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Monday, 23 December 2013
Summer of discontent: Citizen unrest and the politics of protest in Southeast Europe
Kerem Öktem (Open Society Research Fellow, European Studies Centre, St Antony's College, Oxford)
The summer of 2013 has been marked by significant citizen mobilization almost all over Southeast Europe. The mass protests of Istanbul's Gezi Park and Sofia's Orlov Most stood out. Yet, as we discussed in the workshop 'Citizen unrest and the politics of protest in Southeast Europe', discontent with populist politics and incomplete democracies had been building up all over the region over the last few years. As Gwendolyn Sasse (Nuffield) and Michael Willis (St Antony's) suggested, neither the Eastern and Southeast European protests, nor the Arab Spring uprisings can be understood as sudden outbursts of frustrated segments of society. As a matter of fact, protests don't just happen, they always have a pre-history, as one participant stated. In all cases discussed, a certain path dependence explains how popular discontent is translated into action or the lack thereof. In Algeria, for instance, protests did not take hold despite immediate proximity to Tunisia and economic problems as pressing, because the memory of the destructive Algerian Civil War is still very much alive. In this pre-history, a series of factors matter: From the levels of public sector employment to the content of IMF rescue packages, from public trust prior to the protests to forms of party mobilization, protests are shaped by these factors.
Friday, 15 November 2013
Taking them to Task: Reflections on the Commission's Task Force for Greece
David Madden (Senior Member, St Antony's College, Oxford)
Dr Jens Bastian, former Task Force member, spoke at a SEESOX seminar on 13 November. Key take aways are(i) Financial assistance programmes alone could not rescue Greece. (ii) Structural reforms and a political consensus behind them were essential. (iii) The challenges for Greece and its international creditors remained enormous
Dr Bastian reported that the Task Force was established in June 2011, with 56 staff in Brussels and Athens. It was the result of a politically courageous initiative by George Papandreou. It was not part of the Troika. It was there to cooperate, offer qualitative judgements, work alongside the Greek administration, build capacity and effectiveness, help provide know-how and introduce examples of best practice from other Member states, increase EU fund absorption capacity, and prepare Greece for the next EU financing cycle 2014-2020. Successes were the striking improvements in the absorption level of EU structural, cohesion and social funds; recapitalisation of the Greek banks; and the agreed reduction of the Greek share in co-financing EU-funded projects. Work had also been done on improving Greece’s access to FDI e.g. through work on establishing an Institution for Growth. There was room for improvement in the modus operandi of the Task force: it lacked its own budgetary resources, there was a risk of thematic overreach, and public awareness of the work remained worryingly low. Above all, much remained to be done. There was some evidence of economic stabilisation, but talk of a definitive Greekovery was premature.
In answers to questions, Dr Bastian added the following. The Task Force had a good story to tell, and it was not always told. Every Member State was involved in at least one Task Force project. The contributions from Germany and France were exemplary. There was a continuing debate over whether the primary purpose of privatisation was revenue or stimulating competition. The IMF was not seen as the devil incarnate in Greece: it had both reviewed its past performance, and provided honest warnings about future lending requirements. It was true that the Task Force lacked carrots, but its stress on cooperation, collaboration, consensus and capacity building pointed towards a new way of doing business in Greece.
Dr Bastian ended by saying that the Task Force should not be permanent. Instead, its work in assisting the implementation of a critical mass of structural reform would enable it to hand over its tasks to Greek authorities sooner rather than later.
