Growing energy rivalry in the region – a catalyst for development or geopolitical crisis?
The first gas exploration of American oil leader -Exxon Mobil in the Exclusive Economic Zone (EEZ) of Cyprus, officially announced on Friday (November 16th), has also set a new stage in the energy and political development of the Eastern Mediterranean region. Although far from real results – finding /or not/ of hydrocarbon deposits, the launch of the American company has already managed to restore the usual “hot spot” status of the region, putting an end to the short quiet interval, when in February Turkish warships forced the platform of the Italian company Eni to leave the offshore zone of Cyprus.
Exxon Mobil explorations have already changed the dynamics of the geopolitical scene of the Eastern Mediterranean region, being the first of a series of upcoming operations in the region and resulting in the next 6 months into important geostrategic solutions. Since a week Cyprus and his neighboring energy investment partners, Greece, Israel and Egypt, have entered a decisive period to determine whether natural gas will turn to be a catalyst for further energy development or for a new geopolitical crisis.
Embracing the energy projects Cyprus is striving to get the best out of his geostrategic position – being in the center of the Eastern Mediterranean region and the only EU member state within. These advantages have turned Cyprus into a focus point for the EU, thus seeing the region as a future alternative corridor for the supply of natural gas, while being aware of its strategic significance for the European energy security and independence.
Obviously, the interest in Exxon Mobil’s explorations is enormous. Only the confirmation of the launch of the exploratory drilling operations is a proof of that. It was announced, for first time in the 7- year history of explorations in Cyprus, at a high political level following a notable meeting in Nicosia between Francis Fannon, US Assistant Secretary of State for Energy Resources and Giorgos Lakkotrypis, Energy Minister of Cyprus. The game is mostly geopolitical – the answers to the basic questions about the new energy and political architecture in the Eastern Med, regional and European security, the presence and role of forces such as the United States and Russia depend, to a great extent, on the gas finds by the US company.
For the Republic of Cyprus, the exploratory drilling lauched, undeniably,
is a cornerstone
in its overall energy programme, implemented by all governments since 2003. First, two leading global companies – the American ExxonMobil and Qatar Petroleum enter in the Exclusive Economic Zone with all technical, financial and political potential they have. The drilling is of great importance also due to the fact that it happens despite the escalating threats and provocations coming from Turkey, Erdogan’s aggressive rhetoric and the presence of Turkish warships close to the island.
The United States unambiguously declared their position after the repetitive warnings of Ankara to Cyprus over its “illegal and unilateral actions” for gas survey and the involvement of foreign companies in it. In a number of statements before and right after the launch of the new exploration, the State Department underlined its support to the Cypriot sovereign rights to explore in its offshore zone, while the benefits of open natural resources have to be fairly shared with the Turkish Cypriots in the context of a comprehensive settlement of the Cyprus problem.
The core effect of ExxonMobil drilling on the energy development not only of Cyprus, but also of the whole region lays in the expectations of finding a large natural gas supply. The company will drill two wells in block 10 in the southwest of the Cypriot offshore zone. Seismic data from the undersea research show that the selected section “Dolphines” is within the geological zone of the Egyptian supergiant gas field Zohr and has potential for huge reserves. If this becomes a reality – the first results are expected in January-February next year – and a commercially viable deposit is confirmed, ExxonMobil most likely will try to quickly explore the field and export the natural gas – the technical, commercial and political factors are all available.
Two major projects are among the possible scenarios. The first, the US company has already declared readiness in case of success in block 10, is the construction of a ground terminal for liquefied gas on the territory of Cyprus, for which it has the technical know-how and funding. The other option is to renew and enhance the interest in the EastMed Pipeline to Europe between Israel-Cyprus and Greece. Till the end of the year the three countries intend to sign an intergovernmental agreement that will facilitate its construction, but at that stage, based on the gas quantities discovered in the East Mediterranean, the project is considered not economically feasible and does not constitute an investment interest.
