Acting on repeated threats made over the past two years, Turkey announced on March 27 that it will suspend energy projects with Eni in retaliation against the Italian energy company's involvement in oil and gas drilling off Republic of Cyprus. However, as Eni points out, Ankara's options to hit the international oil company look limited.
Following strong results from its first offshore project - licensed to US company Noble Energy - the Greek part of Cyprus ramped up plans to explore the eastern Mediterranean last year with a second round of tenders, which attracted interest from several international energy majors. That saw Ankara threaten to halt any Turkish projects of the companies involved, insisting that the resources around the divided island belong to both the south and the unrecognized Turkish Republic of Cyprus in the northeastern portion of the island.
However, the threats have been largely ignored in public, given that the companies involved have either no operations in Turkey, or by way of contrast run projects vital to wider Turkish interests. Bidders in the second round tender included South Korea's Kogas, Italy's Edison, French giant Total and US independent Marathon.
Eni shrugged off reiterated threats when it was awarded a licence in November. Ankara's retaliation comes after the Italians signed off on an exploration agreement with Nicosia in January. Turkish Energy Minister Taner Yildiz was quoted by the state-run Anatolia news agency as telling reporters in Ankara on March 27: "We decided not to work with Eni in Turkey, including shelving their projects in Turkey."
However, both Eni and unnamed Turkish government sources have suggested the government may struggle to land a palpable hit on the company. Eni CEO Paolo Scaroni too appeared to shrug off the threat, saying that the Italian company is unsure which of its projects could be blocked. "The types of exploration blocks in Cyprus facing the direction of Turkey are disputed, but we're following EU rules and couldn't do otherwise," he told Dow Jones. "I am not sure what Turkey can interrupt."
Meanwhile, an unnamed Turkish official admitted to the same newswire that Ankara won't seek to remove Eni from its two main active oil and gas projects in Turkey - the Blue Stream and Baku-Tbilisi-Ceyhan (BTC) - pipelines.
One of Turkey's main challenges currently is sourcing enough oil and gas to feed its rapidly expanding economy. It's that goal which has Ankara pushing its role as a leader in the fractious but energy-rich regions of the Middle East and Caucasus. Therefore, BTC, the country's largest crude pipeline in which Eni has a 5% stake and which carries Azeri oil to the Turkish port of Ceyhan with a capacity of 1m barrels a day, is unlikely to face undue pressure.
Blue Stream, an Eni joint venture with Gazprom, transports 16bn cubic metres per year, around a third of Turkey's annual gas consumption. Despite recent pricing disputes with Moscow, Turkey is unlikely to make any sudden moves to upset Russian flows, especially as pressure grows on it to reduce oil and gas imports from Iran - it's second largest supplier.
That appears to leave Eni's joint venture with Turkey's Calik Holding to build a 550km crude pipeline to connect the Black Sea port of Samsun with Ceyhan. Yildiz said that Calik will make its own evaluation, adding that Ankara would prefer that the Istanbul-based company doesn't work with the Italian company. Calik CEO Berat Albayrak may wish to talk the issue over with his father-in-law - Prime Minister Tayyip Erdogan, and his company was not available to comment to Dow Jones.
Scaroni, meanwhile, said the project with Calik is currently "dormant", but that Eni remains optimistic about it. "I hope relations with Turkey return to their previous excellent levels - also with Minister Yildiz," he said.
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