Briefing Memo: The Aphrodite gas field and the southeastern Mediterranean's new energy triangle THE HELLENIC AMERICAN LEADERSHIP COUNCIL

Transcription

1 THE HELLENIC AMERICAN LEADERSHIP COUNCIL Briefing Memo: The Aphrodite gas field and the southeastern Mediterranean's new energy triangle Prepared by: Georgia Logothetis Managing Director Hellenic American leadership Council May 8,

2 Cyprus is experiencing an economic crisis, but a natural gas find off its southeastern shore may provide a way forward. Natural gas is a hydrocarbon (fossil) fuel, like oil and coal. Unlike oil and coal, however, natural gas burns more cleanly and produces less carbon dioxide per unit of energy released. Natural gas exists deep below the earth s crust, often but not always near oil deposits, and requires extraction and then transport to the consumption point. In its gas form, natural gas is transported through pipelines that can span thousands of miles. Alternatively, natural gas can be liquified (converted into liquified natural gas) and then transported on carriers or trucks. Just over a dozen countries account for the vast majority of natural gas extraction around the world, and a recent discovery in the Eastern Mediterranean has allowed Cyprus to join that exclusive club. 2

3 Finding Aphrodite: The Discovery of a natural gas field in Cyprus s Exclusive Economic Zone In 2008, Noble Energy, a Texas-based energy company, was awarded a contract to begin exploration of possible natural gas deposits off the coast of Cyprus. In 2011, Noble Energy announced a discovery 170 kilometers south of the coastal city of Limassol of 5 trillion to 8 trillion cubic feet of gas. Morgan Stanley has estimated that the worth of that discovery ranges anywhere from 5 billion to 32 billion, depending on how the gas is transported and whether an onshore liquified natural gas plant is built. It is a significant find that can revolutionize both the domestic energy market in Cyprus as well as the island s export economy. The discovery of the so-called Aphrodite gas field in the country's maritime exclusive economic zone is the latest in a series of natural gas discoveries in the southeastern Mediterranean. The Leviathan gas field off the coast of Israel, discovered in 2010, is that country s largest gas reserve and the world s largest offshore gas find of the past decade, while production in Israel s Tamar gas field began in May

4 The Energy Triangle The discovery of natural gas in the eastern Mediterranean has prompted closer cooperation between Greece, Cyprus and Israel on the issues of natural gas extraction, transport, markets and security. The three countries have agreed to the creation of a gas pipeline that would transport gas from the Aphrodite and Leviathan gas fields to a liquified natural gas plant in Cyprus by 2019, where it could then be exported to Europe. Europe is heavily dependent on Russian natural gas supplied by Gazprom. Establishing infrastructure in the Energy Triangle that would allow for the streamlined export of natural gas from the southeastern Mediterranean to Europe would serve as a strong counterbalance to Russia in addition to providing a new export market for Greece, Cyprus and Israel. 4

5 Turkey s gunboat diplomacy Turkey has heralded the formation of this new geopolitical block between Greece, Cyprus and Israel with increased belligerence. Turkey, which has illegally occupied the northern part of Cyprus since 1974, steadfastly maintains that it (by way of its occupying regime in Cyprus) should have a say in the how Cyprus s natural resources are exploited as well as a share of the profits. No country in the world, save Turkey, recognizes the legitimacy of the occupying regime. Under the United Nations Convention on the Law of the Sea, a country may generally exploit natural resources 200 nautical miles off of its coast, including producing energy from natural gas, water and wind. The Exclusive Economic Zone of Cyprus, divided into 13 exploration blocks, covers more than 70,000 square kilometers (the Aphrodite gas field in located in Block 12 of Cyprus s EEZ). Cyprus has demarcated its maritime border with various countries over the years (Egypt in 2003, Lebanon in 2007, and Israel in 2010). Turkey refuses to recognize or honor those demarcations. In 2011, Turkey went as far as to send a warship into the area after the drilling began in the Aphrodite gas field and has continuously warned that it will continue to respond in such a manner unless Cyprus respects the inherent and equal rights of colonizing residents in the occupied part of Cyprus. 5

6 Exclusive Economic Zones in the Eastern Mediterranean Turkey's version of the Eastern Mediterranean Exclusive Economic Zones, which is unsupported by the Law of the Sea 6

7 Looking forward: Regional stability & Economic Resurgence The profits from the Aphrodite gas field are not a panacea for Cyprus s current economic crisis, but they will eventually help to transform the island s economy and the region as a whole. It is estimated that exports of any Cypriot natural gas is still five to seven years off, as exploration is still ongoing and refining and transport infrastructure has yet to be built. These structural considerations are apart from the maze of geopolitical issues that will have to be resolved before Cyprus can fully enjoy the benefits of resources in its EEZ. The potential of significant revenues from the natural gas in Cyprus' EEZ and the related economic development that this industry will spur provides an additional incentive for reaching a solution that will end the 39 year occupation of Cyprus and allow all Cypriots to benefit from these new economic benefits. Successive governments of the Republic of Cyprus have explicitly stated that natural gas revenues are meant to benefit all Cypriots. If Turkey adopted a less belligerent approach with its neighbors and lived up to its declared "zero problems with neighbors" foreign policy, immediate benefits would pass onto the Turkish Cypriots. Furthermore, greater cooperation by Turkey -- including recognition of the Republic of Cyprus -- could lead to collaboration between Cyprus, Israel, and Turkey for transporting gas to Europe via a pipeline through Turkey or for meeting some of Turkey's energy needs via Cyprus' and Israel's gas field. Cyprus, Greece and Israel will eventually emerge from the current landscape of unknowns as a new energy hub for Europe. The energy hub will not only aid Europe in easing its dependence on Russian natural gas and boost the countries respective economics, but it will also serve a secondary purpose of strengthening the relationships between these key regional players and enhancing stability and security in an area of the world that needs an abundance of both, providing the first Western, democratically controlled source of energy in the region." 7

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