To exploit the exciting new gas reserves in the Eastern Mediterranean in the most profitable way, both economically and politically, the best option is to build a pipeline from Israel’s Leviathan field via Cyprus to Turkey, argues Friedbert Pflüger, Director of the European Centre for Energy and Resource Security (EUCERS) at King’s College London. Such a pipeline is less costly than an LNG terminal in Cyprus – and it could serve as an instrument to (finally) improve relations between Cyprus and Turkey.
The natural gas reserves discovered off the coast of Israel and Cyprus are estimated at 1.1 trillion cubic meters (tcm). To put this in perspective: the reserves are enough to satisfy Germany’s total annual gas demand for roughly twelve years. Moreover, the discoveries have the potential to change the history of the region. They could either bring prosperity to Israel, Cyprus and Turkey or plunge the region, which is already plagued by the Cyprus-Turkey conflict and the Syrian civil war, into an even deeper crisis. How the rich treasures of the Mediterranean are exploited and shared is ultimately a matter of war and peace.
Natural resources can be a blessing, but often also a curse, as was the case with the silver mines in Peru, the Goldrush in the US and the coltan discoveries in Central Africa. Will the countries in the Eastern Mediterranean succeed in exploiting the rich natural gas resources in a manner that avoids further conflict, and potentially even leads to a resolution of ongoing conflicts?
This question is not only important for the region, but also the broader international community. This is why the EU and the US should build a common strategy together with Turkey, Cyprus and Israel in the coming year. The Brookings Institution, the Institute for Strategic Dialogue and EUCERS at King’s College London have already held conferences on the subject and developed initial strategies that should be further expanded upon.
Israelis and Cypriots are currently contemplating the construction of LNG terminals for exports. These are very costly (a single LNG train for about 7 billion cubic meters (bcm) of gas a year costs more than 6 billion dollars) and very difficult to finance, given the relatively limited reserves as well as regional risks.
And where should the gas tankers go? The Asian markets, which are usually the markets of choice, have a growing number of gas suppliers in the region and beyond, including Qatar, Russia (Sakhalin), Australia and, from 2016, potentially also the US.
The solution that makes the most economic and political sense would be to build a pipeline from the Israeli Leviathan field, via Cyprus where it would take additional gas, to Turkey. A twin pipeline with an annual capacity of 16 bcm would cost about 2.5 billion dollars according to a study from Turcas. The pipeline would start in the Israeli Leviathan field and traverse 470 km through the Mediterranean Sea and come ashore in southern Turkey, where natural gas is sorely needed.
Turkey’s annual gas demand is projected to increase from about 42 bcm in 2012 to 62 bcm in 2020. Moreover, Mediterranean gas would be significantly cheaper than imported gas from Russia or Iran, which combined currently comprise some 80% of Turkish consumption. Ankara has long since recognized that it needs to diversify its energy imports for price and security reasons. It already has delivery agreements in place with Azerbaijan and the Kurdish Regional Government of northern Iraq. This is why Turkey is so interested in finding a pipeline solution.
A gas pipeline would also be in Israel’s best interest. Prime Minister Netanyahu’s administration decided in June earlier this year that it wants to reserve 540 bcm of natural gas for Israel’s own consumption, which would leave about 400 bcm left over for exports. A direct pipeline connection to Turkey would bestow Israel a secure market for the next few decades and concurrently make Ankara a long-term partner again.
This leaves Cyprus. From a purely economic perspective, a direct pipeline connection to Turkey would also be in Nicosia’s interest – however, the unresolved Cyprus question and the enormous distrust it has towards its powerful neighbor is a considerable obstacle to the realization of such a project.
In early 2004, the United Nations Annan Plan ultimately failed to gain the necessary votes of Greek Cypriots in a referendum, whereas the majority of Turkish Cypriots supported the proposal. New talks are being held now. The enormous economic potential of cooperation may provide enough incentives to find a resolution to the dispute. The UN, US and the EU should perhaps attempt to bring the Cyprus question back on the agenda and convince the different ethnic factions to approve a political agreement that could facilitate economic revival in the entire region.
Another scenario is also conceivable: the “Gas for Pipes” deal between Germany and the Soviet Union in the 1970s could be a good example of potential cooperation. Despite the Cold War, unresolved border issues, and starkly contrasting social systems, Moscow and Bonn (the German capital at the time) managed to establish a reliable energy partnership. The confidence-building measures and common interests that were required for successful collaboration in the energy sector eventually helped pave the way for German and European reunification.
Thus, an Israel-Cyprus-Turkey “peace pipeline” makes economic and political sense for all parties involved. This is why it has good chances of being realized – ideally right after the Cyprus question has been resolved.
Prof. Dr. Friedbert Pflüger is Director of the European Centre for Energy and Resource Security (EUCERS) at King’s College London, Non-resident Senior Fellow of the Atlantic Council of the United States and supervisory board member of Alstom Power GmbH. He is also Managing Director of two consulting firms in Berlin and Arbil. Pflüger was Deputy Minister of Defence in the first Merkel government.
Note that last week we published an extensive analysis of the potential of the Eastern Mediterannean gas resources by Constantine Levoyannis and Mathieu Labrèche. These two authors argue that for European security of supply, an LNG terminal in Cyprus would be the best route to market.