Energy: Power in unity

Cyprus’s ambassador tells the ‘Post’ that it should be Israel’s natural partner for exporting gas.

May 30, 2013 23:10
Tamar natural gas rig.

Tamar natural gas rig 370. (photo credit: Albatross)


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As Israeli officials continue to spar over the exact quantities of natural gas to allocate for export, the question of how and with whom to perform that disputed act remains on the table – to move forward independently, to work cooperatively with western neighbor Cyprus, or to respond to a cautiously burgeoning courtship from formerly frosty Turkey.

“In ancient Greek there is a saying, ‘power in unity,’” Cypriot Ambassador Dimitris Hatziargyrou told The Jerusalem Post on Thursday morning. “You translate that into modern economics, and you are talking about economies of scale.”

Hatziargyrou sat in his Tel Aviv office with the Post that day to discuss the ongoing eastern Mediterranean hydrocarbon developments that may become an economic anchor for the region, as well as a lynchpin in strengthening cooperation among the various stakeholders on a political level. In Israel’s exclusive economic zone, the 282-billion-cubic-meter Tamar reservoir has already come online, while the neighboring approximately 535-billion-cubic-meter Leviathan is expected to come online within the next few years and still other basins are under exploration.

Just adjacent to Leviathan is the Aphrodite reservoir in Block 12 of the Cypriot exclusive economic zone, a basin that is expected to contain some 198 billion cubic meters of gas and is being drilled by some of the same entrepreneurs working in the Israeli reservoirs – Noble Energy and the Delek Group. Aphrodite is expected to begin flowing in small, domestic quantities within the next three or four years, and by around 2020, a Cypriot liquefied natural gas (LNG) production facility should be ready for export of the natural resource abroad.

While the Israeli resources themselves may be ready for export relatively soon, government officials are still embroiled in the controversy over developing an export policy. The Zemach Committee – headed by Energy and Water Ministry director-general Shaul Zemach – recommended this fall a maximum of 500 billion cubic meters or 53 percent for exports, as well as a minimum reserve of 450 billion cubic meters at home. Environmentalists across the country have been up in arms over these figures, claiming they will be insufficient for domestic needs. Developers and energy officials, on the other hand, continue to express the urgency for approving a stable, robust export policy in order to attract future exploration in the region. Once a policy receives approval, however, a decision as to how, with whom and to where the gas will be exported will be critical.

Israel and Cyprus signed a delimitation agreement on the exclusive economic zones in 2010, and a framework agreement is underway regarding future cross-border hydrocarbon management, Cyprus Energy, Commerce, Industry and Tourism Minister Yiorgos Lakkotrypis explained at a conference in Tel Aviv two weeks ago. Natural gas export collaboration between the two countries – particularly through use of Cyprus’s future LNG facility – could allow the two to become major players in the global energy market in a way that they could not achieve individually, Lakkotrypis said.

“Of course it would be more profitable if we can cooperate on this for mutual benefit,” Hatziargyrou told the Post during the Thursday interview. “It will drop the cost for each unit of LNG produced.”

Agreeing that the deposits in the Levant Basin are comparatively small to, say, the shale gas deposits in the United States, Hatziargyrou stressed that seismic surveys still show “that they are considerable, especially for the energy security of Europe.”

Because Cyprus is such a small island and its domestic needs for gas will only amount to about 1 billion cubic meters annually, the country has no choice but to export its comparatively plentiful finds. In addition to Aphrodite, whose second exploratory and conformational drilling will begin in June, several other basins off of Cyprus’s shores have attracted drilling firms from Italy, Korea and France.

“After the first finds by Noble and Delek in Cyprus, we had an increased interest despite the Turkish threats,” Hatziargyrou said, referring to Turkey’s claims to portions of the reserves for the northern portion of Cyprus under Turkish military rule. “They wouldn’t be interested unless they knew something was there. The quantity of natural gas to be extracted from Cyprus will be a lot more.”

While establishing an LNG facility may be considered a gamble by some due to its $6-10 billion worth of investments, Hatziargyrou stressed that despite the shaky Cypriot economy, the site’s construction will be a sure thing. It will not be difficult to secure funding and bring in companies interested in accruing a profit to build such a facility, and the government has already purchased and designated the necessary land in an unpopulated region of Cyprus, he said.

Making use of this future site for its gas exports would be highly beneficial to Israel, both financial and geopolitically, Hatziargyrou contended.

“It would do a lot to solidify the excellent relations that exist between the two countries if Israel would decide to export part of its gas from Leviathan through the LNG plant in Cyprus,” he said, noting that such a decision would alleviate Israeli environmental concerns about constructing a facility on the country’s packed shores.

