Regional rifts smother east Mediterranean gas bonanza
Beirut - The US Geological Survey says the eastern Mediterranean Basin holds natural gas reserves of at least 122 trillion cubic feet (tcf), plus 1.7 billion barrels of oil, enough to provide immense economic benefits to the countries that ring the coast — Cyprus, Turkey, Egypt, Israel, Lebanon, the Palestinian territories and Syria.
However, efforts to develop this bonanza have been plagued by the region’s multitude of interlocking conflicts and political squabbles, including the 5-year-old war in Syria, whose sector of the Mediterranean probably contains major gas reserves that have yet to be explored.
Development efforts were for several years led by Israel, which discovered at least 35 tcf of gas, but energy has become a political football over whether private companies should hold exclusive control over developing gas and oil fields.
This has threatened Israel’s substantial export potential and its ability to attract foreign investment, not easy with the plunge in oil and gas prices that has affected regional expectations of an energy boom.
The Jewish state’s conflict with the Palestinians has blocked development of a gas field off the Gaza Strip that would provide a major economic boost to a putative independent Palestinian state, a prospect the Israelis seem determined to prevent.
War-divided Cyprus probably has substantial gas reserves off its southern coast, the section of the island controlled by the larger Greek Cypriot community. It does not, however, have the finances to develop it and Turkey, which invaded in 1974 and occupied the northern third of the island, insists the breakaway Turkish Cypriot statelet it supports must have a share of the bonanza.
Economic woes and some US nudging have pushed the two sides towards a settlement that would open gas exploration and eventual production.
Israel and Turkey, strategic allies until a rift in 2010, are seeking to end their rupture because both see gas-related benefits, primarily a proposed seabed pipeline from Israel’s offshore fields to Turkey, which is linked to a Europe that is struggling to rid itself of dependence on Russian gas supplies that Moscow periodically turns off.
Lebanon is supposedly sitting on 96 tcf and 850 million barrels of oil in its sector of the eastern Mediterranean but the country’s sectarian rivalries, exacerbated by the complex, multisided war in neighbouring Syria, along with a 2-year-old constitutional crisis, has led to a paralysed parliament, which has blocked legislation required to get exploration by about 45 international companies under way. The prospects for progress are bleak.
Syria, presumably, has gas reserves under the eastern Mediterranean but there is little chance of exploring them while the war rages. Those reserves, once determined and exploited, could play a vital role in post-war reconstruction — if Syria is not dismembered into sectarian cantons that could squabble over the undersea treasure trove.
Egypt seems to be the only regional country likely to derive major benefits from the gas bonanza, providing it can secure foreign investment. Egypt controls the Zohr field, the biggest gas field yet discovered in the eastern Mediterranean. It has the potential to meet much of the country’s domestic energy needs, currently addressed through imports, and leave a surplus for export.
Despite the regional turmoil, the gas boom could yet encourage coexistence, if only because of hard economic imperatives.
“The discovery of Zohr reaffirms… that the East Mediterranean is the new frontier of oil and gas production and we can expect more such product to come online with further exploration and hence more competition for the incumbents,” observed Gal Luft, co-director of the Institute for the Analysis of Global Security and senior adviser to the US Energy Security Council.
Zohr was discovered 190km off Egypt’s coast by Italian oil major ENI in August 2015. The company described it as a “supergiant” field containing 30 tcf of natural gas — equivalent to 5.5 billion barrels of oil — making it one of the largest finds ever. It is 30% larger than Israel’s Leviathan field with 22 tcf and constitutes 40% of Egypt’s gas reserves.
Analysts said it could prove to be much larger, a boon for a country that in 2015 switched from being a gas exporter to a gas importer.
ENI is fast-tracking development, although that could be endangered by regional politics and a deepening rift between Italy and Egypt over the murder of an Italian student, allegedly by the secret police.
Zohr lies more than 3,950 metres below the seabed in water nearly 1,500 metres deep. Egypt expects its first gas from Zohr in late 2017. In May, the country’s average gas production was 3.8 billion cubic feet (bcf) per day against estimated demand of 5.3 bcf. Zohr is expected to have a daily peak production level of 2.9 bcf by 2019.
Egypt, which had 65 tcf of proven reserves before Zohr, seeks to become an export hub for the region’s gas-producing states, using facilities for producing liquefied natural gas (LNG), currently standing idle since exports by sea stopped in 2010.
Mohamed Shoeib, former head of Egypt’s state gas company EGAS, said in April this could happen within five years. “Egypt already has a large gas infrastructure, so it represents an exit for gas from Cyprus and Israel,” he said.
This is an ambitious undertaking but Simon Henderson, an energy expert with the Washington Institute for Near East Policy, said, “The uncertainty of the Middle East, especially the future of Syria, whose own waters may also contain viable gas deposits, may prove at least a partial insurmountable barrier.”
With Leviathan’s development stymied by legal and political problems, Zohr, which lies in shallower waters and thus can be more easily exploited, is likely to be the key in opening the Eastern Mediterranean’s energy boom.
The discovery of the giant field dramatically undermined plans by Israel and Cyprus to jointly develop their gas fields and lead the pack. It broke the virtual monopoly of Israel’s Delek Drilling and Noble Energy of Houston, Texas, partners that owned all the discoveries so far made in Israel’s exclusive economic zone (EEZ) and the 5 tcf Aphrodite field off southern Cyprus.
Zohr became a direct competitor to the Israeli fields, from which Israel had sought to develop export routes to Europe and Asia, possibly together with Turkey and Cyprus.
Israel and Turkey have been negotiating a rapprochement, in large part because of the potential benefits of exporting Israeli gas through Turkey — though Moscow opposes that because its feud with Ankara over the Syrian war.
Ankara would like to see Israeli gas flowing under the Mediterranean by 2020 but Russia’s rift with Turkey poses a significant challenge to an export pipeline.
An Israeli-Turkish reconciliation may happen despite Turkey being dragged into the Syrian war. The Zohr discovery opens an entirely new option for Israel and Egypt to jointly export to Turkey or Europe.
Even here regional politics act as a brake. “Ankara likely has its own issue with the Egyptian discovery because it lies close to Cyprus’s maritime borders, which Turkey does not recognise,” Henderson noted. “If the field is found to stretch into the island’s EEZ, Ankara may decide to intervene.
“Additionally, Turkey is a regional rival of Egypt… Indeed, the international and domestic political challenges of eastern Mediterranean gas almost make the technical problems look simple.”