Dr Jens Bastian, former Task Force member, spoke at a SEESOX seminar on 13 November. Key take aways are(i) Financial assistance programmes alone could not rescue Greece. (ii) Structural reforms and a political consensus behind them were essential. (iii) The challenges for Greece and its international creditors remained enormous
Dr Bastian reported that the Task Force was established in June 2011, with 56 staff in Brussels and Athens. It was the result of a politically courageous initiative by George Papandreou. It was not part of the Troika. It was there to cooperate, offer qualitative judgements, work alongside the Greek administration, build capacity and effectiveness, help provide know-how and introduce examples of best practice from other Member states, increase EU fund absorption capacity, and prepare Greece for the next EU financing cycle 2014-2020. Successes were the striking improvements in the absorption level of EU structural, cohesion and social funds; recapitalisation of the Greek banks; and the agreed reduction of the Greek share in co-financing EU-funded projects. Work had also been done on improving Greece’s access to FDI e.g. through work on establishing an Institution for Growth. There was room for improvement in the modus operandi of the Task force: it lacked its own budgetary resources, there was a risk of thematic overreach, and public awareness of the work remained worryingly low. Above all, much remained to be done. There was some evidence of economic stabilisation, but talk of a definitive Greekovery was premature.
In answers to questions, Dr Bastian added the following. The Task Force had a good story to tell, and it was not always told. Every Member State was involved in at least one Task Force project. The contributions from Germany and France were exemplary. There was a continuing debate over whether the primary purpose of privatisation was revenue or stimulating competition. The IMF was not seen as the devil incarnate in Greece: it had both reviewed its past performance, and provided honest warnings about future lending requirements. It was true that the Task Force lacked carrots, but its stress on cooperation, collaboration, consensus and capacity building pointed towards a new way of doing business in Greece.
Dr Bastian ended by saying that the Task Force should not be permanent. Instead, its work in assisting the implementation of a critical mass of structural reform would enable it to hand over its tasks to Greek authorities sooner rather than later.
Thursday, 24 October 2013
Addressing energy efficiency measures and innovations in Sweden and the United Kingdom
Androulla Kminara
Addressing energy efficiency measures and innovations in Sweden and the United Kingdom
Click on the above link to read Androulla's blog.
Addressing energy efficiency measures and innovations in Sweden and the United Kingdom
Click on the above link to read Androulla's blog.
Friday, 18 October 2013
An insider’s view of Greece’s Euro crisis: Why the road to redemption must also be paved with skilful intentions
David Madden (Senior Member, St Antony's College, Oxford)
The first day of SEESOX’s academic year was marked by Constantinos Papadopoulos giving an insider’s view of Greece’s Euro Crisis: he was Secretary General for Greece’s International Economic Relations at the Ministry of Foreign Affairs, 2010-2012. He made three main points, supported throughout by examples, detail and statistics. The Greek economy’s adjustment on the basis of the Memorandum with the Troika represented a massive structural transformation intended to make the Greek economy vastly more outward-looking and export-oriented. Fiscal consolidation, and recovery from financial mismanagement, were also important; but structural changes were crucial to the long-term survival of the Greek economy. The fact that this was not fully appreciated was delaying Greece’s exit from the crisis. Secondly, Greece’s future lay in the euro. The failures of the last years did not do justice to the improved performance of the Greek economy in (some) many areas since Greece joined the monetary union. Thirdly, Greece was an extreme example of a wider phenomenon affecting the West: debt-fuelled growth and low savings. Weaknesses in other countries compounded Greece’s problems.
Looking ahead, Papadopoulos said that the West would have to live less on credit, and more on its wits. Greece had squandered earlier opportunities for reform; but now had learned lessons and knew it could not return to the free and easy ways of the past.
In answer to questions, he added the following: across the board budget cuts were indiscriminate and could be damaging, but government structures did not always encourage fine-tuning in these matters; similarly there was an inherent tendency to slow down rather than embrace reform; the brain drain was painful, but it was better for individuals to seek work elsewhere and then return, rather than stagnate at home; the Athens Stock Market was starting to reflect a feeling that things were improving; Greek banks had been the victim of sovereign debt restructuring, and now found it hard to lend because credit continued to be tight, but also less credit was needed partly as a result of the recession itself; broad fiscal guidelines from the IMF had been followed, but not always in the best way; Greece was within reach of achieving a primary budget surplus as well as a balance on its current account; main exports were, in order, petroleum products (a huge earner), pharmaceuticals, olive oil, aluminium products, fish, pipes and tubes, packaged vegetables, cheese, fruit and aluminium composites; shipping and tourism were also tremendously important sources of income for Greece; China and US multinationals were investing in Greece, but much more FDI was essential for economic success.