“If and when the Israeli government decides what to do, how much to export, how to export, where to export, we hope that when that decision is taken they will see the prospect of cooperating through the LNG plant in Cyprus,” the ambassador said.

AS CYPRUS is close to the Suez Canal, LNG exports could easily be shipped to “power-hungry markets of Asia” in addition to those in Europe, he added.

In a recent interview with the Turkish-English newspaper Hürriyet Daily News, Turkish Energy Minister Taner Yıldız claimed that “Israeli officials, local officials in Greek Cyprus and representatives of the TRNC [Turkish Republic of the Northern Cyprus], they have all agreed on one reality: The natural gas to be produced from this region will get its utmost feasibility by a pipeline that will pass through Turkey.”

Several Israeli energy experts – such as Eco Energy CEO Amit Mor and Prof. Brenda Shaffer, an expert on energy policy in the School of Political Science at the University of Haifa – have said that Turkey could serve as a potential gas customer for Israel, now that relations have improved between the two formerly tense nations. Hungry for energy, Turkey has one of the “fastest growing” electricity markets in the world, Shaffer told the Post in March.

Cyprus is not yet a viable option for Israeli export, as neither Israel nor Cyprus has enough gas to justify an expensive LNG plant construction, Shaffer argued. There is also not currently enough proven gas for Israel to delve into multiple export options, but should more discoveries occur, “there could be a different picture,” she said.

“Setting up a pipeline to purchase gas for the huge Turkish market is not necessarily contradictory to us setting up an LNG plant,” Hatziargyrou said in response, noting that Israel could partake in both options simultaneously.

From Turkey’s point of view, Yıldız stressed in the Hürriyet article that while establishing a pipeline for Cypriot and Israeli gas through Turkey would be optimal, Turkey would be “open to any sort of projects with the accomplishment of stability in the region.”

On the other hand, the minister maintained his opinion in the article that the current Cypriot exploration is “illegal,” as the reserves are not being shared with Turkish military-controlled northern Cyprus.

Repeated attempts by the Post to contact the Turkish Energy and Natural Resources Ministry for an interview received no response.

Regarding Yıldız’s comments, Hatziargyrou pointed out what he called the “interesting” nature of the Turkish minister’s word choice, as he referred to “Greek Cyprus” and “the Turkish Republic of Cyprus,” when in reality the former is the internationally recognized republic. The exploration process has occurred precisely “according to the book” following the 1992 Law of the Sea Convention, and has been accepted internationally as perfectly legal, he added.

“The preeminent problem is that Turkey doesn’t recognize the Republic of Cyprus,” the ambassador said. “Mr.

Yıldız is speaking about cooperating but at the same time, the country and government he represents does not recognize the Republic of Cyprus.”

Meanwhile, Hatziargyrou said he had no idea where the statement that Cypriot and Israeli energy officials had agreed on the benefits of a Turkish pipeline came from. In order for cooperation on natural gas or any other issue to occur between Turkey and Cyprus, a normalization of relations would first have to happen, which the ambassador sees happening through one of two modes. The first option would be a “confidence building measure” for the disputed city of Famagusta – if Turkey would agree to UN control in what has become a “ghost city” in order to bring the two communities together, according to Hatziargyrou. The second, he explained, would be an adherence to the Ankara Protocol, which would mean Turkey opening up its ports to all planes and ships of the European Union.

“Then we will make this entire eastern Mediterranean an area of peace and not tension,” the ambassador said.

“The blueprint is there but it requires political will, which unfortunately we don’t see at this point.”

Ultimately, a gas pipeline carrying Cypriot gas to or through Turkey cannot occur until officials from the two countries “sit at the same table” and until Turkey recognizes the Republic of Cyprus, he stressed. As for Israel, Hatziargyrou said he could not predict what the country would do.

“What I can tell you is that unfortunately, our experience with Turkey in the almost four decades of negotiations of the Cyprus problem hasn’t exactly been the best,” he continued. “So now what’s going to happen between Israel and Turkey? I don’t know.”

While stressing that regionally “it would be great to find a common denominator to work together,” Hatziargyrou said that Cyprus’s relationship with Israel is independent of its relationship with other countries in the eastern Mediterranean, and that the same goes for Israel.

Cyprus is an ideal partner and “predictable friend of Israel,” in which “there is no possibility of blackmail” and there is only goodwill on both sides for furthering relations, according to the ambassador. The only dividing line between the two countries is their maritime border, he added.

“We don’t view the relationship with Israel through the prism of Turkey,” Hatziargyrou said. “We view the relationship with us as a predictable friend through which we have prospects for cooperation. I think that the government of Israel, from what they have shown us so far, will act the same way.”

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