Cyprus pledges to share oil resources in bid to cool tensions

In an attempt to defuse an increasingly tense stand-off in the eastern Mediterranean, Cypriot President Demetris Christofias has promised to share the proceeds of any oil found offshore with the island's Turkish Cypriot community.

Christofias insisted that a peace treaty between the EU-member Greek south and the largely unrecognised Turkish north of Cyprus had to be found, but that “even before a settlement we shall find a way to use revenues to the benefit of both communities”. He stated that the discovery of offshore oil and gas would be another incentive for the two sides to find a peaceful solution to their long-running dispute.

The Cypriot move appears to be a limited concession to the Turkish Cypriots, who this week signed a deal with their patron in Turkey to jointly explore the sea off the island's northern coastline. The agreement was a response to Cyprus's own decision to start drilling offshore, a move which Ankara denounced as a provocation which infringed the rights of the Turkish Cypriots. Turkey has also threatened to blacklist any energy firms which cooperate with the Greek Cypriots.

On 23rd September Turkey dispatched a seismic exploration ship to the waters off northern Cyprus. Three warships were dispatched to the area on 21st September and Turkish officials have warned that they will escort exploration vessels as required, although there is no suggestion that the Cypriots would seek a military confrontation. Nonetheless Turkish Energy Minister Taner Yildiz has said he does not expect the region to heat up.

Working with the Greek Cypriots, US firm Noble Energy began drilling to the south of Cyprus earlier this week. They are expecting to find large gas deposits near the maritime border with Israel. Noble has recently discovered a series of major gas fields in Israeli waters, and Cyprus has expressed interest in energy cooperation with Israel, including the development of undersea pipelines. A separate deterioration in Turkish-Israeli relations has contributed to the tensions in the area.

It is unclear whether Christofias's suggestion of sharing revenues is entirely realistic: it may simply be an attempt to reduce the antagonistic atmosphere in the eastern Mediterranean, but it seems unlikely that Turkey will back down on its exploration with the Turkish Cypriots. Joint exploration and drilling would help to calm Turkey and encourage progress on a peace deal, but whether the political will exists to do so is another matter.

Sources; Hürriyet, Reuters, Today's Zaman

Border Focus: Eastern Mediterranean

What is disputed?

The problem in the eastern part of the Mediterranean Sea is that very few countries have established their maritime boundaries. As the extent of the quantities of gas that lies beneath the sea floor has become more clear, the potential for dispute has risen substantially. The existing territorial disputes between Israel and many of its neighbours and between Cyprus and Turkey also complicate the situation as land borders are typically considered a prerequisite for determining maritime boundaries.

Where is the oil and gas?

The US Geological Survey reported in 2010 that the Levantine Basin, which stretches from the Jordan River into the eastern Med, encompassing the West Bank, the Gaza Strip, Israel, Lebanon and Syria, could contain up to 122 trillion cubic feet of natural gas.

The Israeli and surrounding waters seem to be the most prospective at the moment, or at least have received the most attention. BG discovered gas in the Palestinian Authority's territorial waters in 1999, but political issues means the find has not been exploited. American firm Noble Energy had more luck in their early explorations, striking gas in Israel's Mari-B field, which has been in production since 2004.

More recently, Israel, again through Noble Energy, has made substantial finds in the northern parts of its waters. The Tamar field, discovered in 2009 is thought to contain 178.4 billion cubic metres, while new results in December 2010 suggested the nearby Leviathan field may contain up to 450 billion cubic metres of gas, making it one of the largest gas discoveries in the last ten years.

These finds have the potential to radically alter Israel's energy position, but with Lebanon already making claims to some of the new finds, taking advantage of the new finds will not be easy.

Who owns the gas?

While the blocks that Israel have licensed to Noble are in Israeli waters, the question is whether the fields they have tapped into extend across the border to Gaza in the south and Lebanon in the north.

The Mari-B license ends at the unfinalised Palestinian Authority-Israel border, but the gas field may stagger the border. Gaza is, needless to say, not receiving any revenues from the profits Noble and Israel are making. If the field does cross into Gaza's waters, Israel is required under international law to share the proceeds from the field, and while critics of Israel have pointed this out repeatedly, Gaza's lack of legal infrastructure and weak government has meant that its potential claim has been largely overlooked.

Lebanon claims that the Tamar field is partially within Lebanese territory, and in November 2010, Iran's ambassador to Lebanon, Qazanfar Roknabada, claimed that three-quarters of the Leviathan field actually belonged to Lebanon.

There is considerable difficulty in determining who owns the gas however, as Israel and Lebanon do not have a finalised land border, much less a maritime border. While any agreement on a land border is probably a long way off, what the line actually would be is fairly uncontroversial. It is likely to be very similar to the current working land border, which is the June 2000 UN Blue Line, which marked the territory from which Israel was required to withdraw.

