The scramble for the Mediterranean (revisited)

This piece is about the new gas (and possibly also oil) discoveries in the Eastern Mediterranean, which could explain a lot about the ongoing geopolitical shifts in that region.

There can be no coincidence. Two important events took place just within hours apart from each other on March 17. First the Cyprus government decided to grant drilling licenses for gas and oil to several multinational energy giants: Exxon Mobil, Qatar Petroleum, Total and ENI. On that very day, Turkey announced they’d be starting a navy exercise with live rounds just a few days later in Cypriot territorial waters, just 30 nautical miles off the SW coast of the Island of Aphrodite. Turkey said their patience was running out. Much in line with a visit a month earlier by their foreign minister Cavusoglu to the Turkish part of the island, where he warned the Greek Cypriots against any unilateral actions on the oil/gas issue.

Whoever was hoping that the gas off the Cyprus shores could serve as a platform for unification and cooperation between the two communities there, was being naive. Oil and gas are much more likely to stir up conflict, and the latest events are yet another evidence of that. The tension started to escalate instantaneously after the Cypriot move on the gas. The Greek/Turkish negotiations were halted, and the leaders of the two communities started hurling accusations at each other for this failure. Turkey used the opportunity to sharpen the tone and start issuing ultimatums and threats (they’ve been rather active in that regard lately).

The deepening conflict between Turkey and the EU, combined with increased interest by US and EU companies for drilling in the region are tightening the energy knot in the Eastern Mediterranean even more. The big discoveries in 2009 have turned the region into a key strategic hub that’s very important for the energy diversification of Europe. There’ve been arguments that this is the main reason behind all the shit-stirring in the Levant and across the Maghreb, aka Arab Spring. This includes Syria too, of course.

The thing is, the Eastern Mediterranean is the new place to be if you’re a big oil company, or a big geopolitical player. Ever since the discovery of the Egyptian oil field in Zohr, things have changed for the region – for the better or worse, depends on your perspective. But the fact that big energy giants from around the world are scrambling to invest in Cyprus, is presenting both promising prospects for development for the island, and giving sleepless nights to many leaders. If the gas treasure also turns out to be accompanied by the vast oil deposits that experts are predicting, the geopolitical situation would totally change.

Turkey is a big factor in that respect. Some major drilling activity inside the Cypriot exclusive zone is expected to commence later this year, and continue through 2018. In June, Total is planning to drill in Block 11, which could become a second Zohr field because it’s located under the same sea ridge. The first French drilling operation is anticipated with great interest, not least importantly because it had been cancelled four times in a row already. Lastly, it was scheduled for April, but now it’s been postponed for July, just days after the latest conference on the Cypriot issue ended in failure in Geneva in January. This meant pushing the deadline for a possible agreement and unification of the divided island to a unspecified future time.

Italian company ENI is also planning to make two drills by the end of the year, and US company Nobel Energy also has one drill scheduled. Exxon Mobil is also in the game, planning drills in 2018. But despite this tight schedule, any technical preparation before a possible agreement on the Cypriot issue would more likely stumble upon problems and obstacles. Without a political settlement, any drilling would make Turkey react with hostility. And this is not just a prediction, it’s what has actually happened before. Turkey has sent navy forces to the region on four occasions up till now, in a clear demonstration of force. The latest occasion was in 2014 when a seismologist research vessel entered the Cypriot exclusive zone, which made the Cyprus president Anastasiades to suspend the negotiations with the leader of the Cypriot Turks, Eroglu.

So, any attempt to proceed with drilling, despite the Cypriot Greek claim that they’ve got sovereign rights to do that, is bound to bring further tensions. Exploiting the carbon riches under the sea floor would only be possible after a wholesome political agreement that would satisfy the interests of both sides. And this is not just the opinion of some experts and the leaders of the two sides most directly involved – the special advisor to the UN Secretary General on the Cypriot question, Espen Eide has also said that first an end has to be brought to all this uncertainty on the reunification issue. The deadline he has given? This summer.

