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FACTDROP: Greece and Turkey Spar Over Aegean Energy
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2/28/2013

Greece and Turkey Spar Over Aegean Energy



Πηγή: Oil Price
By Alex Jackson
Feb 28 2013

The relationship between Turkey and Greece has improved immeasurably over the past few years. Once locked in a miniature Cold War, Ankara and Athens have now realised that they need to cooperate on a host of issues – particularly gas transit. But as many other countries have come to realise, natural gas is just as often a source of division as cooperation. A new row over offshore drilling rights, along with the ongoing disputes over eastern Mediterranean gas, is posing new difficulties for their relationship.

In January news reports began to circulate that Greece was planning unilateral drilling in disputed areas, prompting a cautious warning from Turkey. Not much more was heard until, in mid-February, Greek Prime Minister Antonis Samaras insisted that Greece has the right to explore for oil and gas anywhere within its territory and that it could declare an Exclusive Economic Zone (EEZ) for that purpose.

The following day, Greece submitted a note to the United Nations raising the issue of “Turkey’s granting of exploration permits [for oil and gas drilling] for areas of the Greek continental shelf” which, Athens said, violated the UN Convention on the Law of the Sea.

Ankara promptly responded by vowing to submit its own note to the UN and take appropriate counter steps. Turkey said that “the licenses that Turkey has given to the TPAO since 2007 are within the borders of the Turkish continental shelf in the Eastern Mediterranean and Turkey has sovereign rights concerning exploration and drilling for natural sources in these fields.”

The dispute over maritime boundaries in the Aegean and eastern Mediterranean has been rumbling on for decades, complicated by the presence of Greek islands near the Turkish coast. Both sides have threatened to use force if the other drills in what they see as their own waters.

As Turkey noted, TPAO has been granted exploration licences in the Aegean and Mediterranean since 2007, although activity since then has been limited. In 2008 Turkey conducted some exploratory work in Turkish waters and in late 2009 TPAO reportedly discovered gas in the area but little has happened subsequently. International investors are cautious until absolute clarity on continental shelf and EEZ rights can be assured.

So why has the dispute flared up again, and what does it mean for the regional gas picture? The answer to the first question is clearer. Samaras was speaking shortly after French President Francois Hollande visited Greece and expressed interest in French firms helping to explore for oil and gas in the Aegean. Total is reportedly keen to drill in the Aegean, which is believed to be extremely prospective but remains under-explored due to the political tensions. Reportedly Hollande is already encouraging Athens to lease two French frigates for the exploration, though whether as escorts or to be fitted with seismic equipment is unclear.

Samaras’s statement also came just a few weeks before he visits Ankara with members of his Cabinet for high-level meetings. Announcing Greece’s right to declare an EEZ and drill in the Aegean was a clear statement of intent to the Turks in advance of that trip, even if he hasinsisted that a peaceful solution must be found.

Greece is evidently laying its cards on the table and trying to force some movement on the Aegean border issue. Turkey, however, is unlikely to compromise. It is already at loggerheads with (Greek) Cyprus over natural gas issues in the eastern Mediterranean and sees Greece as the endpoint of an axis running from Israel and through Cyprus. Ankara has already warned the three states that a subsea pipeline isn’t going to happen; the fact that Total has recently signeda deal with Cyprus to drill offshore (a decision which blackballs it from working in Turkey) underlines the connection.

Given Turkey’s sense of a confrontation stretching from the Aegean to the Levant, and its efforts to increase its own offshore drilling, don’t expect Ankara to compromise on Greek demands. Samaras almost certainly knows this. But Greece’s economic woes have raised the stakes. Developing a new source of revenue whilst also flying the flag for sovereignty might be a popular move.

Worsening Turkish-Greek relations may have an impact on wider gas export patterns. Most obviously it would exacerbate existing tensions in the eastern Mediterranean between Turkey and Cyprus, as both relationships tend to influence each other. The chances of a rapprochement between Ankara and Nicosia on energy, or of a subsea pipeline from Israel, would get even slimmer.

Indirectly it could also affect the chances of the Trans-Adriatic Pipeline being chosen by the Shah Deniz consortium in June. Formally of course the decision of the consortium, in which TPAO has a small stake, is not supposed to be at all political. But in practice a political crisis over the Aegean, or a Turkish decision to suspend energy cooperation with Greece on existing gas pipelines, would raise serious questions about the viability of another pipeline crossing between them.

For now both sides are committed to dialogue and finding a constructive solutions. Greece and Turkey have come a long way in the past few years: this is not 1987, when attempted hydrocarbon exploration by Turkey almost led to a military confrontation. But the energy stakes in the Aegean could be very high, and both sides will try and take things down to the wire.


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