Thursday, 27 June 2013
Energy meets politics in the Eastern Mediterranean
David Madden
On 12 June, Androulla Kaminara (EU Fellow at the European Studies Centre) gave the latest of her SEESOX seminars on the subject of Cyprus natural gas. Confirmed deposits were in the region of 5 trillion cubic feet; the full potential was likely to be considerably higher than this. More than one pipeline would be required; and also Greek Cypriot political leaders had decided there should be a LNG facility at Vassilikos. Cyprus currently has very expensive electricity, so much of the gas would be retained for domestic consumption rather than exported.
Elsewhere in the region, the first gas from Israeli off-shore fields was already flowing, and 52 international companies were interested in Lebanese off-shore gas. Turkey was heavily gas-dependent. World-wide, the energy market was volatile, with the financial crisis encouraging the search for cheaper energy, the shale gas bonanza in the US, Germany moving away from nuclear power, and 33% more energy needed by the world over the next 15 years. The conclusions of the EU Energy Council in June referred to “indigenous energy sources”, which was new wording.
Androulla floated some ideas: the EU itself to play a greater role in EEZ negotiations, Cyprus to apply the “Alaskan model” to gas profits to benefit citizens, more Mediterranean cooperation on environmental protection. She then answered questions on these and other points. LNG from Cyprus might be in production by 2020; financial crises had tended to push environmental aspects own the agenda; and a European Parliament report on shale gas had recommended leaving decisions to member states.
On 12 June, Androulla Kaminara (EU Fellow at the European Studies Centre) gave the latest of her SEESOX seminars on the subject of Cyprus natural gas. Confirmed deposits were in the region of 5 trillion cubic feet; the full potential was likely to be considerably higher than this. More than one pipeline would be required; and also Greek Cypriot political leaders had decided there should be a LNG facility at Vassilikos. Cyprus currently has very expensive electricity, so much of the gas would be retained for domestic consumption rather than exported.
Elsewhere in the region, the first gas from Israeli off-shore fields was already flowing, and 52 international companies were interested in Lebanese off-shore gas. Turkey was heavily gas-dependent. World-wide, the energy market was volatile, with the financial crisis encouraging the search for cheaper energy, the shale gas bonanza in the US, Germany moving away from nuclear power, and 33% more energy needed by the world over the next 15 years. The conclusions of the EU Energy Council in June referred to “indigenous energy sources”, which was new wording.
Androulla floated some ideas: the EU itself to play a greater role in EEZ negotiations, Cyprus to apply the “Alaskan model” to gas profits to benefit citizens, more Mediterranean cooperation on environmental protection. She then answered questions on these and other points. LNG from Cyprus might be in production by 2020; financial crises had tended to push environmental aspects own the agenda; and a European Parliament report on shale gas had recommended leaving decisions to member states.
Wednesday, 26 June 2013
Domestic and foreign policy dimensions of the challenges facing Turkey
Kerem Oktem
On May 28 and 31, we had the pleasure of hosting a longstanding friend of SEESOX, Ziya Öniş, Professor of International Political Economy at Koç University Istanbul, for two well-attended seminars.