The question here is whether despite his aggressiveness and unpredictability, Erdogan would really risk sending military flotillas against the oil and gas corporations and have a direct standoff with the countries behind them (UK, US, France, Italy). Hey, Cypriot president Anastasiades has even gone as far as to declare the presence of Exxon Mobil a guarantee for the Cypriot interests. And let’s not forget that the former Exxon CEO, Rex Tillerson under whom the company applied for drilling license in Cyprus, is now Trump’s secretary of state.

All in all, the situation is not easy at all. On one side, there’s rising tension with Turkey. On the other hand, the companies who are pushing for drilling rights represent the major world players. Any conflict in that regard would be extremely risky for any of the sides.

But that’s not all. There’s also the question about the potential routes that would deliver all that fuel, once it’s extracted. There are huge interests there too. We’ve already talked about Iran’s geopolitical plan to establish a friendly corridor from Pakistan across Iraq and Syria giving them access to the Mediterranean. They want this corridor to bypass the Gulf states, mainly their biggest rival Saudi Arabia. If this happens, the Straits of Hormuz would stop being so important, and the Saudis would take a big geopolitical tumble.

As for Cyprus, there are several scenarios for them to export the gas to the European markets. Of course, the final decision mostly depends on the quantities that are discovered there. Right now they’re not sufficient, but in the future the Cypriot fields could be combined with their Egyptian and Israeli counterparts, which would grant access to much bigger markets. Granted, Cyprus still lacks the needed infrastructure for this, like tanker terminals, ports, etc. But that would be built in the future.

The main gas route to possibly connect the countries in the region currently is the EastMed Pipeline, terminating at the Greek shore. The pipeline could connect Israel and Cyprus to Greece and hence Europe, supplying Israeli and Cypriot gas. The project is technically doable and economically viable, but they need to add more gas fields first to bolster its total capacity.

Naturally, the Turks are not happy because this totally bypasses them. The Russians are not happy either, because if Europe diversifies its energy sources, it would remove Putin’s only tool for geopolitical pressure. The Russians are already planning a geopolitical expansion across the southern periphery of the Eastern Mediterranean, as has been recently mentioned here before: they’ve fortified Assad in Syria, they’ve made friends with El Sisi in Egypt, and they’re now pursuing a military presence in East Libya. This is all for a reason: they want to be part of the game too.

Another option is building a liquid natural gas (LNG) terminal in Cyprus itself, which again requires boosting the gas output, i.e. adding more gas fields to the mix. Part of this plan is to use the vacant facilities at the two LNG terminals currently existing in Egypt: Cypriot gas would be transported via pipeline running on the sea floor (total distance: 180 km), and then exported. If Total’s drills are successful this year, another good opportunity for export to Europe and Asia would be to use floating LNG (FLNG).

Turkey and the Cypriot Turks insist that the shortest, safest and most beneficial route to Europe would be a pipeline connection from Cyprus to Turkey (but of course!) Except, until the Cypriot question still lingers, such a project is absolutely impossible. Right now, when the Turkey-EU relations are getting worse, not better, it would be a huge political risk to give all the taps and keys to Erdogan. That would be a geopolitical suicide for Europe, and the gas/oil corporations know this.

So it’s not just about financial and economic expedience. In fact, it all mostly depends on geopolitics. Because of all the political conflicts, the prospect of building pipelines from the Egyptian and Israeli gas fields to Turkey remains questionable. Turkey and Israel used to like this idea until about a year ago, when their relations were still kind of warm(ish). Finding a mutually acceptable solution to the Cypriot issue would be of big help in that respect of course. But right now, that seems very unlikely. So the gas scramble for the Eastern Mediterranean will continue to be hostage to politics for a long time. And maybe even more so, once the fields are operational and the cards are laid on the table.

Leave a Reply

Your email address will not be published. Required fields are marked *