New Energy and Peace Triangle in the Eastern Mediterranean: Israel-Cyprus-Turkey
It is important to keep in mind the role of gas-producing countries in European energy security. Concerns about the supply have increased significantly due to rising global consumption of natural gas. Recently, developments in global overall proven energy marketing as well as the Middle East-North Africa-Caspian Sea triangle hydro carbon deposits have been discussed. Furthermore, proven gas reserves in the Mediterranean, particularly in Algeria, Egypt and Libya are on the agenda. However, it is good news that Eastern Mediterranean region could offer a new alternative, the reserves in the region are so vast that they could change the economic map of the region. Turkish Republic of Northern Cyprus also has potential gas reserves in its waters. Will the coastal states in the Eastern Mediterranean succeed in exploiting the rich natural gas resources that prevent further conflict, and accomplish finding reasonable solutions to ongoing conflicts? We hope that if the parties could manage to realize an energy cooperation model, gas production and transport opportunities may be increased. Of course, the ongoing political debate in the Cyprus issue between Turkey and Israel as well as the “Mavi Marmara” accident had worsened the relations between Turkey and Israel. However, the relations improved slightly following Israel's official apology to Turkey regarding the raid, and negotiations for compensation to the families of the victims, which contributed to easing the way to reach reconciliation between the two sides. Israel is reluctant to move forward with the negotiations, as Israeli Prime Minister Benjamin Netanyahu is facing criticism from the opposition for his apology. It is expected that the talks for the project will begin after the Mavi Marmara compensation issue is solved. However, correct pragmatic moves on the economic side, development in a partnership spirit and political encouragement by the White House and the European Union could bring possible solutions. Indeed, recently there is some good news. Greece and Turkey are working together to restart talks on the Cyprus issue under the auspices of the United Nations. Indicating that the leaders in Cyprus reached a consensus including all parameters of peace, Turkish Foreign Minister Ahmet Davutoğlu said, “Now it is time to build on these parameters. Columns and walls should be built gradually on this statement and a peaceful Cyprus should be reconstructed.” Although this has been tried before, Cypriot leaders increasingly (if privately) recognize the economic imperative of a pipeline to Turkey. At the same time, Turkish officials have quietly suggested that restoration of full relations with Israel could occur in tandem with an agreement to build an Israel-Turkey natural gas pipeline. Thus, an Israel-Cyprus-Turkey “energy pipeline of peace” makes economic and political sense for all parties involved. Turkish Foreign Minister Ahmet Davutoğlu said the two sides were close to renewing ties and emphasized that “There is a new attitude… and we can say that most of the disagreements have been removed in the discussions with Israel.”
There is another question: “Is there really reasonable volume of gas reserves in the Mediterranean Sea? According to US Geological Survey estimations, the Eastern Mediterranean, known as the Levant Basin, which encompasses Israeli, Lebanese, Syrian and Cyprus waters, could contain about 122,000 bn cubic feet of undiscovered reserves of natural gas. By comparison, Algeria, a critical supplier of natural gas to Europe, contains 159,000 bn cubic feet of proved reserves. First, Israel Noble Energy carried out offshore exploration works and discovered the Tamar field in the Levantine Basin, 50 miles west of Israel’s port of Haifa with an estimated 8.3 tcf (trillion cubic feet) of highest quality natural gas. Tamar was the world’s largest gas discovery in 2009. Second, on the Cyprus Island, energy policies paved the way for progress, cooperation, economic welfare and new opportunities. Noble Energy, the US contractor has carried out drilling works for gas around the Southern Cyprus. Thirdly, Turkey has increased its importance at the crossroads of the world’s energy trade. Prime Minister Erdoğan explained that Ankara will play a more “visible” role in the Eastern Mediterranean. Over the last years Turkey has been increasingly associated in the international political and economic debate with concepts such as “energy corridor” and “energy hub”. This is related to the geographical position of Turkey at the crossroads of Central Asia, the Middle East and Europe. Future role of Turkey in the energy field makes Turkey a key element for the world and European natural gas market. Turkey has become a vital factor for the world and notably the European natural gas markets for another reason: The European quest for a new “Silk Road” aimed at diversifying its natural gas imports. Turkey also wants a share of the new Mediterranean gas production and cooperation projections.
Israel and Discovery of New Gas Fields
For Israel, the discovery of a vast natural gas field off its coast in 2010 was like hitting the jackpot. The future energy development offered the country unprecedented economic security. Eastern Mediterranean region’s landscape is rapidly changing and Israel has become a key point recently. Israel is beginning to realize the benefits of the recent discovery of 36 trillion cubic feet of gas reserves off its coast in the Eastern Mediterranean, mainly in the Tamar and Leviathan gas fields, located near Haifa. But the discovery has also presented Israel with one of its greatest military challenges yet: protecting its new offshore gas infrastructure in the Eastern Mediterranean, which is vital to its energy security, and therefore to its economic security. The Tamar field holds 250 cm of gas reserves. The main investors in the Tamar field include Noble Energy (36%), Delek (15.6%), Houston-based Isramco (28.7%) and Israeli firm Dor Alon Energy (4%). It is expected to produce about 10bcm/year of gas; however this amount will be increased in order to satisfy Israel’s growing domestic gas demand. The Leviathan field was discovered in December 2010. Since the Tamar field can fulfill a significant part of Israel’s gas requirements for the foreseeable future, production in the Leviathan field will likely be directed towards exports, expected to start in 2017. Holding the largest natural gas reserve in the offshore Eastern Mediterranean, Israel has an important role in the emerging regional natural gas architecture. A large scale development in the Eastern Mediterranean seems to be very difficult without a strong commitment of Israel to export a substantial part of resources. Recently the Israeli government has made a decision to allow 40% of its natural gas production to be exported, especially from its Leviathan field.
