Another chapter in Eastmed "Gas Games" as Turkey continues to take the initiative in regional oil & gas geopolitics. At the end of June, the Yavuz drilling ship departed the Dilovasi port adjacent to Istanbul, leaving towards the Famagusta bay on the Eastern side of the Cyprus island, where the ship intends to perform an underwater exploration drilling. The economic zone, where the drilling is supposed to take place is internationally recognized as the economic zone of the Republic of Cyprus (de-facto controlling Southern Cyprus, a.k.a. Southern Cyprus), though obviously with the island being divided - the designated bay area is claimed by Northern Cyprus (Turkish Cyprus), an internationally unrecognized entity which governs the northern parts of Cyprus under Turkish protectorate since 1970s. The legal trick which allows Turkey itself to explore the area for oil & gas, even as it belongs to a separate entity of Northern Cyprus, is the licensing of drilling rights in Northern Cyprus-claimed areas to the Turkish Petroleum Corporation (TPAO).
The Yavuz drilling ship is the second Turkish ship to depart to the economic zone of the Cyprus island. In May this year, the first drilling of this kind was initiated by Turkey - exploring for oil & gas in the Western part of the Cypriot economic zone. The Turkish drilling campaign was initiated shortly after the discovery of a third significant gas resource in the economic zone south of Cyprus by the Republic of Cyprus. As already mentioned, Turkish drillings are taking place in the economic zone around the island of Cyprus, with a principal disagreement between the version of Turkey and its Northern Cyprus protectorate and the Republic of Cyprus in regard to the demarcation of marine economic zones. In the consequence of the first Turkish drilling in May, United States, European Union and Egypt issued statements against Turkish actions in the region, as the drilling is clearly located in the economic zone of the Cyprus island, with no international recognition to the Turkish version of economic rights and no recognition of the legitimacy of Northern Cyprus to make any claims on the northern parts of the zone. Already in May, the government of the Republic of Cyprus formally applied to the UN, asking for an immediate demarcation of its exclusive marine economic zone, but so far with no outcome. It would rather be interesting to witness further developments on this issue with the actual arrival of the second Turkish drilling ship to its destination in the Famagusta bay.
Figure 1. The location of the Turkish drillings in Cypriot economic zone is marked red (edited map by NordNordWest).
In the meanwhile the Greek-majority Republic of Cyprus, which has become a natural gas resource-owning state following recent discoveries of offshore hydrocarbon fields, cannot find a solution for developing its reserves. The industry of the Cyprus island is not sufficiently large to economically justify the development of the discovered reserves, while the export options remain elusive. Egypt is rapidly ramping up its own gas production and hence is unlikely to import natural gas from abroad due to limitation of its gas liquefaction facilities. The grandiose plan of the Republic of Cyprus for a local gas liquefaction facility is too heavy for the local economy of the island - 10 billion US Dollars, whereas the ambitious Eastmed Gas Pipeline to mainland Europe is at this point more of a declarative project than a real one also requiring mandatory Israeli participation and a significant price tag of 7 billion US dollars. There is also another option of a floating LNG facility (FLNG )with advancements in development of this novel technology, but it's feasibility also depends on the volatile pricing of LNG on the spot market. The fastest track for the Republic of Cyprus to bring natural gas seems at this point to be import - whether via a local LNG import buoy facility which is already in advanced planning stages or perhaps via a marine pipeline, bringing natural gas from the Israeli economic zone, with Karish and Tanin partnership already announcing such a plan.