Semih Idiz | Jun 13, 2018 | 0
The Meaning of The New Gas Discovery Around Cyprus #Energy
Italian energy company Eni announced New gas discovery on 8 February 2018 that “it has made a lean gas discovery in ‘Block 6’ Offshore Cyprus with Calypso 1 NFW.
The well, which was drilled in 2,074 meters of water depth reaching a final total depth of 3,827 meters, encountered an extended gas column in rocks of Miocene and Cretaceous age. The Cretaceous sequence has excellent reservoir characteristics. Calypso 1 is a promising gas discovery and confirms the extension of the “Zohr like” play in the Cyprus Exclusive Economic Zone.” Zohr is a giant gas reserve discovery by ENI within the Egyptian EEZ (exclusive economic zone) with an estimated recoverable reserve of 850 billion cubic meters.
In parallel, in Nicosia, Cypriot Energy Minister Yiorgos Lakkotrypis made a complimentary announcement claiming that the discovery was “… a particularly positive development because it is the second substantive discovery in the Cypriot EEZ (exclusive economic zone), which increases the reserves of Cyprus in natural gas,”.
For the so-called “Block 6” for which the Greek Cypriots opened a bid despite Turkey’s strong warning claiming that that area was partially within Turkey’s EEZ and described the licensing as a “provocative act.” In a letter submitted on 2 May 2017 to the United Nations’ General Assembly, Turkey’s permanent representative to the UN, Feridun Sinirlioglu, has said that “Turkey is committed to protecting its sovereign rights emanating from international law and will not allow foreign companies to conduct unauthorized hydrocarbon exploration and exploitation activities on its continental shelf as it was strongly underlined in several statements on the issue by the Turkish Ministry of Foreign Affairs, most recently on 6 April 2017.”
The Greek Cypriots, openly pampered by the EU and timidly by the US, seems confident that Turkey’s threats will be ineffective. For the so-called “Block 6”, Italia’s ENI and France’s TOTAL are partners (50% each) to develop the block awarded by the Greek Cypriots.
Greek Cypriots may be confident with the EU and US backing reinforced by the two powerful European energy companies and may be trying to use their chance particularly in a period in which Turkey is busy to militarily defeat the PKK threat along it’s southern borders. No need to say, this is a very dangerous gamble.
The so-called “Block 6” is partially within Turkey’s EEZ. Moreover, the Greek Cypriots do not have an exclusive right to develop the hydrocarbon reserves around the island themselves even if it does not fall in Turkey’s EEZ, since those reserves should be together developed by the Turkish Cypriots. However, the Greek Cypriots insist on trying to unilaterally develop such resources including the Aphrodite field.
The Aphrodite reserve was first claimed to contain 230 billion cubic meters (bcm) recoverable reserve by the Greek Cypriots. Then the estimated reserve declined to 190 bcm and then finally to 129 bcm. Such a volume is meaningful and vitally valuable for the island if developed together by the two sides (Turkish and Greek Cypriots) however the Greek Cypriots are unilaterally trying to develop the field and use this position as a carrot and stick tactic for the “solution” negotiations. By the way, they tend to forget the fact that such a limited volume do not have any chance alone to be exported neither as LNG nor via pipeline to by-pass Turkey and feed the European markets. Tareq Baconi notes in his report prepared for the European Council on Foreign Relations in April 2017 that “…there is consensus that Aphrodite is too small to justify the capital investment needed for its development. …any prospective LNG terminal would be a greenfield infrastructure project, and the return on invested capital from projected gas flows would be insufficient to make the project worthwhile…” Adam Lomas has a similar opinion: “The gas found Cyprus on its own may not warrant the building of a massive infrastructure such as an on-shore LNG plant, but the region collectively may well have the potential for building and maintaining such an infrastructure.” Here he mainly points out the Israeli gas which has it’s own problems.
The road that the Greek Cypriots have chosen is a dead-end street. They do not have any right to unilaterally develop any resource around the island. On the other hand, ignoring Turkey’s claims for the extension of her EEZ and testing her determination on this specific issue is more than gambling and is an extremely dangerous step. By the way, the best and most feasible market for the Mediterranean gas is the Turkish market and all the parties should never forget this practical truth before going further with their “strategies”.