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Cyprus: long wait for celebration

The rising prospect of East Med natural gas sales is lifting Cyprus' hopes of finding a market, despite Turkish threats

A string of recent developments in the East Mediterranean offshore have raised the possibility of a gas find off Cyprus made in December 2011 finally being developed. The Aphrodite field in Block 12, located 100 miles (160 km) south of the island, contains 5 trillion cubic feet of natural gas. Operator Noble Energy has been unable to proceed with a final investment decision because it has failed to find a market that would justify the expense of developing a relatively small discovery at the bottom of 2,000 metres of sea.

Noble has also made slow progress in finding markets for its two operations offshore Israel, the Tamar field (with reserves of 11 trillion cf) and the giant Leviathan field (22 trillion cf). But in a surprise move in February, Noble announced a deal to sell 700m cubic feet a day to Dolphinus Holdings, a private company in Egypt, from the end of 2019. This is when the Leviathan field is scheduled to start production.

While it's not yet clear how the gas will reach Egypt, the deal has raised hopes that Noble might be able to tie in gas from Aphrodite to the Egyptian venture—thus allowing the company to take the FID. Egypt has said it's definitely looking to import Cypriot gas and there have several joint meetings on the subject. But a gas sale and purchase agreement is still awaited.

Elsewhere offshore Cyprus, the authorities are waiting to hear the detailed results of Eni's discovery, at the Calypso prospect, in Block 6. There are some suggestions that the find could be comparable to that made by Eni in the 30-trillion-cf Zohr field offshore Egypt. The Zohr discovery, in a previously unknown carbonate layer, triggered huge interest in adjoining blocks on the Cypriot side of the maritime boundary.

All the positive news recently about Cyprus has been partly overshadowed by Turkey's reaction to what's happening in Cypriot waters. Turkey doesn't recognise the maritime boundaries agreed by Cyprus and its other Eastern Mediterranean neighbours. It insists instead that some of the Cypriot blocks lie on its continental shelf. It also asserts that offshore exploration should await reunification of the island—the northern half is governed by a Turkish-backed but internationally unrecognised administration.

When Eni's drilling ship Saipem 1200 had finished work in Block 6 to the southwest of Cyprus, it sailed to Block 3 to the southeast where the Italian company is also the operator. But as it approached the Soupia (Cuttlefish) drill site, Turkish warships blocked its progress, saying that military exercises were underway. Turkey threatened to use force if the drilling ship didn't stop. Saipem 1200 later moved to another location.

Eni has postponed Block 3 drilling plans in the hope that a diplomatic solution can be reached. The European Union has urged Turkey to "terminate these activities", and stressed Cyprus' right to "explore and exploit its natural resources in accordance with EU and international law".

Thus far, Turkey has shown no inclination to change its attitude. President Recep Tayyip Erdoğan said that without the consent of both Turkey and the Turkish Cypriot administration in northern Cyprus, "no steps can be taken in the Eastern Mediterranean".

At present, it seems unlikely that Turkey would take military action. The fact that ExxonMobil is one of the operators offshore Cyprus means that Turkey would have to contend with possible US reaction if an American company found itself caught up in the fray. Nevertheless, even the threat of force and the presence of Turkish warships in Cypriot waters is spoiling the atmosphere for what Cyprus hopes will soon be a time for celebration. For the day when the island's gas finds a market may at last be approaching.

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