Amid outright confrontation between the European Union and Turkey about Ankara's drilling program in the Eastern Mediterranean, Cyprus is moving on with its gas export plans. Could it be a bumpy ride?
"Energy, we feel, can act as a catalyst for regional stability and peace, provided that all countries fully respect the sovereign rights of their neighbors, within the framework of international law," Cypriot Energy Minister Georgios Lakkotrypis told DW.
Earlier this month, EU foreign ministers passed a mechanism to sanction individuals or entities involved in "unauthorized drilling activities" in the Eastern Mediterranean.
"Cyprus is using diplomatic and legal means to respond to Turkey's escalating military provocations. As we speak, Turkey is attempting a fourth drilling operation inside Cyprus' territorial waters, accompanied by gunboats," commented Lakkotrypis.
At the end of September, the Turkish drillship Yavuz started operations inside Block 7, off the coast of southeastern Cyprus. Last week, Turkey responded to the European sanctions mechanism by sending back a second drillship, the Fatih, to waters off northeastern Cyprus.
Turkish politicians and academics argue that Ankara couldn't do anything but flex its muscles.
"The EU forgets that Cyprus is a disputed island, Emete Gözügüzelli, director of the Research Center of the Law of the Sea at Bahcesehir Cyprus University, told DW.
"Turkey has the legal right to take countermeasures over hydrocarbon activities. Greek Cypriots should accept the common joint program on energy and share welfare with the Turkish Cypriots."
UN-mediated reunification talks to resume soon?
As tensions rise, United Nations Secretary General Antonio Guterres is throwing his political weight behind reunification negotiations. The meeting with Greek Cypriot and Turkish Cypriot leaders aimed at restarting talks is set to take place in Berlin on November 25.
Turkish Foreign Minister Mevlüt Çavuşoglu said on Monday that Turkey might not be interested in supporting the talks under the current conditions.
France's Total and Italy's Eni made headlines over an alleged change of plan in Block 7, the area claimed by Turkey.
According to Lakkotrypis, the decision of the consortium to start with other blocks has nothing to do with Turkish actions. It was rather taken, he added, on the basis of geological data, even before Turkey's intervention in the area.
A helicopter flies over Turkey's drilling ship Fatih dispatched towards the Eastern Mediterranean, near Cyprus
"The companies licensed in Cyprus' Exclusive Economic Zone (EEZ) are willing to invest significant resources in both the exploration of new prospects, as well as the appraisal of existing discoveries," said Lakkotrypis, underlining that Cyprus recently issued the first exploitation licence for the Aphrodite field, currently the biggest in Cypriot waters.
Aphrodite and financial considerations
The development plan presented by the Aphrodite consortium estimates gas will start flowing in 2025. The final investment decision (FID) from the consortium, which includes Israel's Delek group, Texas-based Noble Energy, and Anglo-Dutch Shell, could be reached by 2022.
The plan hinges on the construction of a pipeline connecting the field to Idku in Egypt, "from where it will be reexported to Europe and international markets in the form of LNG."
The Aphrodite consortium and the owners of the Idku LNG terminal will soon start negotiations to secure a gas sales contract, but several experts have voiced doubts. The field is in deep waters, and global gas prices are relatively low. Competition from Russia, Qatar and North America remains fierce, while Egypt is ramping up its gas production.
"In the gas business, what matters most is the words of bankers, not politicians," Gal Luft, co-director of the Institute for the Analysis of Global Security, argued.
Luft, who is also a senior adviser to the United States Energy Security Council, adds that developing local markets would be the best way to guarantee long-term demand.
"While all the local players are toying with grand infrastructure projects, they have done very little to develop their own domestic demand for gas. In Cyprus and Greece electricity is still generated from oil; in Israel there is almost no use of gas in the industrial and transportation sectors."
Laurent Ruseckas, senior advisor at consultancy group IHS, argues that if additional discoveries are made in undisputed waters, there seem to be three other options to export EastMed gas, apart from using Egyptian LNG terminals: a new LNG plant in Cyprus, a pipeline through Turkey or the EastMed pipeline to mainland Greece via Crete.
The EastMed pipeline is technically and commercially the most complicated one. Exports will indeed come up against a global glut of gas supplies.
However, EastMed received broad political support from both the EU and the US. For instance, it was recently confirmed in the European Commission's list of Projects of Common Interest. The European Investment Bank, which announced a change in its lending policies last week, kept a window open for gas projects in that list even beyond 2021. The saga is not over yet.