Monday, 20 February 2012

Russia backs away from Cyprus natural gas involvement

Last week, the Cyprus government announced that it was initiating the second round of hydrocarbons licensing to cover the 12 remaining blocks of the island’s southern Exclusive Economic Zone. Exploratory drilling by US-based Noble Energy in the Aphrodite field produced results that showed an estimated five to eight trillion cubic feet of natural gas and not a little euphoria on the island that it was on the brink of Gulf-style wealth.

Speculation has been rife in Cypriot newspapers that potential bidders in the new round would include Gazprom and Lukoil from Russia; Total SA from France; Shell and BP from the UK and Holland; Exxon from the USA; Petrobas from Brazil; and Petronas from Malaysia. The thinking behind attracting interest from such a diverse range of companies being the desire to implicate their national governments in the island’s energy endeavours and neutralise Turkey’s belligerent reaction to Cyprus exercising its sovereign rights – rights that, of course, Turkey doesn’t recognise.

Given Russia’s increasing economic penetration of Cyprus and President Christofias’ emotional attachment to Russia, it was assumed that it was almost inevitable that state-owned Gazprom would be a major beneficiary of the new licensing round, and would be awarded one or more blocks to explore.

However, according to this report (in Greek) in yesterday’s Politis, Gazprom has decided it won't be bidding for a Cyprus block, citing the high production costs involved in exploiting Cypriot hydrocarbons.

But cost, Politis says, is not the real reason behind Gazprom’s reluctance to become embroiled in Cyprus. Rather, Gazprom is backing away from Cyprus because it doesn’t want to alienate Turkey now that Turkey has agreed to allow the construction through its territory of the South Stream pipeline, which will transport Russian gas to Europe under the Black Sea, obviating Ukraine’s involvement in the project.

The Politis article goes on to argue that the Cyprus government has also overlooked the fact that the transportation to Europe of hydrocarbon deposits from the Eastern Mediterranean will upset Russia’s plans to make Europe dependent on Russian gas and that Moscow has a vested interest in creating tension between Turkey and Cyprus. Politis further suggests that the much-vaunted despatch to the Eastern Mediterranean last October of a Russian battle group led by the aircraft carrier Admiral Kuznetsov had less to do with warding off Turkey from its threats to disrupt Cyprus’ gas exploration and more to do with showing support for President Assad in Syria.


Makis said...

We shouldn't believe too much what Politis says; it has an agenda and it's been wrong many times before.

John Akritas said...

True; but I thought I'd just put it out there. We'll see soon enough if Gazprom bids or not. Also, it's good that we don't get carried out away, like Christofias, with the Russians – though there are significant implications for Cyprus if it can't attract the big guns to get involved with its EEZ.

Hermes said...

If this is true, then it does not surprise me. Why would the Americans and their lackeys the Israelis (or perhaps the other way around) allow the Russians in on the game? Or, why would the Russians want in on a game that could reduce their leverage over the EU. The risk is that the Americans (and the EU) may lock in Cyprus as a supplier without urging Turkey to solve the Cyprus problem. Of course, Cypriots will be wealthier but we will still only control 60% of the island. And arguably, we do not even control that 60%.

However, only time will tell if this is true.

John Akritas said...

The problem is that if Cyprus doesn't manage to attract interest from the larger players because they don't want to alienate Turkey and jeopardise their projects with Turkey – didn't Shell or BP recently announce it was exploring for hydrocarbons off Attalia? – then Cyprus will have to rely on smaller firms like Noble and on Israeli firms like Dalek, making Cyprus too dependent on Israel. But it's all a bit hazy at the moment. This report suggests Gazprom are interested in Cyprus hydrocarbons:

Anonymous said...

Well it was announced a few weeks ago that Turkey has allowed Russia to build a pipeline through Turkish waters in the Black sea. The analyst in the article I read thought Turkey allowed this while gaining nothing. Well maybe this was the price. Also as mentioned Gazprom does not want competition. I don't think it matters if the other big players are involved.

And I don't think this would dampen Further Cypriot and Greek ties. It shows you can never be dependant on one country as there interests are not one dimensional. But I don't necessarily see this as putting russia in Turkeys camp either.


Hermes said...

If you want to help people in Greece and do not want your money going to the nouveu riche who have recently fallen on hard times and other fat cats crying poor, then this charity looks good. It supports large Greek families on islands, mountain and border areas and also helps to alleviate Greece's dire demographic problem. It also appears to be endorsed by other serious organisations.

John Akritas said...

The other thing to consider, Ted, is that Russia and Turkey are in diametrically opposite camps when it comes to Syria. If Assad should fall, Turkey will be in a position to step in and exert influence there – putting Turkey at odds with Iran. Turkey at odds with Iran and with influence in Syria might want to make Israel even more keen to patch things up with the Turks; but if Russia loses Syria in the Eastern Mediterranean then won't that make Moscow keener to exert influence in Cyprus? Wow! Such a lot to think about. Amazing what a little bit of gas can do.