GAZA MARINE: NATURAL GAS EXTRACTION IN TUMULTUOUS TIMES? | Natural Gas Europe

February 26th, 201512:20amPosted In: News By Country, More Countries, Israel,Featured Articles, East Med Focus

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GAZA MARINE: NATURAL GAS EXTRACTION IN TUMULTUOUS TIMES?

In a report published by the Brookings Institution on 19 February 2015 entitled Gaza Marine: Natural Gas Extraction in Tumultuous Times?, the authors Tim Boersma and Natan Sachs highlight the challenges standing in the way of the successful development of Gaza Marine field and the benefits that its exploitation would bring the Palestinians and Israelis. Since its discovery in 2000, and despite Palestine leader Yasir Arafat’s optimism at the time of the discovery, the field was not developed. According to the report, the development of the field would significantly improve the Palestinian energy market and the Palestinian economy as well as the israeli market. Despite the technical and security-related challenges in developing Gaza Marine, the benefits from such a development are considerable but require strong Palestinian and Israeli leadership. Israeli-Palestinian cooperation is essential to move the project forward, but the already tensed relationship between the parties has furthered collapsed after the 2014 confrontation between Israel and Hamas, says the report.

The Gaza Marine field was one of the first discoveries in the Levant basin, a region believed to hold as much as 122 Tcf of natural gas according to the U.S. Geological Survey encompassing the Exclusive Economic Waters of Cyprus, Lebanon, Israel, the Palestinian Territories and Egypt. In 2011, Noble Energy made the discovery of the Aphrodite field in Cyprus’ Exclusive Economic Zone, a field estimated at 4.54 Tcf of natural gas. Israel has also made several discoveries, the largest being the Tamar and Leviathan fields estimated respectively at 10 and 22 Tcf of gas, enough to secure Israel’s domestic demand for decades and turn the country into a net natural gas exporter. The Gaza Marine field is estimated at 1 Tcf and despite being located in shallow waters and therefore technically easy to develop, it has still been untapped, adds the report. BG, its operator, has engaged in a series of talks with the Israelis for the purpose of selling the gas from the field to Israel but in vain, and in 2007 BG withdrew from the discussions, explains the report. The hostile climate and increased confrontations between Israel and Hamas have not allowed any progress towards the exploitation of the field despite efforts from the US to intervene.

The Palestinian energy system as explained by the report suffers from two major problems: a complete dependence on Israel for power generation and a chronic debt by the Palestinian electrical companies to the Israeli Electrical Corporation (IEC) due to severe underpayment to Palestinian suppliers, erroneous billing and theft of electricity.

Energy cooperation between the Israelis and the Palestinians would bring significant benefits to both parties. The development of the field could generate revenues to the Palestinians estimated to reach between $2.5 to $7 billion. The Palestinians would also have access to a domestic fuel source for electricity generation and sufficient power for water desalination in the Gaza Strip, as well as acceleration of the development of agriculture, essential to the local economy. The revenue generated from the sale of gas could also alleviate the debt to the IEC and end the frequent power outages.

The report does not dismiss the significant challenges ahead. The region is politically complicated, suffering from recurrent confrontations between Hamas and the Israelis. The benefits from an eventual development of the field would also largely depend on securing a customer for the gas. The report highlights that the revenues generated from the sale of gas would heavily depend on regional gas prices, on the price negotiated with the customer as well as on energy subsidies. The main problem remains the lack of cooperation between Israel and the Palestinians and Israel’s fear that gas revenues would strengthen Hamas. 

The report can be accessed here: http://www.brookings.edu/research/papers/2015/02/gaza-marine-natural-gas

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

Source: http://www.naturalgaseurope.com/brookings-institution-brief-gaza-marine-field-99178

THE FUTURE OF EASTERN MED GAS: INTERVIEW WITH DR TIM BOERSMA, BROOKINGS | Natural Gas Europe

February 23rd, 201512:20amPosted In: Energy Security & Supply, News By Country, More Countries, Israel, Greece, Featured Articles, Cyprus, Egypt, Energy Security, Expert Views,East Med Focus

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THE FUTURE OF EASTERN MED GAS: INTERVIEW WITH DR TIM BOERSMA, BROOKINGS

Natural Gas Europe has had the pleasure to speak with Dr Tim Boersma, fellow and acting director in the Energy Security and Climate Initiative of the Foreign Policy Program at Brookings. Boersma gaveNatural Gas Europe valuable insight on Eastern Mediterranean gas developments and the challenges ahead.

On Cyprus’ development plans

The discovery of the Aphrodite in Block 12 of Cyprus’ Exclusive Economic Zone has triggered a lot of excitement about the finding and the prospects it entails. However, the size of the discovery, albeit sizeable (estimated at 4.54 Tcf), does not validate infrastructure investments in for instance LNG liquefaction capacity that would allow the monetization of Cypriot natural gas and the island’s entry in the export market, explains Boersma.

