December 14th, 2014
The recent discoveries of natural gas in the Levant basin, particularly in Israel and Cyprus, have triggered a series of discussions around the optimal ways of exploiting the hydrocarbon wealth of the Eastern Mediterranean. The complicated geopolitical landscape in this part of the world poses significant challenges and it is no certainty that the newly found wealth will be a catalyst for peace and prosperity. National consumption will be satisfied for decades to come, and the excess will also likely turn the Eastern Mediterranean countries into net natural gas exporters. Israel and Cyprus are currently studying several export options, including the East Med Pipeline project pitched to the EU and the LNG terminal in Vassilikos Cyprus which commercial viability depends on further exploratory successes in Cyprus’ Exclusive Economic Zones.
Regional deals between immediate neighbours are also shaping with both Israel and Cyprus having an interest in selling gas to their thirsty neighbours. Cyprus and Egypt are engaged in talks to supply Egypt’s LNG plant at the Damietta idle with natural gas from the Aphrodite field in Block 12 offshore Cyprus. Cyprus’ Aphrodite field was discovered in Cyprus’ Exclusive Economic Zone (EEZ) by Noble Energy in 2001 and is estimated to hold between 3.6 to 6 tcf of natural gas, with a mean of 5 tcf.
The recent discoveries of natural gas in the Levant basin, particularly in Israel and Cyprus, have triggered a series of discussions around the optimal ways of exploiting the hydrocarbon wealth of the Eastern Mediterranean. The complicated geopolitical landscape in this part of the world poses significant challenges and it is no certainty that the newly found wealth will be a catalyst for peace and prosperity. National consumption will be satisfied for decades to come, and the excess will also likely turn the Eastern Mediterranean countries into net natural gas exporters. Israel and Cyprus are currently studying several export options, including the East Med Pipeline project pitched to the EU and the LNG terminal in Vassilikos Cyprus which commercial viability depends on further exploratory successes in Cyprus’ Exclusive Economic Zones.
Regional deals between immediate neighbours are also shaping with both Israel and Cyprus having an interest in selling gas to their thirsty neighbours. Cyprus and Egypt are engaged in talks to supply Egypt’s LNG plant at the Damietta idle with natural gas from the Aphrodite field in Block 12 offshore Cyprus. Cyprus’ Aphrodite field was discovered in Cyprus’ Exclusive Economic Zone (EEZ) by Noble Energy in 2001 and is estimated to hold between 3.6 to 6 tcf of natural gas, with a mean of 5 tcf.
Egypt’s petroleum minister expressed to his Cypriot counterpart that Egypt will absorb as much gas as Cyprus can provide. Egypt is currently undergoing a severe energy crisis due to its growing consumption and a flat production. Cyprus is studying the optimal solution to export natural gas to Egypt, including a pipeline scenario. Cyprus’ Energy Minister Yiorgos Lakkotrypis also visited Jordan where he expressed to Jordanians officials the island’s intent to export gas to Jordan. The Kingdom has suffered tremendously from the disruption in the flow of Egyptian gas and is looking for a cheap and secure source of natural gas, including from Cyprus and Israel.
Israel is also eyeing Egypt and is exploring the possibility of using Egypt’s unused export facilities to access far-reaching export markets. The Tamar and Leviathan partners signed MOUs to export 7 bcm of natural gas to respectively Union Fenosa’s liquefying plant at Damietta and BG’s plant in Sinai.
Egypt has an increasingly important role in shaping the energy landscape of the region. A recent meeting between the ministers Lakkotrypis of Cyprus, Maniatis of Greece and Ismail of Egypt has reiterated Egypt’s role as a customer and a potential gas route for Israeli and Cypriot natural gas. The desire to build a close cooperation between the three countries was also the spirit of the Cairo Declaration signed following the meeting between Abdel-Fattah El Sisi, the President of the Arab Republic of Egypt, Nikos Anastasiades, the President of the Republic of Cyprus, and Antonis Samaras, the Prime Minister of the Hellenic Republic.
Despite the efforts to encourage regional collaboration, some political hurdles remain. A solution for divided Cyprus is yet to be found, and the discovery of natural gas off the island’s coast is not making the task any easier. Recent tensions between Cyprus and Turkey following Turkey’s decision to send an exploratory vessel offshore the island have led to skepticism around the possibility of a settlement. Regional deals between Israel and its Arab neighbours will also largely depend on the level of political sensitivities. Neighbouring Lebanon has delayed the launch of its first licensing round due to its political vacuum and a maritime border dispute between Lebanon and Israel is still pending. The hydrocarbon potential of the region is undeniable; but so are its complications.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. She reads International Relations and Contemporary War at King's College London focusing on Natural Resources and Conflict. She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat
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