More complex and hazardous are
the political scenarios,
which take place or will happen alongside the drilling of the US company. The major problems the exploration and future exploitation of gas fields in the region have to face are not technical or financial, but political challenges. And the aim is to find a way to reduce regional geopolitical risks, as multi-billion investments in gas exploration and transportation projects need stability.
The biggest “teaser” producing the highest tension is Turkey. Will there be an energy and diplomatic clash between Turkey and the United States in the Eastern Mediterranean because of ExxonMobil’s drilling, is the top question for months in the comments over the situation in the region.
Turkey has ambitious plans for energy and political expansion in the region – to strengthen its position as a leading force in the Eastern Med, having the right to dictate the political agenda in it and thus to control the geopolitical order. These plans could not be realized without putting a hand on natural gas – on exploration, exploitation of deposits, supply and pipeline transit through its territory.
Turkey seeks in every way to hamper the implementation of the energy programme of the unrecognized by her Republic of Cyprus so as not to be excluded from the emerging new energy architecture of the Eastern Mediterranean. At that stage she is isolated. Turkey and the so-called Turkish Republic of Northern Cyprus perceive the successfully established tripartite formats in the region (Cyprus-Greece-Israel and Cyprus-Greece-Egypt) as a “common anti-Turkish front”. Nicosia urges Turkey to be included in the region’s energy development, to cooperate with other countries on the use of oil and gas potential of the Eastern Mediterranean, only after the Cyprus problem is resolved, declared Cyprus President Nikos Anastasiadis and Foreign Minister Nicos Christodoulides in the beginning of November.
The accumulation of the new energy alliance over the existing political problems between Ankara and other countries of the region have provoked sharp polarization and confrontation in the Eastern Mediterranean region. While Cyprus and its partners are looking for ways for mutual benefit, Ankara and the political leadership of the Turkish Cypriots claim that the actions of Cyprus, involving US into them will jeopardize the regional stability.
Despite Ankara’s aggressive rhetoric and her drive to stop gas exploration in Cyprus offshore area, it is unlikely to expect Turkey to intervene directly against ExxonMobil and cause a clash between Turkish and US military forces. Turkey has already played this game in February when Turkish warships blocked drilling rig of the Italian company Eni in waters off Cyprus. The situation now is different – ExxonMobil is a much more powerful company than Eni, which can defend herself, also being backed up by the United States. Even if the relations between the two countries deteriorate to a greater extent, hardly will Turkey have the guts to test Washington’s readiness to support its leading company, a provider of its economic and political interests in the region.
The question is not that Turkey has no claims to block 10, where ExxonMobil is undegoing exlorations. It is neither in the group of four blocks of the Exclusive Economic Zone of Cyprus, which, according to Turkey, partially or completely are within her continental shelf, nor among the seven blocks, which, again to Turkish view, are an Exclusive Economic Zone of the Turkish Republic of Northern Cyprus. However, the political leadership of the Turkish Cypriots claim that as “co-owners” of the island they have rights over all blocks, the entire offshore area designated by the Republic of Cyprus, and all its natural resources.
On the other hand Turkey does not want to play the role of spectator of ExxonMobil’s drilling. Her further expected reaction is an increase of pressure through statements, threatening that any measures could be taken, military and diplomatic includingly, to protect the rights and interests of Turks and Turkish Cypriot in the area off the island. This approach was demonstrated on Sunday, just two days after the launch of drilling, when Ankara and the Turkish Cypriot leadership simultaneously warned again Cyprus and foreign companies and states, operating under its licenses, to stop “illegal” exploration of hydrocarbons off the island.
Ankara has another scenario as a trump card – to deteriorate the situation in the eastern Mediterranean, with the aim to escalate the tension in it. In the last weeks and days Erdogan and a number of his ministers repeatedly focused on it. The scenario was even explicitly stated in the latest declaration on Sunday. Turkey, according to this declaration, will start drilling through its state oil company, further to her own continental shelf, in areas for which the state has a license from the so-called Turkish Republic of Northern Cyprus. These areas partially or completely overlap with the blocks of the offshore zone of the Republic of Cyprus. Thus, Turkey aims not only at advancing her political, diplomatic and economic interests, but also at putting the geopolitical map on a fait accompli situation, challenging Cyprus rights over the Exclusive Economic Zone.
