Along with the newly incumbent Cypriot presidency of the Council of the European Union, Cyprus is also coping with the impacts of a second round of licensing (February – April 2012) for the gas discovered in its Exclusive Economic Zone (EEZ), which created tension around the divided island and has thrown up further complications. A new report sheds light on available options.
The Exclusive Economic Zones of countries, as defined by the United Nations, encompass 200 nautical miles from the coast of the country. However, in a crowed sea, such as the Mediterranean, this is not necessarily possible and negotiations are sometimes required through the United Nations to discern the zones. The division of Cyprus after the 1974 war into the Republic of Cyprus and the Northern Republic of Turkish Cyprus (NRTC) makes the Cypriot EEZ a disputed territory.
The key issue for Cyprusis the recent link between the Republic of Cyprus and Israel. Israel and Turkey have previously had close relations. As Turkey supports Palestinian statehood, these are now rocky while Cypriot/Israeli ties become tighter due to their gas exploration. This has led to Turkey accusing Israel of violating Turkish-occupied airspace.
The second licensing round between February and April this year showed interest coming from Russia (Novatek and through Israel– Gazprom), France (Total) and the United States (Exxon Mobil). This signals that other countries may be more interested in the gas than the stability of the region. In fact, it has prompted Turkey to approve gas exploration in Cypriot waters, a move which should be ringing alarm bells across the world.
An in depth report by International Crisis Group puts forward various scenarios for the extraction of the gas. The report highlights that the ideal outcome for the extraction of the gas would be to come to an agreement across the whole island that meets with Turkey’s approval as well. Key to this, is the transport of the gas to its export market. There are a few options on the table:
A) Transport the gas to Greece;
B) Transport the gas to Turkey;
C) Build a Liquefied Natural Gas (LNG) plant.
However, each of these has monetary and/or political disadvantages. Transporting the gas to Greece would cost too much money. Transporting the gas to Turkey may be the most economically viable, but given the politically unstable nature of the region (Turkey has suspended links with the Cypriot presidency of the Council of the European Union), this is not an option that the Republic ofCyprus is likely to take. Building a LNG plant is scarcely economically viable and will take a considerable amount of time.
International Crisis Group’s report highlights the opportunity for the gas to benefit the whole island, through sharing the profit from the gas extracted. The report goes on to state that, given that a Cyprus-Turkey pipeline is the most viable option, an agreement should be reached between the Republic of Cyprus and Turkey on an economic basis which would allow Turkey to sell the gas on the ‘… Turkish market and, in initially limited quantities at least, be passed on, through the interconnector pipeline, to Greece.’ This route may well have implications for the Trans-Anatolian natural gas pipeline project (TANAP), the proposed Nabucco West pipeline, and the Trans-Adriatic Pipeline – all of which have a Turkish leg.
However, there are down sides to the gas finds. First, it may take five years for the gas to be processed, and ten years before it becomes economically viable. Second, although the amount of gas estimated sounds like a lot (10 billion cubic meters bcm), this is less than one fiftieth of Europe’s annual consumption for 2010 of 522 bcm.
It is clear that there are options for the eastern Mediterranean to choose from. The threat is that they will not choose one that would ease each other’s nerves. One step towards this would be an ad hoc advisory committee between the NRTC and the Republic of Cyprus to work out how the gas can be used for the benefit of the entire island while decreasing the conflict between Turkey and Israel.