In the first, Prof. Öniş examined the challenges to Turkey's economic growth and the democratic reform process during the three terms in government of the Justice and Development Party (AKP). He registered that the country’s economy had developed impressively in the last decade thanks to a policy of ‘regulatory neo-liberalism’ and a significant restructuring of the budget away from military spending towards health and education expenditures. He also reminded the audience that important liberalising reforms had been enacted particularly during the first AKP government, and that the influence on politics of the military has been massively curtailed. Yet, Turkey now seems to have become caught in a double trap: The middle-income trap suggests that Turkey has reached a threshold which it can only surpass by shifting its industrial base and export output from low and medium technology to high-tech. Such a leap, however, requires significant and concerted investment into education, research and development, and the current level thereof seems unlikely to be sufficient to help Turkey out of its middle-income position. The second is the procedural democracy trap. While the country has reached a certain maturity in terms of multi-party elections, it still has relatively weak political institutions, and remains mostly illiberal and majoritarian in spirit. Again, to move from the current majoritarian system to a liberal democracy, with the rule of law and extensive human rights, looks like a major challenge. ‘Conservative Globalism’, which Prof. Öniş likens to Asian style developmentalism, may be the AKP’s best bet at the moment, but it will not enable to take Turkey beyond either threshold.
On May 28 and 31, we had the pleasure of hosting a longstanding friend of SEESOX, Ziya Öniş, Professor of International Political Economy at Koç University Istanbul, for two well-attended seminars.
In the first, Prof. Öniş examined the challenges to Turkey's economic growth and the democratic reform process during the three terms in government of the Justice and Development Party (AKP). He registered that the country’s economy had developed impressively in the last decade thanks to a policy of ‘regulatory neo-liberalism’ and a significant restructuring of the budget away from military spending towards health and education expenditures. He also reminded the audience that important liberalising reforms had been enacted particularly during the first AKP government, and that the influence on politics of the military has been massively curtailed. Yet, Turkey now seems to have become caught in a double trap: The middle-income trap suggests that Turkey has reached a threshold which it can only surpass by shifting its industrial base and export output from low and medium technology to high-tech. Such a leap, however, requires significant and concerted investment into education, research and development, and the current level thereof seems unlikely to be sufficient to help Turkey out of its middle-income position. The second is the procedural democracy trap. While the country has reached a certain maturity in terms of multi-party elections, it still has relatively weak political institutions, and remains mostly illiberal and majoritarian in spirit. Again, to move from the current majoritarian system to a liberal democracy, with the rule of law and extensive human rights, looks like a major challenge. ‘Conservative Globalism’, which Prof. Öniş likens to Asian style developmentalism, may be the AKP’s best bet at the moment, but it will not enable to take Turkey beyond either threshold.
Monday, 17 June 2013
The limits of neoliberal conservatism: Taksim Square and a new deal in Turkey?
Dimitrios Gkintidis
The Seminar “The limits of neoliberal conservatism: Taksim Square and a new deal in Turkey?” was held on Monday 10 June 2013 at the ESC. The speaker was Kerem Oktem, Open Society Research Fellow at the ESC, and Associate Faculty Member at the Oriental Institute, University of Oxford. Whit Mason, analyst and Research Associate at the Centre for International Studies, Oxford, took part as a discussant, while the event was chaired by Dimitrios Gkintidis, Leventis Visiting Fellow at SEESOX, ESC.
Kerem Oktem’s captivating presentation was based on a detailed chronological and ethnographic account of the events and protests that followed the violent intervention of police forces against environmentalist protesters in Gezi park, Taksim square, Istanbul. What started as a localized environmental protest against the planned construction of a commercial complex on the site of the Gezi park led to massive protests, in which citizens, social movements, and political forces of various backgrounds took part. The opposition and protest politics soon spread beyond the issue of the Gezi park itself. The slogans and aims of these social protests, that engulf urban youth, artists, left-wing and anti-authoritarian groups, kemalist activists, human rights and LGBT activists, as well as minority political organizations (e.g. Kurdish organizations), raised the issue of a generalized discontent; regarding both the authoritarian shift of the state, under the leadership of the Turkish PM, as well as the introduction of conservative policies, in terms of public practices of sociability (sexuality, alcohol consumption, imposition of religious normative precepts). To a great extent, the discourses enacted within Taksim Square also raised the issue of the limits of the economic liberal project of the last years and the fragile balance between capitalist growth, social consensus, and environmental sustainability, what Kerem Oktem termed as a “neoliberal overstretch”. At the same time, the dynamics of this social mobilization also exceeded the boundaries of Istanbul, since many urban centres in Turkey (Ankara and Izmir being the most prominent ones) witnessed equally important social mobilization and political confrontation, with local variations in terms of police violence, protesters’ reactions, and competing discourses.
