Turkey’s fate in the Mediterranean gas story

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MARKAR ESAYAN Published14.03.2019 Daily Sabah

It’s certain that the eastern Mediterranean will come to the fore frequently in the 21st century due to its natural gas and oil reserves. Whether this is going to foster conflict and tensions or enhance stability and prove constructive will definitely be related to what kind of positions littoral countries take or how they ensure cooperation. It’s impossible to assume that gas and oil exploration, discovery and marketing efforts in the region will proceed independently of politics, especially on the issues of Palestine, Iraq and Egypt. But that does not have to produce conflict, either.

On the contrary, if wisdom prevails, perhaps it will become easier to solve the existing problems with a win-win formula. Similar to the rule of communicating vessels in physics, common sense, cooperation and courage added to a vessel will serve as an example and impetus for a problem in another vessel. I think that even knowing and recognizing that such a possibility exists is important in itself. We have to accept that we are very far from this at the moment.Conducting operations in Turkish territorial waters without the consent, involvement and cooperation of Turkey and the Turkish Republic of Northern Cyprus (TRNC) while ignoring their rights is not possible.

Indeed, in early March, Nikos Kotzias, the former Greek foreign minister, made one of those long-awaited statements. While saying that Greek Cyprus must continue its offshore natural gas exploration activities and ensure the transfer of gas to Europe, Kotzias said the following when Turkey was mentioned:

“We must ensure Turkey’s participation in the commercial developments there. It should be fair. If we want to take everything for ourselves, we might face a huge disappointment. That’s why we should include Turkey.”

Kotzias had occasionally made hawkish statements while in office. But his positive remarks must be endorsed by the Greek government as well. Meanwhile, Turkey’s recent naval drill “Blue Homeland,” which was conducted in three seas simultaneously for the first time in its history and which was considered by the Greek public as related to this issue, hit the headlines. Turkey is not an aggressor. Its presence in Syria today is a temporary measure necessitated by self-defense. But yes, Turkey is a significant power when a serious threat to its security and interests arises anywhere. Certainly, its friends do not have to be wary of Turkey.

Obviously, Turkey has more reasons to be suspicious particularly about Greece. Greece had invaded western Turkey at a most difficult time. Again, in Cyprus, it waged war on its Turkish neighbors instead of the British colonial forces.

Exxon’s founding

The hydrocarbon reserves in the eastern Mediterranean came to the fore again after the discovery of approximately 142 billion to 227 billion cubic meters (BCM) of natural gas in Block 10. An Exxon-Qatar partnership found this reserve at 4,200 meters below the surface. Various estimates put the total natural gas reserves in the eastern Mediterranean at between 4 and 15 trillion cubic meters. Assuming even the lesser figure, the reserves there are enormous. A glance at the amount currently reached shows there is more to go.

But the discovery of natural gas and oil and their extraction and marketing at competitive prices are totally different issues. If I’m not mistaken, the oil with the lowest production cost is extracted in the deserts of the Arabian Peninsula, as it is closer to the surface. However, this is not possible for the oil discovered farther north. There are some oil reserves discovered but not tapped due to high costs.

And the Mediterranean reserves pose challenges of their own. Let me mention now what I’m going to explain later: Apart from Turkey’s own share, the shortest and most feasible route to Europe for natural gas and oil that is being extracted or planned to be extracted and exported by Greek Cyprus, Israel and Egypt passes across Turkey.

Indeed, despite the discovery of natural gas in the Tamar (300 BCM) and Leviathan (600 BCM) blocks by Israel and in the Aphrodite (100 BCM) Block south of Cyprus, production began only in the Tamar Block for domestic consumption since efforts to realize a feasible plan failed. According to İbrahim Palaz, former Director General of BOTAŞ International Limited (BIL), Egypt appears to be the only country that is doing it successfully in the Mediterranean. It has discovered nearly 1 trillion cubic meters of gas reserve in its own territorial waters in the Zohr Block and is extracting around 31 million cubic meters of gas daily. It’s because, unlike Israel and Greek Cyprus, Egypt has a certain level of infrastructure in this field. Palaz explains it as follows:

“Aside from Egypt, Israel and Greek Cyprus seem to be not as familiar with the oil and gas sector as Turkey is. Israel still lacks the legal infrastructure related to the export of natural gas. It is observed that deficiencies about the prevention of a monopoly in natural gas production, about its taxation and state oversight, continue.”

How the extracted gas will be delivered to the importing countries is the most important issue. Experts say that building a liquefied natural gas (LNG) facility in Greek Cyprus is not reasonable. Though constructing a joint LNG facility with Israel may alleviate the burden a bit, these options would create costs that can be shouldered by the political will only after excluding Turkey. Building an LNG facility on the sea will never make economic sense. But it’s possible to build that facility in Israel.

However, Palaz states:

“The price of LNG to be exported will have to be equal to those of other LNG exporters in the global market. The cost of the extraction of natural gas and its conversion into LNG by Israel will be the highest of its kind. That is to say, it will bring much less profit to the partner companies.”

Since countries emerge as the key players here, preferences of other players, companies, take a back seat. After all, neither Israel, Egypt nor Greek Cyprus has discovered and extracted these reserves on their own. It is multinational oil companies that are doing this with their own technology and funds. So, there is a limit to the use of energy resources as a political weapon by countries. And that limit is defined by cost/benefit ratios.

The pipeline debate

Another option is the Israel-Greek Cyprus-Crete-Greece natural gas pipeline. And it’s possible to realize it. But it will not be economical, either and shunned by companies. Palaz explains why, as follows:

“The Israel-Greek Cyprus-Crete-Greece natural gas pipeline in the eastern Mediterranean. Due to its planned underwater route, it poses technical challenges but that’s not an obstacle. The real problem is that it is expensive commercially. For such a pipeline to be of commercial value, the amount to be exported should be roughly around 10 BCM at a minimum. Besides, the total consumption of Greece is near 4 BCM. Therefore, the surplus volume should be transferred beyond Greece. And that can be possible by, say, building a connection to the Trans-Adriatic Pipeline (TAP), which is an extension of the Trans Anatolian Pipeline (TANAP). Thus, eastern Mediterranean gas can be transferred to Italy and beyond. This alternative could not make much way until now.”

Israel’s using the LNG facilities in Egypt is neither compatible with the rules of competition nor feasible. Egypt is a gas exporter now, and Israel or Greek Cyprus is its competitor in the market. It’s not in its interests to allow these countries to use its LNG facilities except for political reasons. It can be claimed that Egyptian President Abdel-Fattah el-Sissi was brought to power for making such decisions. It’s clear, however, that such decisions cannot be sustained over time.

According to Palaz, carrying eastern Mediterranean gas to Turkey with a 500-kilometer pipeline is the most reasonable solution from the outset. If a deal had been reached, the discovered gas could have been sold to Europe since 2012.

In short, Israel, Greek Cyprus and Egypt avoiding a greedy, selfish and politically motivated stance toward sharing the Eastern Mediterranean reserves would be the best course for all. Turkey has the capacity, know-how and experience to transport reserves it discovers in its waters. So, other countries should give priority to establishing good relations with Turkey.

https://www.dailysabah.com/op-ed/2019/03/14/turkeys-fate-in-the-mediterranean-gas-story

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