The countries of the eastern Mediterranean are on course for some choppy waters. Following Turkey’s announcement on May 6, that its ships would continue to explore for oil and gas in an area of the sea that Cyprus considers to be part of its Exclusive Economic Zone (EEZ).
The move was denounced by the Cypriot Foreign Ministry on Saturday, calling Turkey’s bid to drill for natural gas in waters where the island nation has exclusive economic rights “a flagrant violation” of its sovereignty under international law.
Egypt warned against the intentions of Turkey to begin drilling activities in a maritime area west of Cyprus, according to a Saturday statement issued by Egypt’s Ministry of Foreign Affairs.
The statement added that Egypt is following the developments, warning against the effects of any unilateral actions on the security and stability in the eastern Mediterranean region.
“The United States is deeply concerned by Turkey’s announced intentions to begin offshore drilling operations in an area claimed by the Republic of Cyprus as its Exclusive Economic Zone,” State Department spokesperson Morgan Ortagus stated.
“This step is highly provocative and risks raising tensions in the region. We urge Turkish authorities to halt these operations and encourage all parties to act with restraint,” she continued.
Moreover, the European Union (EU) High Representative for Foreign Affairs and Security Policy, Federica Mogherini, urged Turkey to reconsider its plans to start exploratory drilling for oil and gas off Cyprus, already condemned as illegal by the EU.
Subsequently, on Monday, Turkish president Recep Tayyip Erdogan said that Turkey expects the NATO to support its rights in the eastern Mediterranean.
Turkey issued the statement after the US and the EU criticised it for sending a ship to explore for energy in a zone which both Cyprus and the breakaway northern Cyprus are in dispute over, prompting Cyprus to file international arrest warrants for the crew of the Turkish drilling ship.
The eastern Mediterranean region carries substantial potential for cooperation; yet, it also sparks rivalries, and disputes. Daily News Egypt provides an in-depth analysis of the region, its complex geopolitics, key players, and associated risks.
Eastern Mediterranean potential
The eastern Mediterranean region has become a hotspot of international energy discussions in the last decade, following a series of large-scale gas discoveries off the coasts of Egypt, Cyprus, and Israel.
With the region’s significant potential, as confirmed reserves exceed 2,000bn cubic metres (bcm) of gas, several export and regional cooperation scenarios are being studied. Eastern Mediterranean gas discoveries have stirred hope in playing a role to boost regional cooperation; however, it has also posed a risk for conflict.
Over time, the initial optimistic assumptions started to fade, especially following the natural gas investment decision delays in Israel, and the downward revision of scale of the explored gas reservoirs in Cyprus. These events led to the rise of scepticism regarding the concept of the eastern Mediterranean regional gas hub itself.
Following the discovery of Egypt’s mammoth Zohr gas field in offshore Egypt, with reserves estimated at 30tn cubic feet, Zohr’s discovery has reshaped the regional gas outlook, revived earlier expectations, and advanced new regional cooperation prospects.
The Zohr gas field, was dubbed as Egypt’s bonanza by industry experts, as it will primarily serve Egypt’s domestic market needs. The country’s status changed from a liquefied natural gas (LNG) exporter in 2003 to an LNG importer in 2015, following drops in production and increasing demand. Consequently, Egypt’s LNG exporting infrastructure, including the two LNG plants in Idku and Damietta, were left idle and completely unutilised. Hence the importance of the Zohr discovery, as it represents a major relief for Egypt’s strained gas market.
Moreover, Zohr could be just the beginning of a series of new gas discoveries in offshore Egypt. Various international oil and gas companies have flocked to the area and increased their operations there, and if Zohr and other deep-water fields such as Atoll, Nooros, Taurus, and Libra fields begin production at full capacity by 2020, Egypt would restore its position as LNG exporter once again.
The impact of Zohr could surpass Egypt’s boundaries, as a result of its geographic location, and the availability of nearby infrastructure.
Zohr is situated only 90km away from Aphrodite gas field in Cyprus, which in turn is only 7km from the Leviathan field off of Israel. Such proximity could allow for the development of joint fields and could lead the way to the creation of an integrated regional gas infrastructure network.
