Harry Sachinis, chairman and CEO of the DEPA. Unfortunately, Özden did not attend the meeting to present Turkey’s approach to the question.
However a Turkish diplomat, assisting the roundtable from the floor, tried to fill the gap. Mithat Rende, the general director of multilateral economic affairs at the Turkish foreign ministry, obtained permission to speak after the roundtable members and read aloud a foreign ministry press release entitled “Regarding Hydrocarbon Activities of the Greek Cypriot Administration”, which had made public on November 3rd. “The attention of the international oil companies has been repeatedly drawn, as regards the adverse consequences that would be created by their activities in the disputed areas over which Turkish Cypriots also have rights,” the statement said. “We repeat our call to the relevant countries and oil companies to act with common sense, not to engage in activities in these areas which are disputed, especially due to the Cyprus issue and to withdraw from the said tender.”
This tough reaction of Turkey dates back to September 2011, when the Republic of Cyprus, in partnership with Noble Energy, started exploratory drilling in offshore research blocks encircling the southern half of the island (called Block 12). It subsequently announced finding between 142 and 227bcm of gas in the Block 12 field code-named “Aphrodite”. In February 2012, the Republic of Cyprus announced a second licensing round for Block 12. Turkey quickly responded, contesting the exploration of natural gas deposits off the divided island and citing maritime boundaries. Turkey argued Block 12 overlaps with its continental shelf and areas where Turkish Cypriots in the north have given Turks a license to explore.
The situation is further complicated by Israeli interests groups owning 30% of shares in Noble Energy and the Aphrodite gas field being partly in Israel’s exclusive economic zone. Israel’s involvement in the Cyprus energy crisis has added more complications to already deteriorating relations with Turkey.
Since the discovery of large gas fields in Israel (the Tamar in 2009 and the Leviathan in 2010), energy experts have discussed gas transit opportunities for the region. More, after giving the roundtable an overview of the latest gas discoveries in Israel territories, underlined the importance of the volume and its perspectives for European energy supply. More than focused on the Eastern Mediterranean’s offshore sources, pointing out there are two transport options for the gas; shipping liquefied natural gas (LNG) to the Mediterranean Sea or building a gas pipeline that runs from the north of Israel to Turkey and then onwards to Europe. In the conclusion of his speech More noted he was skeptical about such an arrangement being made with Turkey.
Sachinis, conversely, began his remarks more optimistically. “We should be happy there is gas in our area,” he said. “More gas means more competition and cheaper gas.” Sachinis then invited stakeholders to react quickly and take easy decisions. “Someone has to make a decision to take advantage of the situation, but decisions in this region take time,” he said, noting discussions revolving around the southern energy corridor discussions. Sachinis also stressed the fact that, for European consumers, Mediterranean gas can be cheaper then Caspian gas.
Pope drew attention to the questions’ financial aspects. In the frame of the huge financial deficits currently suffered by Greece and Cyprus, he raised the question of who will finance the project. He went on to emphasize the high cost of LNG and the incompatibility of Mediterranean LNG with the relatively cheap prices of American shale gas.
For Pope, a pipeline from Greece to Turkey is the most reliable, economic, and competitive solution, but one which requires the normalization of Turkey-Cyprus relations. For now, there is no sign of progress on the Cyprus problem. “If you would like to move this gas to the market, you should resolve this chess problem,” said Pope.
Sachinis did not agree with Pope on this matter. “There are already telecommunication cables running under the Mediterranean, and they are also plans for electricity cables,” he said. “You don't need to solve this problem to put something in the ocean or in the sea.”
The conclusion of the discussion saw Rende intervening from the floor, accusing the roundtable of not representing Turkey’s point of view. The discussion became very political. Participants and attendants from the floor speculated on topics ranging from Turkey-Israel relations (including the Mavi Marmara crisis) to larger regional foreign policy issues. That is how once again, Eastern Mediterranean energy sources found themselves sunk by political waters.
Olgu Okumuş