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Israel could broker gas deal with South and Turkey

11 August 2013

Following the recent approaches by South Cyprus to Israel, where Israel is being asked to send its gas finds to be processed by South Cyprus LNG plant, tensions between Turkey and South Cyprus can only escalate as the South plans to build its first Liquid Natural Gas (LNG) processing plant.

Turkey maintains that the South’s gas exploration is broaching Turkey’s continental shelf off shore Cyprus and is also ignoring the fact the North Cyprus also has rights to gas found around its shore.

In the bickering and petulant world of politics, where South Cyprus (and the rest of the world, bar Turkey) does not recognise the North and where Turkey does not recognise South Cyprus, it has been suggested by Dr Ahmet Han of Kadir Has University’s International Relations Faculty that Israel might quietly broker a natural gas revenue deal between the two sides.

Speaking to the ‘Jerusalem Post’, he said that Israel could play a pivotal role in alleviating the tension brewing between Turkey and South Cyprus over eastern Mediterranean hydrocarbons by entering as a “silent broker” in a special commission that would negotiate natural gas revenue sharing.

Although Cyprus is a European Union member state recognised by the international community, Turkey does not acknowledge the country’s existence and has held a considerable military presence in the North since 1983.

The increasingly significant natural gas discoveries along Cyprus’s shores have added fuel to a long and slow burning fire, as Turkey claims that a share of these resources belong to North Cyprus. Meanwhile the South resolutely continues its gas exploration and fosters plans to process the gas on the island. Turkey, for its part has offered to pipe the gas from Cyprus to Antalya and onwards to Europe and beyond. This, it is claimed would be the cheapest option. It is estimated that the financially broken South would need to find $6 billion to build an LNG plant.

The South Cyprus Ambassador to Israel, Dimitris Hatziargyrou says that no such cooperation between Turkey and Cyprus could even be considered until a normalization process between the two states occurred. Elsewhere, he said that the first option toward achieving normalization, according to Hatziargyrou, would be a “confidence building measure” for the disputed city of Famagusta. The second, he explained, would be an adherence to the Ankara Protocol, which would mean Turkey opening up its ports to all EU (South Cyprus) planes and ships.

Bloomberg Financial News reveals the scope of the South’s energy ambitions saying this:

‘’The country may build as many as five liquefied natural gas production lines, or trains, in addition to a planned $12 billion, three-train terminal near Limassol, according to Cyprus National Hydrocarbons Co., in charge of all gas developments. Extra gas for the plants could come from nearby countries.

“Three trains won’t be enough,” Chief Executive Officer Charles Ellinas said by telephone. “We may have land available for eight trains, to also make sure we can accommodate gas from Israel and Lebanon.”

Cyprus plans to start LNG exports in 2020 after it invited international companies to explore offshore. Gas shipments are part of a plan to boost the sputtering economy following a 10 billion-euro ($13 billion) bailout agreement with European partners and the International Monetary Fund this year.

The government in June approved a framework for negotiating construction of the first terminal with Houston-based Noble Energy Inc. (NBL) and Israel’s Delek Drilling LP (DEDRL) and Avner Oil Exploration LLP. (AVNRL) A company will be set up this year to run the plant and arrange LNG sales starting early in 2014, Ellinas said.

Israel could be instrumental in easing this strain – both over hydrocarbon allocations and perhaps toward a “final settlement” between the two entities – if the country would step in as a quiet middleman to help negotiate a profit-sharing agreement, says Dr Han.

While ending the political conflict between South Cyprus and Turkey would be optimal, an agreement on natural gas could occur without requiring Turkey to recognize South Cyprus as a state or requiring the South to recognize the Turkish portion of the island as independent, Han stressed. Dr Han recently delivered a speech at a conference titled “Natural Gas in the Eastern Mediterranean – Economic Impacts and Strategic Implications,” held at the Institute for National Security Studies in Tel Aviv.

Relations between Israel and Turkey have thawed following an apology issued by Israel to Turkey over the Mavi Mara incident*. It would appear that both countries are beginning to appreciate the possibility mutual political and economic benefits, said the international relations expert. (Although there seems to be little development from there, pending issues of financial compensation to relatives of those who lost their lives in the incident.)

Israel has yet to set an export policy for its own natural gas reserves and Ankara has recently tried to persuade Israel to consider exporting gas to both Turkey and Europe through a Turkish pipeline.

The arguments against this are political recognition and security; an LNG facility would be easier to monitor against any potential attack. Although Han counters that the Turkish navy could patrol the area to ward off the possibility of sabotage. This option may have faded into the background, since Turkey has recently been pointing fingers at the Jewish lobby, accusing it, among other factions, of involvement in the Gezi Park and Taksim Square demonstrations.

Should Israel decide that it is interested in exporting gas through the Turkish option, another impetus for taking part in such a process would be the additional Cypriot gas flowing through that pipeline, according to Han.

“Involving Cyprus makes the project more feasible, the regional environment more secure and the relationship between Turkey and Israel much more integrated,” he said.

Reiterating that the two countries would not necessarily have to recognize each other, Han explained that a special commission guided by Israel could grant each party certain rights.

Admittedly, he acknowledged, this would not necessarily “be something that looks like the standard of international law.”

If the current situation prevails and Cypriot natural gas explorations continue in today’s pattern, Han predicted that “Turkey will do anything to make this not work,” and that the country has enough international leverage to do so – particularly along the Cypriot western shores.

 

*Nine Turkish nationals were killed by Israeli soldiers who boarded the Mavi Marmara vessel on an aid mission in May 2010.

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