On Israel’s regulatory hurdles

Next door in Israel, significant gas fields were discovered. The Leviathan and Tamar field hold 22 and 10 Tcf respectively, enough to satisfy Israel’s modest domestic demand for decades and turn the country into a net natural gas exporter. Regulatory hurdles have created major setbacks in the production of the Leviathan. Israel’s Antitrust Authority’s decision to reassess Delek and Noble’s ownership of Israel’s largest fields has created a climate of regulatory uncertainty that poses the risk of pushing away investors and even forcing Noble Energy to withdraw from its presence in Israel altogether. Boersma does not see Noble pulling-out in the immediate future, but he believes that the tension created by the competition regulator has put a strain on its relationship with the Texan company. It is a relatively expensive gas to produce and the right conditions need to be put in place and maintained in order to attract and retain an operation, adds Boersma. It is yet unclear what Mr David Gilo, Israel’s Antitrust Authority’s commissioner, will decide but breaking up the monopoly is a possible outcome. Boersma highlights that a monopoly in itself does not necessarily constitute a problem. The problem generally arises when that monopoly or a dominant market player is not effectively regulated. Closely monitoring and possibly regulating the prices and allowing Delek and Noble to retain their shares in the Leviathan and Tamar could have been a way to deal with the problem, though this has been fiercely debated by the Texan and Israeli companies. Boersma is not very optimistic about the consequences of the dispute but believes that breaking the consortium by forcing a sale of shares will have a negative impact on the investment climate.

On the impact of the Noble/Delek dispute with the regulator on future investments and regional deals

Boersma fears that the ongoing dispute between Israel’s Antitrust Authority and the partners in Israel’s largest offshore fields may deter future investments. The potential delays in the development of the Leviathan could also negatively affect regional deals. Israel has been engaged in talks with its immediate neighbours, namely with Jordan, Egypt and the Palestinian Authority, for the purpose of supplying its energy-hungry surrounding with a cheap and secure flow of natural gas. Fears that production of the Leviathan will be delayed beyond 2018 have led Egypt to explore alternative possibilities such as importing natural gas from neighbouring Cyprus. Egypt and Cyprus recently signed an MOU launching talks over the possibility of an energy cooperation that would involveEgypt purchasing gas from Cyprus’ Aphrodite field. Selling the gas to Egypt would help Cyprus develop its offshore field and even perhaps use Egypt’s unused export terminals to reach far-reaching export markets. Boersma does not believe however that Cyprus replaces Israel in the region given that the quantities of natural gas discovered in Cypriot waters are relatively modest compared to the sizeable discoveries off Israel’s coast. Egypt is undergoing a severe energy crisis, adds Boersma: the demand for natural gas is increasing in Egypt and the country’s declining extraction levels has turned the once natural gas exporter into a net importer of hydrocarbons. Boersma is also cautious about the likelihood of materialisation of the regional deals. Despite various talks around Israel’s strategy to export via pipeline to regional markets, the complicated political relations and the complex geopolitical landscape have rendered the concretisation of the various discussions uncertain. If all the signed memorandums of understanding were an indication, one would think that all countries get along perfectly well. The reality as we know it is much more complex, and it remains to be seen whether states will be able to effectively cooperate and establish a stable investment climate in which long-term natural gas trade can take place.

On the status of the Gaza Marine Field

Since the discovery of the Gaza Marine field in 2000 by BG, no progress has been achieved towards the development of the field. Boersma believes that its development would benefit not only the Palestinians but also Israel, on four levels. First, it would secure an additional revenue stream for the Palestinians estimated anywhere between 2.5 and 7 billion US$ according to the Palestine Investment Fund which would help the Palestinians pay the electricity debt to Israel. Second, it could also potentially introduce competition to the Israeli market if BG or another operator was allowed to sell the gas from the Marine Gaza field in Israel. Third, it would secure additional supplies to balance the system, in particular near Mishor Rotem. And finally, development of Gaza Marine could help ease some of the diplomatic tensions with countries like Egypt and Jordan. Boersma is cautious about a positive development related to the Gaza Marine field given the complicated politics in Israel, and the lack of (particularly, but not exclusively) Israeli leadership that would issue and implement policies to push forward such a project, have infrastructure built, and allow for the Palestinians to reap the benefits of its offshore field.

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

Source: http://www.naturalgaseurope.com/eastern-mediterranean-gas-tim-boersma-brookings

Israel takes advantage of Arab delay over gas | Al Monitor

An Israeli naval vessel sails in the Mediterranean Sea near the border with Lebanon, Dec. 16, 2013; Mount Carmel and the Israeli city of Haifa are in the background. (photo by REUTERS/Amir Cohen)

Israel takes advantage of Arab delay over gas

A seminar titled “Petroleum Resources in the East Mediterranean: Economic, Political & Security Concerns” was held last week in Beirut under the patronage of the Lebanese army’s Research and Strategic Studies Center and the Lebanese Petroleum Administration.