The Cyprus Island and Gas Reserves
In 2011 Noble Energy discovered a natural gas reserve with a source estimated at 140-220 bcm in offshore Cyprus Island. Notwithstanding the ongoing dispute with the self-declared state of the Turkish Republic of Northern Cyprus, exploration of offshore natural gas resources continues over the last two years; the Republic of Cyprus launched two rounds of offshore exploration licenses. Despite the previous warnings of the government of the Republic of Turkey to bring into question the interest of international oil and gas companies operating in Turkey if committed to become active also in the Republic of Cyprus, the two rounds of offshore exploration licenses included the participation of a large number of international companies. Noble Energy opened up its activities in the country to two other operators, Delek Drilling and Avner Oil Exploration, which now compose a consortium led by Noble Energy with a share of 70%. The great expectations regarding the potential natural gas bonanza, led the government of the Southern Cyprus to promote a LNG export option to quickly monetize the potential natural gas resources. The idea is to develop an LNG plant with an initial export capacity of 5 million tons per annum expandable to 15 million tons. The Southern Cyprus signed a MoU with Noble Energy, Delek drilling and Avner Oil Exploration in June 2013. Other options have been offered for the potential natural gas exports of Cyprus; some of them are mainly based on commercial considerations, while others are based on geopolitical issues. A pipeline to Turkey would certainly have commercial importance.
Rethinking the Energy Cooperation in the Mediterranean Sea
Over the last few years the Mediterranean region has progressively attracted the attention of the world natural gas industry due to a series of natural gas discoveries in the offshore Israel and Cyprus. "Israel can use the new natural gas discoveries as a bridge to improve its relations with our neighbors," Mr. Abu says. "It's a win-win for everyone in the region." Major natural gas fields in the region, Leviathan and Aphrodite respectively enclose 476 bcm and 140 bcm of natural gas reserves, for a total of 616 bcm. "Leviathan can potentially help Israel be totally independent from an energy perspective and also position Israel as an exporter of natural gas rather than importer," says Yossi Abu, Chief Executive of leading Israeli natural gas company, Delek Drilling. Israel is offering its technological expertise and has partnered with Cyprus and Greece to assist the development of the Aphrodite gas field of Cyprus. However, natural gas resources being discovered in the region could well represent a game changer for the region itself as far as natural gas cooperation is concerned. LNG plant is seen by many stakeholders as a better cost-effective way of monetizing both countries’ resources and achieving economies of scale.
As we mentioned above, Israel, whose relations with Turkey deteriorated after Israeli soldiers killed nine Turkish nationals during the attack to the Mavi Marmara boat carrying humanitarian aid to Palestine's blockaded Gaza Strip in 2010, is looking to work with Turkey to deliver its natural gas to Europe via Turkey's undersea pipelines. However, Israel will base its new regional initiative on energy cooperation, with the final aim to deliver Eastern Mediterranean natural gas to Europe through Turkey. Previous Israeli plans to export its natural gas via Cyprus and Greece have been shelved due to their exorbitant cost. From Turkey’s perspective, the Israel-Turkey pipeline is highly attractive for economic and political reasons. Economically, Leviathan gas would help Turkey decrease its heavy dependence on more expensive Russian and unreliable Iranian gas. Politically, an Israel-Turkey pipeline would make Turkey a new gateway for natural gas into Europe, and perhaps one with hub-based pricing. At the same time, an Israel-Turkey pipeline faces two serious political obstacles. Firstly, Israel and Turkey have to normalize their relations following the steep decline as a result of the Mavi Marmara incident in June 2010. Secondly, Turkey and Israel need the permission of Cyprus to build a pipeline across the Cypriot continental shelf. The parties should have the advantages of cooperation and they have to find justified solutions to eliminate current diplomatic barriers.
Conclusion
Politically and economically the most feasible solution would be to build a pipeline from the Israeli Leviathan field to Turkey through Cyprus where additional gas resources would be integrated. A twin pipeline with an annual capacity of 16 bcm would cost about 2.5 billion dollars. The pipeline would start in the Israeli Leviathan field, passing 470 km through the Mediterranean Sea and reaching the Southern shores of Turkey, where there is a dire need for natural gas. A direct pipeline connection to Turkey would make Israel a secure market for the next few decades and concurrently make Ankara a long-term partner again. Building a pipeline between Israel and Turkey offers strategic opportunities, including a chance for Israel and Turkey to restore their strategic partnership. It would also push Turkey to reach an agreement on the Cyprus question, removing 40-year-old problems in relations with Europe and re-energizing Turkey’s flagging efforts to join the EU. The U.S. and the EU should help shape this future. Thus, Turkey may cooperate with Israel if the reconciliation in Cyprus between the Turkish and Greek sides is successful, as Greek Cyprus will also benefit from the prospective project. Both Israel and Europe would benefit from integration to the existing pipeline from Azerbaijan that runs through Turkey. As a result, the European Union market clearly would be the best customer for Eastern Mediterranean gas, but it could be sold to Asia as well with shipments through the Suez Canal through the energy-thirsty China- Japan- Korea triangle market. This short analysis indicates why the EU and the US should build a common strategy together with Turkey, Cyprus and Israel in the near future…