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Turkey moves against gas exploration in the South

27 March 2013

Turkey’s Ministry for Foreign Affairs issued a statement last weekend, outlining its objections to South Cyprus treating the hydrocarbon reserves discovered off the island’s southern shores as belonging only to itself. It further stated that South Cyprus should not be granting licences to look for and extract gas in order to raise money for its devastated economy, without any reference to its co-owners, North Cyprus.

Yesterday Turkey began acting against energy companies that were in business with South Cyprus to extract gas.

A major energy Italian energy company, ENI is to be excluded from any current and future energy projects in Turkey if it acts upon a licence granted earlier this year, to begin gas exploration off southern Cyprus.

“We have decided not to work with ENI in Turkey, including halting their current projects,” Turkish Minister for Energy, Taner Yildiz said. ENI, which is not currently very active in Turkey, responded by expressing its hope that it could reach an agreement with Ankara “and return to our usual good relations”.

Yildiz had suggested that ENI be removed from a project to build an oil pipeline from the Black Sea port of Samsun to Ceyhan on the Mediterranean – but admitted that the project had made little progress. ENI had been a stake holder in the Blue Stream pipeline that transports Russian gas to Ankara but that project has been completed.

Turkey, is trying to increase pressure on South Cyprus, which has plans to build a terminal to liquefy natural gas and ship it abroad. However, given that the economy is in crisis, and that it would cost 20 billion euro to complete the project, (a writer in the ‘Economist’ commented that they don’t have enough gas finds to justify the huge expense of building an LNG terminal), South Cyprus may have to consider alternatives. The cheapest option would be to pipe gas via North Cyprus and under the sea to Antalya. A recent study says that this option would add a further 15 billion euro in net revenue.

However, there is a long history of enmity between South Cyprus and Turkey, since Turkey launched a rescue mission to the island in 1974, culminating in the Greek Cypriot ‘no’ vote to the Annan Plan. The mutual antipathy continues since many negotiations for Turkey’s access to the EU have been blocked because it will not open its ports to vessels from South Cyprus.

Turkey’s threats have been dismissed by some as rhetoric. It will be interesting to see what the next move will be.

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