Friday, 7 June 2013
Tuesday, 4 June 2013
Wednesday, 29 May 2013
Croatian foreign policy: The European Union and South East Europe
David Madden
The annual SEESOX lecture was given on 24 May by President Josipovic of Croatia, at the conclusion of his official visit to the UK in the run-up to Croatia’s accession to the EU on 1 July. The subject was: Croatian foreign policy; the EU and South East Europe.
The President started by saying that the Croats had believed that war in Europe would never happen again; but unfortunately it had happened. Croatia’s policy had been: international recognition of the country, to stop the war and help the peace; the territorial integrity of Croatia; and the plan to join NATO (achieved 2009) and the EU (2013).
One purpose of the EU was to bring peace to the continent, and Croatia had taken this route. Another was economic development, and Croatia was building a new economy. A third was better relations with neighbours, and Croatia was also active here: rebuilding connections, overcoming problems, and discussing all open issues. Of course there was still much to do: eg working on the continuing problems of missing persons, and border issues.
The EU vision meant peace, security, freedom (and the balance between the two), solidarity and justice. The path to accession entailed strict criteria, but had helped Croatia become a better society than it had been 10/15 years previously: improved rights for minorities, improved rule of law, better investment climate, a crack-down on corruption. Was this connected with foreign policy? Yes. Cooperation, an improved position in global markets, rule of law, real partnerships: all this added to Croatia’s European future. Europe was not complete without South East Europe: Croatia was not a “leader”, but could use its experience to help the other countries of the region vis-à-vis the EU; and would also play its part in the current EU debate over more/less centralisation etc.
Friday, 24 May 2013
Greece's foreign policy priorities
David Madden
On 20 May, Ambassador Konstantinos Bikas spoke at a SEESOX seminar on Greek foreign policy. The major task was to strengthen the external credibility of Greece. The financial crisis in South East Europe was part of the global debt crisis. There were many factors: debtor country misuse of loans; EU governance failures; unsustainable interest rates; no fiscal transfers within Euro zone. Greece had now come close to a primary budget surplus, with huge social pain; but Greeks wanted to stay within Eurozone.
The Greek relationship with the Drachma was not the same as UK with the £. Greece needed a relationship with rest of Europe (and inflationary memories of Drachma made Grexit deeply unattractive). Regional foreign policy: there was regional consensus on abandoning nationalism in the Balkans. There were good prospects on Greece/Turkey. Turkey would eventually join the EU, and that was in the interests of Greece. Cyprus: there had to be a solution. This would need to go beyond talks between the two communities to involve Ankara directly. Energy discoveries created a new situation and all parties in E Med must benefit. Benefits should be shared for the entire island, after a resolution of the current division. There should be regional partnerships.
Developments on Serbia/Kosovo were positive. Greece accepted Kosovan membership of EBRD. Greece was keen to find a solution on the name of FYROM, but was the government in Skopje ready for compromise? Relations were pragmatic, but the ball was in the Skopje court for a solution.
The cultural heritage of Greece in the UK was remarkable, as was the number of Greek students: third after China and India.
The Ambassador added a number of points in answer to questions. Greece had not collapsed: it still held 35th place in UN prosperity scale. It would become more competitive after the crisis. Greece was ready to accept mosques as the obligation of a democratic society: this was in no way a natter of Greek/Turkish relations. Illegal immigration from Turkey was a huge quantitative problem, bringing social problems in its wake; the EU had failed to press Turkey, and should do more. The rise of Golden Dawn was connected more to this than to the economic crisis.
