Cyprus, Egypt, Israel and Greece Look to Improve Regional Security
Cyprus plans joint military exercises with Israel, Greece and Egypt to improve regional security. Cyprus has suffered from the violation of its Exclusive Economic Zone by a Turkish seismic vessel sent by the Turks to conduct exploratory searches in Cyprus’ maritime zone. The NAVTEX announcing the offensive has led to the disruption of the UN peace talks aimed at reunifying the island of Cyprus divided since 1974.
Hopes that the natural gas finds off the island’s coast will be a catalyst for a settlement are now at their lowest. Turkish Cypriots advance that gas explorations initiated by the government of the Republic of Cyprus will only benefit the Greek two-third of the island, despite repeated statements by Cypriot officials that all revenues generated from gas production will benefit the totality of the island.
Texas-based Noble Energy made a significant discovery in Cyprus’ EEZ in 2011. The Aphrodite field, estimated at 3.6 to 6 Tcf, has not yet reached production stage as the government studies the optimal way of getting the hydrocarbon to market. Despite its complete dependence on gas imports to satisfy domestic demand, Cyprus’ need for the hydrocarbon is negligible and most of the gas found in its waters will be allocated for exports.
An original plan to build an onshore LNG terminal in the Vassilikos coastal site of Cyprus has been put on hold until further exploratory successes are made to justify the commercial viability of the endeavour. Cyprus is currently looking to develop its Aphrodite field with the possibility of exporting the gas to Egypt. Finding a customer would encourage the costs involved in the development of the field, domestic demand alone being too small to justify the investment.
Cyprus has also been considering importing gas from neighbouring Israel as an interim solution until the island reaches self-sufficiency. However, regulatory hurdles in Israel have threatened to delay production of the 21 Tcf Leviathan beyond the original 2018 deadline. A dispute between Noble Energy and Delek, and the Israeli competition regulator has yet to be resolved. The outcome is unclear but possible scenarios including breaking the Delek-Noble consortium and forcing the partners to sell their stakes in the field.
Meanwhile, Cyprus continues exploratory activities in its waters. Despite TOTAL’s (temporary?) withdrawal from the island, the ENI/KOGAS consortium pursues its search in Block 9 of the island’s EEZ. Successful discoveries would encourage further investments and widen the island’s options in terms of export possibilities. Tensions with Turkey will need to be reduced but it is far from certain that positive progress in the energy field will improve the security situation of the Eastern Mediterranean.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat