Six warehouses filled

Cyprus’ much-anticipated hydrocarbon reserves should be used to help solve the Cyprus problem

NATURAL resources, if properly managed, are a blessing for the country which is lucky to discover and exploit them in a sustainable manner with the minimum environmental impact.

In light of the rising world energy prices and the dwindling conventional oil reserves, new energy finds assume paramount importance, particularly if they are major discoveries, have a high energy returned on energy invested (EROEI) value and are termed as environmentally clean fuels. In addition to meeting a country’s energy needs, promoting economic prosperity through royalties, employment opportunities and services from support industries, and enhancing energy security, energy assets arm the owner with political leverage.

The timing, of course, at which one decides to exploit any natural resource and the details of the agreements with oil developing and support companies are equally important. Norway can serve as an exemplary nation worth mimicking in this respect. But the sustainable exploitation of energy assets, which demands dedicated expertise, confronts national administrations with formidable technical and economic dilemmas. Risks are particularly acute for countries with little or no experience in exploiting their natural wealth. When natural resources are the subject of conflict the realities change fundamentally. Yet energy companies continue to operate in some of the most politically unstable regions on the planet, more often than not, under hostile environmental conditions.

Things do not look so bad for Cyprus which is currently about to commence exploratory drilling operations for hydrocarbon reserves in its exclusive economic zone (EEZ) in October. The political situation in Cyprus, which has prompted Turkey’s opposition to the drilling, is perhaps the major impediment. Exploratory drilling for natural gas, led by the Greek Cypriots, will take place offshore in its exclusive economic zone. As a full member of the EU and signatory to the international convention of the law of the seas (UNCLOS), Greek Cypriots have every legal right to proceed with the exploration with Noble Energy, Inc. But at the same time, the Turkish Cypriots, equal citizens of the country, have a stake in the national wealth.

Turkish Cypriots and Turkey, in particular, are reluctant to endorse these actions out of fear that they will be left behind. But it’s worth clarifying that the decision to proceed with the development of oil and gas reserves in Cyprus is an internal (or national) affair exclusively falling under the jurisdiction of the Greek and Turkish Cypriot communities. It also benefits the Greek Cypriots to ensure that a fair share is allocated to the Turkish Cypriots.

Plans to proceed with the development have been facilitated by bilateral EEZ delimitation agreements signed between Cyprus and Israel and Cyprus and Egypt in February 2003, and, December 2010, respectively. These mutually binding agreements should also be viewed as a success for both Turkish and Greek Cypriots as they pave the way for extracting natural resources in a peaceful manner. Furthermore, bilateral agreements open up new possibilities for cooperation in which Cyprus could act as trade gateway to Europe. A natural gas liquefaction (LNG) plant facility which will be used to export natural gas, using LNG ships to Europe, is only one of those prospective shared ventures. Certainly, both Turkish and Greek Cypriots have a lot to benefit from such initiatives.

Regarding hydrocarbon exploitation, as a tangible act of good will the Greek Cypriots should proceed to establish a fund where a proportion of the exploitation rights will be shared with the Turkish Cypriots. In this way, nobody will be left behind. The amount of funds can be decided between the two community leaders. Obviously, any agreement rests on the assumption that hydrocarbons will be discovered off the coast of Cyprus in amounts to justify any investment. Meanwhile, to assuage the concerns of the Turkish Cypriots, the Greek Cypriots ought to proceed to agree on the details of the abovementioned fund.

Moreover, a more balanced deal between the two sides could allocate a number of jobs, associated with hydrocarbon extraction, to Turkish Cypriots. Already a large number of Turkish Cypriots are employed on the Greek side. Along the same lines, Turkish Cypriot companies must also be allowed to compete with Greek Cypriot and other enterprises for business. Just like the Turkish and the Greek Cypriots cooperate already in a number of matters, such as, electrical power generation, the dumping of municipality waste, and water resources there is no reason why they should not extend the scope of their mutual cooperation to other areas as well. Cypriot natural gas reserves could also be used to power electricity generation and transportation on the entire island.

Instead of being perceived as an obstacle to the solution of the Cyprus problem, joi ned hydrocarbon exploitation efforts hold great potential in bringing the two communities closer together helping in this way to realise progress towards reaching a lasting solution to the Cyprus problem. Instead of being viewed as a threat to Turkey and the Turkish Cypriots, the national wealth of Cyprus offers fertile ground for extensive cooperation between the sides - with the ultimate goal of enhancing prosperity and reuniting the island.

As part of the ongoing Cyprus problem negotiations, the two leaders could agree on a probationary formula for the mutual exploitation of natural gas findings. To eliminate the risk of mistrust arising between the two communities on the grounds of irresponsible decisions there is an increased need for transparency. Tenders for example and agreements with subcontractors ought to be based purely on their merits and meritocratic criteria. Objective decisions could be taken by a committee of Turkish and Greek Cypriot experts, comprising energy professionals, academics, government technocrats, lawyers, businessmen, and others. In the event that the Turkish Cypriots decide to exploit potential hydrocarbon resources in the north part of the island mutual agreements of trust building dictate that Greek Cypriots will also be invited to participate in the decision-making process.

After decades of negotiations and almost 35 years now since Cyprus’ division, political reasoning has failed to bring reunification of the island. Conventional wisdom maintains that financial incentives are more powerful in settling a conflict than politics alone. If both parties stand to benefit financially then economic leverage can put aside political differences in place of political stability. Emphasising the economic benefits and reaching for a compromise is far more beneficial than partition, isolation and inaction. The current dire economic climate in Cyprus, exacerbated by the knock out of the Vassilikos power station, together with hydrocarbon exploration should act as a catalyst to progress.

If the small steps outlined above materialise, perhaps someday a pipeline exporting natural gas from Cyprus to Europe, traversing Turkey, will not be a science fiction scenario. Unlocking the potential of unified Cyprus on economic grounds is clearly of benefit to all Cypriots. Energy matters have a pivotal role to play.

Constantinos Hadjistassou, D.Phil. is a low-carbon and conventional energy researcher and specialist working at the University of Cyprus. His articles are posted on Energy Sequel (www.energysequel.com)




By Constantinos Hadjistassou
Published on August 28, 2011
cyprus-mail.com
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