After 5 years of austerity, 75% of Greeks still wanted to be in Euro – it was seen as an anchor. People were angry and in pain, but they stuck to the policy.
There was no way to impose a solution on Cyprus, especially in the current crisis. Cyprus was not a failed state. Attempts to use the crisis to push Cyprus to a solution wouldn't work and created nationalism.
Thursday, 23 May 2013
Cyprus and the energy developments in the Eastern Mediterranean
Androulla Kaminara
On the 17th of May we had a very interesting seminar on the hydrocarbon discoveries in the East Mediterranean, this time from the Cypriot perspective. This was the second such event at St Antony’s this term on the issue[1]. The main presenter was Dr Charles Ellinas, the Chairman of the Cyprus National Hydrocarbon Company, the discussant was Anastasios Giamouridis from Poyry who recently wrote a paper on the monetisation prospects and challenges of these deposits[2] and Androulla Kaminara EU Fellow was the organiser and the Chair.
The presentation of Charles Ellinas focused on three main issues:
1. The technical aspects and the developments so far and the estimated natural gas discoveries;
2. Cooperation prospects with Turkey, Israel and Lebanon;
3. Future milestones for Cyprus.
1. The technical aspects and the developments so far and the estimated natural gas discoveries
- American owned Noble Energy has already discovered about 7 tcf recoverable gas reserves in Cyprus’ EEZ in the Aphrodite field and will be carrying out appraisal drilling in June 2013. Noble has strong indications through the evaluation of their 3D survey data that there is another gas field in Block 12, possibly of the order of about 3-5 tcf.
· The next key stages in the development of the Aphrodite gas field are as follows:
- Pre-Feed (Preliminary Front End Engineering Design – PRE-FEED): This is in progress and will be completed by Q2 2013.
- Appraisal drilling will take place during the summer of 2013, and by Q4 we should be able to confirm gas volumes and commerciality in 2014, taking into account export and project execution options.
- Cyprus expects to complete FEED by Q1 2015 and LNG sales agreements before the middle of 2015. The bidding process and selection of the EPC contractor and project finance should be completed by Q3 2015.
- The Final Investment Decision (FID) is targeted to be taken by the end of 2015.
- They expect to start construction of the offshore facilities, subsea pipeline and the LNG Plant at Vasiliko early in 2016. This is achievable if all preparation is carried out as planned and will provide good employment opportunities for Cypriots.
- Delivery of natural gas for the local market is expected by the end of 2018/early 2019. This will help the economy since currently the cost of electricity on the island is five times more expensive than the cost of electricity in the UK and this puts a huge burden on the cost of businesses and households.
- By the end of 2019/early 2020 the LNG Plant is expected to be operational, starting LNG exports to Europe and other parts of the world.
· Cyprus has so far leased 6 Blocks and progress is as follows (see map):
- Italian ENI with Korean KOGAS has Blocks 2, 3 and 9 and are about to start their survey program, with exploration drilling scheduled early 2015.
- French owned TOTAL has Blocks 10 and 11, with potential both for oil and gas, and are also about to start their survey program, with exploration drilling scheduled earlier, in 2014.
These two consortia have committed to very aggressive survey and exploration programs that over the next 2-3 years will cost of the order of US$2 billion dollars. This substantial investment confirms their confidence for success.
All indications are that Block 9 holds substantially more gas resources than Block 12. Based on the above it is estimated that all 6 leased Blocks potentially hold 40 tcf of natural gas. This in turn is a good indication that indeed the Levantine Basin has 122 tcf and the Cyprus EEZ 60 tcf of gas, as suggested by USGS (USA Geological Survey)
2. Cooperation prospects with Turkey, Israel and Lebanon
Israel has a proven and probable gas reserves (Tamar) – 10 tcf, proven gas resources (Leviathan) – 19 tcf as well as small gas fields and prospective gas resources (undrilled prospects) – 15 tcf. There has been a lot of very high level contacts between the two countries recently including a visit by President Anastasiadis to Israel earlier on in the month and prospects for closer cooperation are very good.