Potentially significant reserves, but difficult to tap
The principal area of interest is the expanse of sea beginning off the coast of Israel, Gaza, and Lebanon, extending northwest toward Cyprus. Various discoveries have already been made there, usually of gas but with some potential for oil as well. Egypt is keenly interested in this area as well. Although the country has a long-established oil and gas infrastructure with numerous fields off the Nile Delta, its largest find occurred in waters around 120 miles north—the Zohr gas field—discovered in 2015 and even bigger than Israel’s Leviathan.
However, drilling in these deep waters is expensive ($100m for each bore), time consuming (three months), and infuriatingly unpredictable despite detailed preliminary seismic work. For example, ExxonMobil, partnering with Qatar Petroleum, recently failed to find commercial quantities in a Cypriot offshore block and has moved its drilling ship to another prospect slightly further north.
Disputes over legal title.
According to the law of the sea, any littoral country can claim an EEZ, but its boundaries have to be agreed with neighbouring states. Notably, Lebanon does not recognise Israel’s claimed EEZ and refuses to negotiate. Likewise, Turkey does not acknowledge that Cyprus has an EEZ beyond its 12-mile territorial limit, and has harassed exploration vessels beyond that distance. The Turks also claim that their own EEZ reaches as far south as a line with Egypt—though Cairo has agreed on an EEZ with Cyprus which includes much of this area. Adding to the confusion, Ankara allows the otherwise unrecognised “Turkish Republic of Northern Cyprus”—where Turkish forces are based—to claim a large EEZ south of the island, extensively overlapping the EEZ claimed by the internationally recognized Cypriot government.
Egypt leads the E-Med regional gas hub race
Following these discoveries, three nations, Egypt, Turkey, and Greece shared the dream and aspiration of becoming the cornerstone of the proposed regional gas hub. All three countries possess different strong points which may allow them to play such role.
However, since October 2016, following the fourth round of the trilateral summit between Egypt, Cyprus, and Greece, held in Cairo, Greece and Egypt, focused on cooperation leaving only Turkey as the main contender.
According to a policy paper published in The Washington Institute, by Simon Henderson, Baker Fellow Director, Bernstein Programme on Gulf and Energy Policy, eastern Mediterranean regional political rivalries have hindered some developments while facilitating others.
The policy paper indicates that relations have deteriorated between Israel and Turkey, Egypt’s main regional rival. President Recep Tayyip Erdogan’s apparently visceral dislike of Prime Minister Binyamin Netanyahu appears to have killed the notion of a northward export line, at least while both men remain in power. As a result, the economic dilemma of having to choose between working with Egypt or Turkey has effectively been decided for Israel on political grounds.
Egypt
Egypt holds the keys to the Eastern Mediterranean’s gas future. It has the ability to proceed alone by exporting the expected gas surplus from the Zohr field via its existing exporting infrastructures, such as the two idle LNG terminals and the Arab gas pipeline, or it might decide to proceed together with Israel and Cyprus by creating a new eastern Mediterranean gas hub, according to the Forbes opinion piece of Simone Tagliapietra and Georg Zachmann.
While considering the EU as its main market, Egypt’s LNG terminals are the current most foreseeable sources of gas supply in the entire region, in addition to the fact that Egypt has the largest natural gas reserves in the region. Consequently, Egyptian LNG would prove to be cheaper than either Cypriot or Israeli gas, as there would be no need to inject any capital investment. Although it is hard to compete with the price of Russian gas, which is currently one of the main suppliers to the EU, Egyptian gas could be competitive in comparison to American LNG, and it could provide an option for greater diversification of the EU’s energy mix, allowing it to be less dependent on Russian supply.
According to an opinion article published in the Financial Times by energy expert and visiting professor and chair of the Kings Policy Institute at Kings College London, Nick Butler, it is clear that there is no other practical export route for gas from the giant Leviathan field in Israeli waters off of Haifa or from the smaller Aphrodite field off of Cyprus.
Butler placed Egypt as the cornerstone of the commercial development of natural gas (and perhaps oil) in the eastern Mediterranean.