Once the terminal land border point is determined, a maritime boundary can be determined. Given the flat, controlling coastline that exists along the eastern Mediterranean and given that there are few indentations and no significant islands to take account of, it seems the most sensible approach to determining a maritime boundary would be by constructing a line perpendicular to the coastline.

This issue, therefore, is not that it would be difficult to plot a maritime boundary line that would uphold the UN Convention on the Law of the Sea's aim of achieving 'equitable result': the difficulty is purely political.

Are other boundaries determined?

Other countries have had more success in determining their maritime boundaries, or at least outlining their claim to an Exclusive Economic Zone (EEZ). These, however, must be seen still as provisional until Israel and its neighbours determine their boundaries.

Cyprus , much to Turkey's annoyance, has taken the lead in settling its EEZ, and has made agreements with Egypt, Lebanon and Israel.

In 2003, Cyprus and Egypt signed the first agreement specifically devoted to the delimitation of an EEZ in the eastern Mediterranean. The boundary line is composed of seven segments, each based on equidistance, and no special circumstances have been taken into account to modify the boundary.

Cyprus also signed an EEZ agreement with Lebanon in 2007, but significantly, the Lebanese parliament has yet to ratify the agreement. Lebanon's hesitations are surprising, given that they have shown their dedication to determining their maritime boundaries in a number of other ways. In July 2010, Lebanon deposited with the UN Secretary General, charts and a list of geographical coordinates of points defining the southern limit of Lebanon's EEZ: in other words where they see their border with Israeli as lying. The deposit also gave coordinates for their EEZ with Cyprus.

In August 2010, the Lebanese parliament passed a law which established a committee to oversee exploration and drilling off Lebanon. Energy Minister Gibran Bassil said at the same time that Lebanon planned to outline its maritime sea borders and auction off rights to explore offshore gas reserves by 2012. Norway's Petroleum Geo-Services has already explored Lebanese waters and said they gained 'valuable information' on potential offshore gas reserves.

In December 2010, Israel and Cyprus signed an agreement defining their EEZs, and it committed the two sides to cooperating on any cross border resources that are found.

Syria does not appear to have made any maritime agreements with its neighbours. In November 2003, it repealed previous legislation and reduced the width of its territorial sea from 35 nautical miles to the more conventional 12 nm. The legislation established a 24 nm contiguous zone and an EEZ of 200 nm, although it did not give any specifications about its delimitations.

Turkey, also, has not made any maritime boundary agreements in the Mediterranean, and its offshore hydrocarbon exploration has been focused, until recently, on the Black Sea. 

What are the prospects for the future?

Israel looks set to reap the rewards of their early exploration efforts. Noble Energy has recently announced their 2011 programme for the region worth US$650 million, and said a large portion of that sum will go towards the development of the Tamar gas field. Appraisal of the Leviathan find will also continue.

Cyprus, it appears, is also ready to push ahead with exploration despite Ankara's misgivings, and after an unsuccessful first licensing round in 2007, they signed an agreement with Noble Energy for the 1,250 square mile Block 12 in 2008. The block lies 35 miles away from the Leviathan discovery and recent reports have suggested that Noble will start exploratory drilling the region in late 2011 or early 2012. Cyprus has said it will hold a second licensing round, although a date has not yet been set.

The wealth that Israel's finds are likely to bring has caused all of its neighbours to take a closer look at what they can claim. Before the Mubarak regime fell in February then minister of petroleum and mineral resources Sameh Fahmi was quoted by an Egyptian newspaper as saying the government is “studying the precise coordinates of the maritime borders in order to determine our share of the reserves” in late January 2011.

The main issue continues to be between Israel and Lebanon, however, and the tone of conversation between the two sides has been anything but amicable. Both sides have threatened the use of military force to maintain their hold on what they see to be their rightful resources, and there does not seem to be any likelihood of an agreement between the two sides in the near or medium term future.

For the full Border Focus, please see the Menas Borders website, here.

Noble Energy's new find draws attention to eastern Mediterranean borders

Israel's gas boom got further support last week when Noble Energy announced that it had made a significant natural gas discovery in the Leviathan field on Wednesday 29th December.

The newest discovery was in the Rachel licence, and results from the well confirm earlier reports that the supergiant gas field holds an estimated 450 billion cubic metres (16 trillion cubic feet) of natural gas.

The Leviathan field is located about 80 miles offshore of Haifa, and 29 miles southwest of the Tamar discovery, which Nobel also holds the licence for. The new estimates announced by the US firm means that Leviathan dwarfs Tamar, which was previously Israel's biggest offshore field. The Tamar field has an estimated capacity of 178.4 billion cubic metres (6.3 trillion cubic feet), but it is not yet operational.

"Leviathan is the latest major discovery for Noble Energy and is easily the largest exploration discovery in our history," the firm's chairman Charles Davidson said in a statement.

"This discovery has the potential to position Israel as a natural gas exporting nation," added company president David Stover.

