Incoming new EU Commission may be keener on negotiations to resolve regional East Med problems

LIMASSOL, Cyprus – The possible resumption of the dormant peace talks when Cypriot President Nicos Anastasiades and Turkish Cypriot leader Mustafa Akinci meet UN Secretary General Antonio Guterres next month could be a step towards resolving the issue of developing the potential gas reserves offshore Cyprus and pause Turkish drilling in Cyprus Exclusive Economic Zone (EEZ).

“There is a strong push and more readiness to resume negotiations next month, starting with Greek and Turkish Cypriots,” Cyprus Natural Hydrocarbons Company CEO Charles Ellinas told New Europe on 24 October, adding that recent events following the incursion of Turkey into Syria have helped focus minds and hopefully there will be better convergence. “But even then, there is still uncertainty how they will progress. I am not that confident though that Turkish drilling will stop altogether, but once current commitments are completed, it may pause for a while until we see how negotiations progress,” Ellinas said

He noted that drilling by the international oil companies (IOCs) in Cyprus EEZ will probably start in the first quarter-second quarter next year, at least in areas not claimed by Turkey.

Meanwhile, there has been increased US interest in the East Mediterranean region and several summits highlighting cooperation between Greece, Cyprus and Israel as well as Greece, Cyprus and Egypt.

Ellinas said Washington’s interest is limited to forging the Israel, Greece, Cyprus alliance and cooperation with Egypt as proxies to the US in the region. “The pull-out from Syria has sent shivers to the spines of these friendly nations and I am sure they will be rethinking how best to safeguard their interests – hence the increased readiness to resume negotiations for the Cyprus problem,” Ellinas said, adding that the incoming new European Commission of President-elect Ursula von der Leyen may also be keener on negotiations to resolve regional East Med problems.

The US and EU has seen exports from the new discoveries in the East Med as a way of reducing reliance on Russian gas supplies as the first leg of Gazprom’s Turkish Stream or TurkStream nears completion and the Russian gas monopoly mulls a second leg of Turkish Stream to Europe.

But Ellinas noted that the probability of exports of gas from the East Med to Europe has receded. “Low gas prices in Europe, which are likely to persist to the end of the next decade, and the drive for reduction in carbon emissions – which will increase under the new European Commission – are putting pay to this. Putting it simply, East Med gas is too expensive to produce and export to make any inroads into Europe. That’s why Russia is not showing any interest in Cyprus EEZ,” he said.

Russian sources have told New Europe Moscow is not interested in Cyprus gas reserves as they have bigger projects with Turkey and China.

In any case, Cyprus gas reserves are quite limited, Ellinas said, adding that Russian oil major Rosneft and Novatek, Russia’s largest independent gas producer, are players in the East Med, but mostly through their partnerships with IOCs, such as Italy’s ENI, British Petroleum and France’s Total. “Gazprom’s interests right now are in Turkey, with TurkStream 1 and 2 and exports through there to Europe taking priority,” Ellinas said.

He noted that the increasing impact of energy transition, renewables and climate change activism, entrenched low oil and gas prices and an increasingly competitive international market, IOCs are becoming more selective where to invest – multi-billion dollars – in developing large projects. “They give priority to easy to get, cheap and low risk to develop oil and gas fields, with direct access to global markets,” Ellinas said, noting that East Med does not quite fulfil these conditions, except perhaps Egypt with its huge internal energy market, existing infrastructure and free from conflict.

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