Qatar leaves Turkey in cold water with ExxonMobil deal

US giant ExxonMobil and Qatar Energy signed a contract Friday for oil and gas exploration and production-sharing off the divided island of Cyprus despite Turkey’s opposition to the deal.  Turkish President Qatar had recently visited Qatar to urge the Emirate to double investment in cash-strapped Turkish economy. He also called Qatar “Turkey’s greatest ally in the war of economic independence.  Also last week, Erdogan urged friendly nations to grant diplomatic recognition to Turkish Republic of Northern Cyprus, the official name for the island’s Turkish enclave.


Cypriot Energy Minister Natasa Pilides, Varnavas Theodosiou, CEO of ExxonMobil Cyprus, and Ali al-Mana, director of Qatar Energy’s International Upstream and Exploration, signed the contract in Nicosia.


It is the second gas exploration contract that the consortium has signed for Block 5 in the island’s Exclusive Economic Zone (EEZ).


In February 2019, the consortium discovered a huge natural gas reserve off Cyprus in Block 10, the island’s largest find to date, holding an estimated five to eight trillion cubic feet.


The consortium plans to drill an appraisal well on Block 10 in late December, with results expected by the end of February.


Oil and gas drilling off Cyprus has been interrupted by the Covid-19 pandemic.


“Despite the increasingly difficult working environment for the global oil and gas industry, today we are taking a decisive step towards enhancing our mutually beneficial partnership,” Pilides said at Friday’s signing ceremony.


Asked about Turkey’s negative reaction to the licensing of Block 5, Pilides said: “We proceed based on international law and the Law of the Sea; this has always been our principle.”


Fieldwork on Block 5 will begin in the second half of 2022, she said.


Turkey has threatened to prevent ExxonMobil’s search for oil and gas off Cyprus after Nicosia awarded it the rights to Block 5.


Last week, the Turkish foreign ministry said a sector of the licensed area violates Turkey’s continental shelf in the eastern Mediterranean.


“Turkey will never allow any foreign country, company or ship to engage in hydrocarbon exploration activities in its maritime jurisdictions,” the ministry said.


Ankara would “defend” its rights and those of the Turkish Republic of Northern Cyprus, it said.


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The breakaway TRNC, recognized only by Ankara, lays claim to energy resources discovered off its coast, insisting the island’s natural resources belong to both communities.


The eastern Mediterranean has become an energy hot spot, with significant natural gas finds for Cyprus, Israel and Egypt.


Ankara was accused of “gunboat diplomacy” in February 2018 when the Turkish navy prevented a ship leased by Italy’s ENI from reaching its drilling target in Cyprus’s Block 3.


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The European Commission has urged Turkey to de-escalate and vowed to defend the interests of member states Greece and Cyprus.


Turkey was widely condemned for sending its own drill ships into Cypriot waters for energy exploration, with the EU slapping sanctions on Ankara.


In the first half of 2022, ENI and France’s Total are expected to drill in their licensed blocks.


Nicosia has pushed ahead with offshore energy exploration despite the collapse in 2017 of UN-brokered talks to end the country’s decades-long division.


Despite overtures to Egypt and Israel, Turkey could not break the East Med natural gas pipeline consortium, which plans to pump gas with an underwater pipeline to Italy for EU markets. The project’s cost makes it economically infeasible, but it extremely annoys  Turkey, because its claims to a share of Cyprus territorial waters is not acknowledged by estuary countries.


Turkey’s economy is currently battling with soaring inflation, cause by the run-away depreciation of the currency.  The currency market is extremely sensitive to bad news. If Ankara were to contest drilling activity in disputed waters, TL could hit new lows.


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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.