Even before Leviathan, a series of finds had put the so-called Levant Basin on the international energy map. In March 2010, the US Geological Survey released its first assessment of the area, estimating that it contained 1.7 billion barrels of oil and 122 trillion cubic feet of gas. That is equivalent to half of the proven gas reserves of the US.

The finds in Israel have prompted its neighbours to start their own exploration programmes. In August, lawmakers in Beirut rushed through the country's first oil-exploration law and in October, Lebanon's oil minister Gebran Bassil, an ally of Shi'a militant group Hezbollah, said the country hoped to start auctioning exploration rights by 2012.

The finds have also prompted countries in the region to get their maritime boundaries in order. Cyprus, for example, has in recent years made agreements with Lebanon, Egypt, and in December 2010, Israel.

Remaining border issues are, however, stalling development for Israel. Lebanon claims that the Tamar field is partially within Lebanese territory, and in November 2010, Iran's ambassador to Lebanon, Qazanfar Roknabada, claimed that three-quarters of the Leviathan field actually belonged to Lebanon.

Disputes over Noble's licenses in the eastern Mediterranean are nothing new. Their Mari-B field, production from which began in 2004, is on the border of the Gaza marine area, and the field may stagger the border. If this is the case, Israel is required under international law to share the proceeds from the field, and while critics of Israel have pointed this out repeatedly, Gaza's lack of legal infrastructure and weak government has meant that its potential claim has been largely overlooked.

It seems, however, that affairs in the north of Israel's waters will not be so easy to control.

Lebanon and Israel are still officially in a state of war, and both sides have threatened each other over offshore resources. Clearly, until peace is found and borders established, disputes over offshore resources will remain ever present.

Sources: Rigzone, Wall Street Journal

For more information on disputes in the eastern Mediterranean, see the menas borders website, here.

Eighteen cooperation agreements, memos of understanding, executive programs and protocols were signed on Sunday 18th July between Syria and Lebanon at the end of the Syrian-Lebanese Follow-up and Coordination Commission meeting held in Damascus.

On his fourth visit to Syria since taking office in 2009, Lebanese Prime Minister Saad Hariri urged closer bilateral ties as did his Syrian counterpart Niji Otari.

A top issue between the two countries remains the border demarcation. After diplomatic relations were re-established in 2008, Syria agreed to establish a joint committee with Lebanon to demarcate the border, two years after United Nations Security Council Resolution 1701 recommended that Syria address the issue.

Since then, however, progress has stalled, with Damascus claiming it was busy finishing the border demarcation with Jordan and that the continued presence of Israelis in the Sheb’aa Farms area complicated any demarcation.

Confusion over the Lebanon-Syria border has existed since the two countries achieved independence from France after the Second World War. No official agreement on the 365km long border has ever been reached, and the internationally recognised border is still that from the French Mandate in 1920.
Although a joint border committee was established in the 1950s and presented its conclusions in 1964, neither country took the findings to the United Nations to have new international maps established.

Syrian military and civilian presence has been a prolonged issue in Lebanon: a year after civil war broke out in Lebanon in 1975, Syrian troops entered the country. While their presence was initially part of an Arab peacekeeping force it eventually became a 29 year occupation.

Civil conflict continued far beyond the Taif Accord which officially ended the conflict in 1989 and during the occupation, Palestinian militias such as Hezbollah, established themselves in Lebanon, with Syrian approval.

In September 2004, the UN issued Security Council Resolution 1559, which called on the Government of Lebanon to exert control over all Lebanese territory, and reiterating previous resolutions, and declared its strong support for the territorial integrity, sovereignty and political independence of Lebanon. It also called for the withdrawal of all non-Lebanese forces from Lebanon.

On 14th February 2005, Lebanese Prime Minister Rafiq Hariri – who was the father of the current Prime Minister Saad Hariri - was assassinated, prompting protests in Beirut calling for Syria to withdraw. By late April 2005, Damascus announced that all of its troops had been withdrawn from Lebanese territory, which the UN confirmed in late May.

After the July-August 2006 conflict between Israel and Lebanon, the UN Security Council issued Resolution 1701, which called upon the Government of Lebanon to secure its borders and recommended that Syria address the issue with Lebanon.

There are still 17 non-delineated sectors along the common border winding through valleys or rivers and despite Syrian insistence that it has withdrawn, large sections of Lebanese territory is likely still under de facto Syrian military and civilian control.

Following Noble Energy’s extensive offshore gas discoveries in Israeli waters there is considerable interest from the IOCs in the prospects for further discoveries in both Lebanese and Syrian waters. Noble’s Tamar field may contain 6 trillion cubic feet of gas, while the Leviathan block may contain 16 trillion cubic feet. Given that the terminus of the land boundary determines the precise direction of the maritime boundary, the formal settlement of the land border is an essential pre-requisite before the maritime area can be delineated.

Sources: SANA, All Lebanon, Bloomberg

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