Lebanon is in the process of going for its first licensing round, and it estimated to have at least 25 tcf and there is a lot of interest already from perspective bidders. Lebanon has also shown interest for cooperation with Cyprus.
To pipeline or not to pipeline – that is the question?
- Technical considerations provide serious arguments against the pipeline option: Cyprus is talking about gas exports that could reach 35-50 bcm per year. Due to water depth (2000m) there is a limit in the diameter of subsea pipelines that can be installed. As a result 5 to 6 pipelines might be needed to export such volumes of gas. Such a solution would be neither practical nor economic.
- Legal complexities:
Pursuant to Art. 58 and Art. 79 of UNCLOS[3] all states are entitled to lay submarine pipelines on Costal States and EEZ. Although according to subparagraphs 79(2) and (3) require that: “Subject to its right to take reasonable measures for the exploration of the continental shelf, the exploitation of its natural resources and the prevention, reduction and control of pollution from pipelines, the Coastal State may not impede the laying or maintenance of such pipelines.” It is also stated “The delineation of the course for the laying of such pipelines on the continental shelf is subject to the consent of the coastal State.”
The geography of the area and the legal implications therefore mean that even if Israel wanted to build a pipeline to Turkey – it will need the consent of the transit states – i.e. Syria, Lebanon or Cyprus. In the current political context this consent will be very difficult to achieve.
Additional legal limitations arise wrt transit via pipelines through EEZ under Energy Charter Treaty (Cyprus, Greece and Turkey are parties to it).
According to Ellinas, the answer to pipeline or not to pipeline can only be not to pipeline and to build an LNG Plant at Vasiliko is the only logical but also economical solution for Cyprus.
The decision by Cyprus’ Ministerial Council in 2012 to establish an LNG Plant at Vasiliko, reconfirmed by the President in April 2013, was vital as it makes it possible to access world markets not just in Europe but also the Far East, thus contributing to the security of sales and stability of prices in the longer term.
With the timely establishment of the LNG Plant, Israel and Lebanon should also be able to bring their gas to Cyprus for liquefaction, making it possible to create a world class LNG hub at Vasiliko (and potentially other gas or energy dependent industries).
This is one of the main reasons KOGAS, the largest LNG trader in the world, ENI and TOTAL decided to invest in Cyprus. Pipelines do not offer flexibility in the selection of markets, there could be legal complexities and are subject to longer-term commercial and political risks.
- As we saw earlier, by 2025 Cyprus could be in a position to export 25 million tonnes LNG (35 bcm) per year, starting with 5 million tonnes (7 bcm) by 2020. This could rise to 35 million tonnes (50 bcm) per year if Vasiliko becomes an LNG hub for the region.
- As a result, by 2025 Cyprus and the Levantine Basin could supply 50% of the additional gas needs of the EU. Through the South-East Med Gas (SEMEG) Corridor it could form a new independent and secure supply of LNG which could contribute substantially to EU’s future energy security.
- The EU is looking for secure and independent sources for its future gas needs. Something which requires a new and independent gas corridor. This is what an LNG hub at Vasiliko can offer, at the centre of the Levantine Basin. From there LNG can be distributed to any regasification terminals in the EU.
- Although the South-East Med Gas Corridor is essential this has not yet received the backing it deserves and as Ellinas put it «We have a lot of work to do to make the case!»
- The South-East Gas Corridor that Cyprus offers is important because it can cover up to 50% of the additional gas needs of the EU by 2025.
- Given EU’s future gas needs, both the Southern Corridor (through Turkey) as well as the South East Gas Corridor will be needed.
