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Cyril Widdershoven

Cyril Widdershoven

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently he works as a Senior Researcher at Hill Tower Resource Advisors. Next…

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A Natural Gas War Is Brewing In The Mediterranean

Natural gas pipeline

Offshore gas developments in the East Mediterranean region are heating up. Alongside increased exploration efforts and a possible gas pipeline deal between Turkey and Israel, geopolitical risks are increasing too. While commercial prospects are starting to look good for all parties, a real military conflict is also brewing and may come to a head if Cyprus, Greece and Turkey are not able to find a solution soon.

Optimism has been high of late about the prospects of offshore Cyprus gas developments, not only due to the increased interest and agreements reached by Nicosia and several international partners, but also based on a possible Cyprus reunification success. However, the latest development has once again proved to be in vain, as the two main stakeholders, Greek Cyprus and Turkish Cyprus, were again not able to find a solution to solve the dispute. Both sides still accuse each other of being unwilling to reach a final solution. This continuing military standoff could threaten the ongoing offshore oil and gas exploration projects of French oil major Total and Italian major ENI. The oil majors have stated that they will start their offshore drilling operations at Block 11 on July 16.

Ankara’s reaction has been very firm, condemning these operations while threatening to take all necessary measures. At present, Turkey has sent a frigate, TCG Gokceada, to the area, with as its sole purpose to monitor the West Capella, the drilling vessel used to drill on Block 11. The West Capella already arrived in Cypriot waters, and is going through a trial and control work program. When given the green light, the vessel will start drilling in 700 meters water depth. The work is expected to last about two to three months and the first results are expected to be announced this autumn. Analysts expect that the drilling operation will be a success, as Block 11 is close to immense offshore gas discovery Zohr in Egypt.

Due to the offshore drilling activities, Cyprus has closed five miles around the Block 11 and two neighboring blocks to sea traffic. Ankara sees this as a direct confrontation, as it has always stated that all the resources of the (whole) island belong to both communities (Greek and Turkish Cypriots). In a reaction to the Turkish press, officials stated that all resources (gas) should be shared between these two communities. During the 22nd World Petroleum Congress, currently held in Istanbul, Turkish President Recep Tayyip Erdo?an said "our expectation from those who are party to developments in Cyprus is to avoid the steps leading to new tensions in the region.” “I would like to remind them that they could face the risk of losing a friend like Turkey, not just in the region, but anywhere and in any field," Erdo?an warned. Related: Oil Markets Pessimistic Despite Bullish News

Turkey at present is not sitting still either. In a reaction to the Cypriot drilling operation, Turkey has already sent the Barbaros Hayrettin Pa?a seismic research vessel to conduct drilling. Turkish Energy and Natural Resources Minister Berat Albayrak has said that Turkey will begin drilling in the Mediterranean by purchasing its own ship this year. Several other Turkish navy vessels have already been controlling part of the disputed areas.

Until now, the Cypriot gas developments have been directly linked to the ongoing Israeli offshore gas projects. In June, Greece, Cyprus and Israel, discussed plans for an ambitious underwater natural gas pipeline. Which, according to officials, would carry natural gas from Israeli and Cypriot reserves in the eastern Mediterranean to Europe. The pipeline would be over 2,000 kilometers in length and is expected to cost over $6 billion dollars. The so-called East-Med pipeline would be among the world’s longest. Israel at that point, as indicated by Israeli PM Benyamin Netanyahu, was still backing the plans. This strategic integration of Cyprus-Israel-Greece/EU and even Egypt, is now under threat. During a visit this week of Israeli Energy Minister Yuval Steinitz to Turkey, both countries have decided to speed up an intergovernmental agreement on the construction of a subsea pipeline between Israel and Turkey. Turkish Energy Minister Berat Albayrak is set to visit Israel by the end of this year to conclude this.

Main gas supplies should come from Israel’s Leviathan natural gas field (613 bcm of gas and 39.4 million barrels of condensates). Tel Aviv is still searching for additional partners to make it economically feasible. "We want to build a pipeline stretching from Israel to Turkey in order to able to export natural gas from Israel to Turkey," Steinitz said, adding that the Israeli gas could be delivered to Europe and to the Balkans through Turkey. The Israeli ideas are clear, but will be in conflict with the other East Mediterranean developments.

The Israeli overture with Ankara could lead to a breakdown of the Israel-Greek-Cyprus and Egypt options, as all the others are not very interested or even vehemently opposed to a possible cooperation with Ankara. Tel Aviv could be (until proven wrong) stepping into a quagmire that could increase the instability in the region substantially. Choosing the Turkish side, Israel is putting a bomb under the other European focused strategy of Cyprus, Greece and Egypt.

The Turkish implicit threats to the Cypriot offshore developments has also been met by a harsh reaction from Athens. Greece officially has stated that the Turkish “countermeasures to Cyprus Block 1 developments” will be met by Greece, as it is “ready to defend its sovereign rights”. The latter is another sign of growing tensions between the two NATO allies. The Greek support is needed for Cyprus, but Nicosia has also received the support already from Washington and the European Commission. Brussels has openly stated that Ankara should refrain from making threats against EU member states. In a reaction, Yorgos Lakkotrypis, Cypriot Minister of Energy, stated in May that his country will continue its project of developing offshore gas, keeping this dossier “completely separate” from the negotiations for the reunification of the island. The latter, shown by the failure of the Cyprus reunification talks, has not been possible according to Ankara. Greek Premier Alexis Tsipras has also reacted to the implicit threats by Ankara. The Greek PM said that the latest developments were not making Athens “particularly happy”. Related: Significant Draw In Crude Inventories Jolts Oil Prices

A possible escalation between the parties is a real possibility. Over the last months, EU sources and NATO have indicated that Turkey has been violating Greek airspace on a regular basis. Navy vessels have also been crossing into national waters. The latter, when showing a real military intent in Cypriot waters could lead to a military confrontation, as Greece and Cyprus since 1993 have set up their Defence Doctrine of the Single Area, which aims to deter or jointly react to an aggression by another country.

The main unknown in this brewing conflict is the position that Egypt will take. Cairo has been one of the main potential suppliers of natural gas to Ankara, but politics have blocked a potential deal until now. Turkey’s ongoing support of Qatar, while implicitly supporting the Muslim Brotherhood and other groups, has caused anger in Egypt. If a potential conflict would escalate in the East Mediterranean, Turkey will have to assess a possible Egyptian involvement too.

Offshore security issues have already been recognized by Israel it seems. Israel’s Defense Ministry announced that it has signed a $420 million deal to outfit the Israeli Navy with maritime systems to protect the country’s gas fields and shipping lanes. This deal is in addition to Israel’s existing purchase of 4 Sa’ar-6 warships, which are going to be used to guard Israel’s economic waters in the Mediterranean Sea. The new deal entails missile defense batteries, electronic warfare, navigation systems, command and control centers, communication gear and other naval systems. The procurement is largely done with local Israeli companies. The ministry stated that the deal is a “substantial milestone” in the multi-year plan to protect Israel’s gas fields.


By Cyril Widdershoven for Oilprice.com

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