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Eastern mediterranean gas field pressure | Analyst Picks | RiskMap 2020

Eastern Mediterranean


Pressure builds in a contested gas field

Competing claims over maritime space in the eastern Mediterranean – and the gas below – have kept the region contested for decades. These and other geopolitical risks have complicated exploration and exploitation of the gas reserves since their discovery in the late 1990s. Touted by some as a new potential gas supply for Europe, and a potential alternative to reliance on Russian gas for European countries (although some scepticism surrounds this), the stakes around their development are especially high.

In 2020, Turkey will likely remain intractable on the disputes over these claims, sustaining eastern Mediterranean operational risks and stalling efforts to resolve the frozen conflict on the island of Cyprus.

The two political entities on Cyprus have competing claims to eastern Mediterranean waters and crucially the gas fields below, respectively backed by Greece and Turkey, who also have competing claims. Turkey has deployed naval vessels in support of exploration and drilling operations, while The Republic of Cyprus (RoC) protests Turkey’s actions but has few means, primarily diplomatic, at its disposal.

We do not anticipate conflict between the parties involved. However, tensions run high and movement of naval vessels in the area poses a challenge, with potentially harassing commercial vessels licenced by another government. In 2020, this will likely continue, with Turkey following a deepening path of international isolation, finding itself on the wrong side of the EU who will back its member Cyprus, and the US where anti-Turkey sentiment is growing on the issue.

Further east, a maritime boundary dispute continues between Lebanon and Israel. Efforts to solve the issue will continue to be frustrated by both parties’ unwillingness to compromise on intermediaries, and exactly where the boundary should fall. The demarcation issue will also impact offshore natural gas exploration – some blocs already fall within the disputed territory, raising reputational and regulatory risks for operators seeking to conduct projects in either country.

Companies must consider whether activities in disputed areas puts their investments at risk of expropriation; whether if they licence the activities with one country, the rival power will revoke licences or make it harder to operate in its jurisdiction; and whether operating in one jurisdiction will damage the company’s reputation elsewhere.

As the development of gas infrastructure continues, dynamics will shift and impact geo-political risks. Companies investing in gas exploitation will have to consider the effect that could have on the viability of their investments.
 

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RiskMap 2020

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