We should not rule out such a scenario for a potential future drilling in the coming months, even if ExxonMobil’s drilling is still running. It is more likely Turkey not to come close to block 10, but rather to choose an area in Cyprus’s non-declared Exclusive Economic Zone, i.e. north or north-west off the island, in the sea area, separating it from the mainland. Moreover, Turkey is currently running her two gas exploration wells – off the coast of Antalya /Alanya, where the drilling rig Fatih is situated/ and in the Mersin area, as well.
Turkey will continue to excalate tension in the area with provocations with the ongoing seismic studies on Barbaros Hayreddin Paşa research vessel. Recently, the vessel, escorted by warships, is moving in the northern parts of blocks 4 and 5 of the Cyprus Exclusive Economic Zone, which, according to Turkey, belongs to her continental shelf.
The other major player and “opponent” of Turkey in the potential dispute over ExxonMobil’s exploration is USA, also taking advantage of the situation for its economic and political interests. The region is a priority for Washington, Francis Fannon, the US Assistant Secretary of State for energy resources declared and made a key tour in the region just during the week when ExxonMobil began drilling operations. Fannon visited also Israel, Cyprus and Egypt, but not Turkey, sending a clear message to her in line with a warning not to take any actions against the oil company.
The United States are in a process of developing a broader strategy for the Eastern Mediterranean region with the aim of strengthening its role and position. This is evident from their strong support to the trilateral energy cooperation between Cyprus and Greece and their neighbours. The US are interested in exporting LNG from East Mediterranean finds, which could be done not only by ExxonMobil by successful drilling and construction of the Cypriot terminal, but also by any company investing in the region if safe the business. Therefore, in a series of State Department statements before and after the most important drilling in the region it was underlined that the United States do not encourage any activity or rhetoric that increases tension in the region.
Israel also looks with interest at the explorations in block 10, while the results will also affect his substantial energy ambitions. The ultimate exploration of large deposits will increase the price of its own deposits; one of the current problems of their exploitation is the lack of a route for export of the gas supply to the European markets. The availability of more commercially viable gas fields will put EastMed pipeline in a more favourable position. Therefore, Israel fully supports the rights of Cyprus to explore and study its Exclusive Economic Zone, and calls on Turkey to avoid any acts hindering that. Moreover, Israel explicitly announced its support to Cyprus and Greece in the event of a Turkish military threat.
The drill of ExxonMobil is important for Egypt, as well, which, especially after the discovery by Eni in its exclusive economic zone the biggest Zohr Gas Field in the Eastern Mediterranean. Zohr now makes Egypt regional energy center and has strengthened its positions. No plans for exploring the energy resources in the region can be made without taking Cairo’s interests into account. The drilling in the seawaters of Cyprus affects Egypt and the overall energy development of the region. It resulted in an intergovernmental agreement between Cyprus and Egypt signed in September for the construction of a gas pipeline from the first and only for the moment Cypriot deposit – Aphrodite in block 12 next to Egypt’s liquefied gas terminals. In the event of a successful drill in “Dolphin” and the construction of a ground terminal in Cyprus, it is possible the Aphrodite supply also be directed to that gas pipeline.
The existing opposition between Turkey and Egypt also counts, by economical and political aspects, for the division of the strong players in the region. Their debates over the leadership in the Arab world have deteriorated their relations and affected the field of energy. One of them is the problem with the exclusive economic zones of Egypt and Turkey, whose boundaries are confronted by Ankara.
Natural gas could be a blessing or a curse – a source of wealth or tension, said some time ago Espen Bart Eide, United Nations Special Adviser on Cyprus. The Eastern Mediterranean and international forces are now to decide.