3. For Cyprus the key milestones are:
- Start of construction in Q1 2016 creating thousands of much needed employment opportunities.
- Delivery of natural gas to the island end of 2018 / early 2019 leading to major reductions, possible 50%, in the cost of fuel for electricity.
- Export of LNG by the end of 2019 / early 2020 producing much needed revenue and profits.
- If Cyprus pursues the development of its natural gas resources correctly, then by 2025 Vasiliko will become the LNG hub for the region – including Israel and Lebanon.
- The South-East Med Gas (SEMEG) Corridor will be of major strategic importance to Europe, firmly establishing the Levantine Basin and Cyprus within the energy and political map of the EU.
- Vasiliko will become a major centre of gas-based and energy-intensive industries, with major long term employment opportunities.
From his side Anastasios Giamourides made the following points:
Aphrodite and other recent discoveries in the East Mediterranean have given rise to a lot of optimism that Cyprus can emerge as a natural gas exporter in the coming years. This is feasible but not a given. It presupposes significant current technical/commercial uncertainties (perfectly normal at this stage) are clarified favourably before a Final Investment Decision (FID) can be reached before early 2016. These include clarification of the exact size of recoverable reserves; and the ability of Noble Energy and any partners to contain infrastructure development costs (production, pipelines, liquefaction etc.) and sign long-term sales contracts that capture high prices and other commercially appealing terms.
If economics at Aphrodite alone do not work, then Cyprus will have to seek economies of scale with its other offshore blocks and/or with Israel, albeit this is likely to delay the commercialisation process. Furthermore, proving up commerciality in the offshore blocks that were recently licensed to Total and the ENI-KOGAS consortium under the country’s second licensing round will at any rate be necessary, if Cyprus is to export more than the 5 mmtpa currently envisaged by Noble Energy for block 12.
Importantly, any attempt to mix (real) political problems or goals relating to the Cyprus dispute with what ought to be commercial decisions aimed at monetising these resources as efficiently as possible, could end up undermining progress, which may be fully achievable on technical/commercial terms. For example, Turkish attempts to condition development of Cypriot hydrocarbons on a solution to the long-standing Cyprus dispute can result in considerable delays, whilst these political negotiations last. Meanwhile, calls for Cypriot exports via a subsea gas pipeline to Turkey are based on the (erroneous) premise that this is necessarily a commercially superior monetisation option compared to liquefaction. Preferred options need to be defined by scoping/costing of development options and market feasibility including discussions with potential customers, led by Noble Energy and other licensees/investors.
The EU has three main reasons to take an active interest in Cyprus and help it make the most of its upstream potential as soon as feasible, and without unnecessary delays imposed by extraneous factors. First, as a means of stimulating growth and facilitating successful transition of the Cypriot economy; second, as a direct corollary of the involvement of France’s Total and Italy’s ENI in Cyprus upstream; and third, as a result of the EU’s commitment to supporting competition on the gas supply level. Support from Brussels and European capitals should thus be aimed at allowing relevant commercial decisions to be taken on the appropriate commercial (i.e. not political) levels, including licensing, exploration planning, exploration and production operations, commercialisation, and export markets. Failure to meet these objectives could impact negatively on the economic sustainability of Cyprus; market effectiveness and profitability potential of major European energy companies Total and ENI; and the EU’s own stated goals of security of supply and competitive energy markets.
From my side having convened both of the South East Mediterranean hydrocarbon seminars of this term – the first one by Deputy Energy Minister of Turkey Murat Mercan and this one by Dr Charles Ellinas, I can only conclude that both countries would stand to benefit if there was direct dialogue between them. The encouraging thing is that both speakers indicated that there was a willingness at least to exchange ideas and to explore possible cooperation.
[1] See blog on the 22nd of April event http://akaminara.wordpress.com/2013/05/06/turkey-and-the-eu-energy-policy-seminar-at-st-antonys/
[3]UNCLOS UN Convention of the Law of the Seas
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