On the other hand, Butler believes that Turkey lost its chance to act as an export route for gas from Cyprus, after trying to associate the exports with the settlement of the long-standing Cyprus territorial division. In addition, Turkish-Israeli relations have deteriorated over the last few years, making it almost impossible currently for Israel to entrust its gas trade to the control of a government whose leader has described Israel as “a terrorist state.”
Additionally, in January 2019, Egypt, Cyprus, Greece, Palestine, Italy, Jordan, and Israel agreed on the establishment of the East Mediterranean Gas Forum (EMGF).
The gas forum between the seven countries will contribute toward increasing joint cooperation in exploring the untapped potential of member states, where pipelines will be constructed to connect a number of countries to Egypt to transfer their gas production to the factories to be exported to international markets or to import them into Egypt.
In the same context, a research paper by Thrassy N Marketos, titled “Eastern Mediterranean energy geostrategy on proposed gas export routes,” published by the Fondation pour la Recherche stratégique, concluded that for the EU, the materialisation of an eastern Mediterranean gas hub (understood as a crossroads of physical flows, not as a trading platform) based on Egypt’s LNG infrastructure would be beneficial for both energy policy and foreign policy considerations.
“Providing substance to the long-lasting EU gas supply diversification strategy and functioning as a catalyst for sensible regional dialogue, and most importantly keeping Russia away from acting as a political arbiter for the whole region. Indeed, this scheme’s energy routing to the markets could help the EU to avoid becoming hostage to either Russia’s monopolistic visions or Turkey’s regional aspirations,” the report concluded.
Turkey
Turkey owns a considerable and expanding network of natural gas pipelines that it uses them primarily for importing natural gas to fulfil its domestic market needs. Its oldest international pipeline is the Russian-Turkish natural gas pipeline (west line), connecting Turkey to Russia through Bulgaria, Romania, and Ukraine. In addition to the west line, the blue stream gas pipeline cuts through the Black Sea to carry natural gas from Russia to Turkey. The pipeline began operations in 2003, and has the capacity of supplying Turkey with 16 bcm of natural gas per year, according to the Turkish Ministry of Energy and Natural Resources.
However, following the instability plaguing the Ukraine over the past few years, gas imports through the west line have been threatened, which led Russia and Turkey to develop alternative routes. Consequently, the two countries signed an agreement in 2016 to establish the TurkStream pipeline. The proposed project will include two pipelines connecting Russia to Turkey through the Black Sea with an annual combined capacity of 31.5 bcm of natural gas, according to the Turkish Ministry of Energy and Natural Resources. The expected plan aims to re-export around half of this amount to the EU markets, while the other half will substitute the current gas imports via the west line. Gas supplies through the pipeline are expected to start in 2019.
In addition to Turkey’s natural gas connections to Russia, the Tabriz-Ankara pipeline connects Turkey with Iran’s huge natural gas market. The pipeline extends over 2,577km, and has a capacity of 10 bcm per year and became operational in 2001, according to the Turkish Energy Ministry. However, the pipeline has been attacked by explosions several times by PKK guerrillas.
Moreover, to further tap the rich natural gas supplies in the Caucasus, Turkey and Azerbaijan agreed to build the Baku-Tbilisi-Erzurum (BTE) pipeline, running from the Shah Deniz field in Azerbaijan through Georgia and into Turkey, to transport 6.6 bcm of natural gas from Azerbaijan to Turkey. According to the Turkish Energy Ministry, the capacity of this pipeline is being increased to feed into the Trans-Anatolian Natural Gas Pipeline (TANAP). The TANAP is supposed to connect Europe with the natural gas fields of Azerbaijan. Once completed, the pipeline is planned to transfer 32bcm of natural gas per year, and to stretch from the Turkish border with Georgia to the Greek border. The Turkish Energy Ministry, according to its website, anticipates gas to reach Europe via the new pipeline in 2020. To facilitate the flow of natural gas through Asia Minor to Europe, an interconnection pipeline between Greece and Turkey was inaugurated in 2007—though plans to extend the pipeline toward Italy have languished uncompleted.
However, despite its extensive pipeline network, Turkey lacks pipelines to the south to capitalise on Mediterranean gas resources. If such a pipeline was built, Turkey, straddling multiple energy markets, could draw upon the natural gas resources of Russia and the eastern Mediterranean for re-export to Europe.
