• Natural Gas News

    Will the Gas Factor End the Division of Cyprus?



Brokered by the UN and backed by the US, Cyprus' talks resume after a 2 year break motivated by common interests to benefit from the Eastern Med's natural gas.

by: Karen Ayat

Posted in:

Natural Gas & LNG News, News By Country, , Cyprus, Top Stories

Will the Gas Factor End the Division of Cyprus?

In a press conference in Ankara, Turkey’s Energy and Natural Resources Minister Taner Yildiz expressed his support of the UN-brokered, US backed renewed peace talks between Greek and Turkish Cypriots aimed at reaching a solution to the Cyprus problem after two year of interruption. The success of the talks would pave the way to various possibilities in terms of exporting the Eastern Mediterranean gas to international markets.

The island has been divided since the invasion of the northern part of the island by the Turks in 1974. Although previous talks were not successful, there is a hope that this time around things could be different given the interests at stake. The whole region is believed to be home to abundant reserves of hydrocarbon. Noble Energy encountered substantial amounts of natural gas off Israel’s shore with its Tamar and Leviathan discoveries (respectively with gross mean resources of 10 and 18 Tcf). Noble has recently added the Aphrodite field in Cyprus’ EEZ  on its Eastern Mediterranean success list (Aphrodite has an estimated gross mean resources of 5 Tcf).

Noble has been studying various options to allow the Eastern Mediterranean gas to reach export markets. The complicated geopolitics of the region have not made this endeavor simple. While the Cypriot government is keen to build an onshore LNG facility in its Vasiliko coastal area to liquefy its gas and sell it to international customers, the project requires large amounts of funds that the current discoveries off the island’s coast do not justify. Israel has been considering various options including participating in Cyprus’ LNG or building a pipeline to Turkey. Building an onshore LNG plant in Israel was discussed for a while but does not seem to be the immediate priority at the moment, for various reasons including security, cost and the difficulty in finding an appropriate coastal site (as demonstrated by the recent Leviathan-Woodside MOU). While the Turkish pipeline makes sense from a cost point of view for Israel, a resolution of the Cyprus conflict seems to be a prerequisite as such a pipeline would have to cross Cypriot waters given that passing by Lebanese waters is inconceivable (Israel and Lebanon are in a state of war). 

“The gas factor” has been brought up on many occasions when discussing the Cyprus problem. Cyprus has suffered tremendously on a financial level since the crisis hit its economy in 2013 and monetizing the offshore riches would not only mean the crisis but also ensure economic prosperity for the island for decades to come. Offshore reserves could bring to the country as much as USD 400 billion according to the U.S. Geological Survey. Not only will Turkey benefit from a resolution of the Cypriot problem but companies involved in Cypriot waters - like Total, ENI-Kogas - will also be more likely to invest large amounts of funds in exploration activities and in the LNG plant without fearing that their blocks will be contested. Israel will also be more likely to give Cyprus its gas in the presence of a solution.

Hopes are high at the moment as a reunification of the island would allow some of the Eastern Mediterranean players to achieve their goals: Turkey would see its energy needs eased, Cyprus will have a higher chance of successfully completing its LNG plant offshore by attracting investors and Israeli gas and Israel will have various export routes open for its Leviathan gas field.

Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.  Email Karen on ayat_karen@hotmail.com. Follow her on Twitter: @karenayat