Turkey, due to its central geographic location and extensive network of pipelines, is in a perfect position to benefit from the ongoing natural gas boom in the eastern Mediterranean. Yet, despite the different factors favouring the country, Turkey’s problematic relationships with Israel and Cyprus have the potential of countervailing its strengths.
The biggest obstacle in the way of Turkey’s ambitions is Cyprus. Cyprus’ central location in the eastern Mediterranean makes its territorial waters the natural pathway for natural gas pipelines from the region. Yet its relationship with Turkey has been hostile since Turkey occupied northern-or Turkish-Cyprus in 1974. Turkey still has 30,000 soldiers stationed on the island and continues to contest the maritime rights of the Cypriot government. After the breakdown of talks between the rival parties this summer, the Turkish government warned international oil companies against operating in Cypriot waters, according to a July 2017 Reuters article by David Dolan and Ece Toksabay.
Such disputes not only threaten the possibility of gas exports from Cyprus to Turkey but, due to Cyprus’ central location, it also blocks potential pipeline routes from Israel, and Egypt as well, according to a Financial Times article in September 2017 by Andrew Ward.
On the other hand, while Turkey’s relations with Israel were originally better than its relations with Cyprus, diplomatic relations between the two countries were only restored in 2016. In 2010, after the deaths of several Turkish activists in a maritime incident off the Israeli coast, Turkey broke off relations with Israel. When the two countries resumed diplomatic ties in 2016, many assumed the reconciliation was driven by Israel’s recent natural gas discoveries and Turkey’s need for natural gas, according to a CNN article by Oren Liebermann and Elise Labott in June 2016. Yet the two nations have yet to reach a natural gas agreement and relations have remained rocky.
A report by Stratfor titled “The Eastern Mediterranean’s New Great Game Over Natural Gas”, indicates that the “Prospect of a Turkey route is more remote. Although Netanyahu has pushed for this option for political purposes — it is one of the reasons for Israel and Turkey’s rapprochement in recent years — the plan presents a variety of logistical headaches. A direct pipeline to Turkey must travel through either Lebanese (a non-starter for Israel) or Cypriot waters, and so long as Turkey continues to challenge the island’s exploration efforts, Nicosia will block any attempt to build a pipeline. The countries could reach a pragmatic political agreement in which Turkey withdraws and accepts Cypriot control in its maritime zone, but Ankara is highly unlikely to agree to such a deal for the sake of the pipeline.
Greece
Greece has the means to become a regional gas hub, located at the EU borders of the southern gas corridor and having access to LNG and gas supplies from Russia, one of the largest suppliers of natural gas to the EU.
Hence, Greece has all the required elements to develop itself into a gas hub, providing competitive prices and security of supply, in addition to market integration in the region, according to European Semester: Country Reports – Greece, 2014.
The Mediterranean island nation keeps energy at the forefront of economic investment in Greece and turning it into a regional hub. One of these projects is the agreement signed in 2013 between Greece and an international consortium, the Trans Adriatic Pipeline (TAP). Through this agreement, a new pipeline will be built, which will cross Greece and then move gas through Albania, and underwater through the Adriatic to Italy, and then to Europe. Construction of this $3.52bn pipeline will be completed by the end of 2019, transporting 353.1bn cubic feet (bcf) from Azerbaijan to Italy, according to the Institute of Energy for South-East Europe (IENE).
This is not a significant amount of gas given European gas needs, which reached almost 17,657.3 bcf in 2014. Nevertheless, the TAP pipeline is supported by the EU as Europe’s best alternative gas supply route in its efforts to lessen its customary dependence on Russian gas. Nevertheless, the TAP, even if it doubles its capacity to 706.3 bcf, as latest plans suggest, will still provide insufficient quantities to enable it to play a key part in European gas supply diversification, according to the IENE.
While Greece enjoys the privilege of being part of the EU, which supports its dreams of being a regional hub, simultaneous gas discoveries in offshore Egypt have opened a new opportunity for regional collaboration between the EU and the east Mediterranean countries, given that discovered volumes seem to exceed domestic market capacities.