Summary



As Israel reaps the benefits of natural gas available in the region, Arab countries lag behind in discoveries and agreements.

Author Walid Khoudouri
Posted September 28, 2014
Translator(s)Pascale el Khoury

Original Article اقرا المقال الأصلي باللغة العربية

The conference tackled the topic of geopolitical factors that emerged with the discovery of natural gas in the eastern Mediterranean, especially in light of the harsh political crisis in this region due to wars. [The conference also addressed] the lack of demarcation in the maritime exclusive economic zones (EEZ) before the start of discovery operations, not to mention the war hazards to offshore rigs.

There is no doubt that most of the petroleum activity in the world has been accompanied by political disputes arising from conflicts of interests. The eastern Mediterranean region does not differ in this regard. However, some differences can be found in the details and the nature of the conflict between one region and another, which is why the geopolitical variables of the eastern Mediterranean region are relevant. They include, for the first time in the history of the Middle Eastern petroleum industry, an Israeli interference in the Arab energy industry. Israel has taken over Arab oil fields; it occupied and exploited Egyptian oil fields following the occupation of Sinai after the 1967 war. It subsequently returned those fields to Egypt in return for the Camp David Treaty and the United States’ pledge to provide [Israel] with oil in the event of supply disruptions.

Moreover, Israel imposed its influence on the discovery of natural gas in the Gaza Marin field in Palestinian territorial waters off the coast of Gaza. Ever since the discovery of gas in 2000, Israel has banned the development of the field and any supply to Gaza's power station. Israel also imposed on the [Gaza] Strip the importation of fuel exclusively from Israeli companies, which made the Palestinian Authority incur heavy financial losses, not to mention the halt of supplies when political disputes arise. Undoubtedly, the frequent wars on Gaza are in part an attempt by Israel to sustain the ban of development of the oilfield.

The current geopolitical situation of eastern Mediterranean gas differs from the earlier situation when Israel occupied oilfields. Israel discovered gas reserves that meet its domestic consumption for decades, which prompted the Israeli government to adopt a policy allocating 60% of the reserves of each gas field to domestic consumption, with the possibility of exporting the rest to international markets.

The most important global markets for natural gas imports are Asian countries, followed by the European countries, in addition to the countries of the Middle East that have high economic growth and population increases. The US market, deemed the most important market worldwide until recently, is contenting itself with its own local gas resources following discoveries of shale gas. Thus, eastern Mediterranean gas — in the event of the discovery of adequate quantities allowing exportation after meeting domestic demand — will cater to the needs of Middle Eastern and European countries.

Natural gas export trade has not witnessed any development between Arab countries. The reasons are many, including the lack of an approved price formula for regional gas trade. European states adopt a price formula for imported natural gas based on comparing the price of gas with the prices of equivalent petroleum products. Asian countries have set the price of imported liquefied natural gas (LNG) compared with a price equivalent to the price of imported crude oil in Japan. The lack of a regional pricing formula led to the use of political influence by the importing countries over the exporting countries to impose low prices.

There are very few gas trade agreements between Arab countries, including the Dolphin Gas project for the export of Qatari gas to the United Arab Emirates and Oman; an agreement to export Egyptian gas to Jordan, which is currently subject to amendments after supply disruptions due to the bombings that targeted a pumping station in El-Arish; and the export of Iraqi gas to Kuwait during the 1980s.

Further contributing to the blocking of the Arab-Arab gas trade are agreements imposed by influential countries in countries the gas pipelines pass through. Agreements were changed according to the [influential countries'] circumstances rather than abiding by the agreed-upon obligations. They sometimes halted exports whenever a political dispute broke out between them and the exporting or importing state, or disrupted the whole pipeline network whenever required.

Israel benefited from its fast decision-making process to start discoveries and succeed. This prompted it to hold negotiations on exportation to regional and European markets. Negotiations are currently underway between companies, but obtaining a final approval requires the consent of states. The consortium of companies (US Noble Energy and partner Israeli companies) operating in Israel's giant Leviathan gas field suffers from shortage of financial liquidity for the development of the field, which cost $6 billion. The consortium tried to attract international companies to cut down costs, but did not succeed. It resorted to the signature of sale and purchase contracts with regional countries.

A need to buy gas arose among some regional countries. The cessation of Egyptian exports forced Jordan to seek out alternative gas supplies. There are now attempts to import LNG, either through Aqaba or by importing Israeli gas. There are challenges facing the Egyptian gas industry that transformed Egypt from an exporter to a net importer of gas within two years. Egypt is negotiating with Algeria, Qatar and Cyprus to import LNG, but the agreement with Qatar is unlikely in light of differences between Cairo and Doha.

In light of these developments, a memorandum of understanding was signed between Noble Energy and British BG oil and gas company to supply the LNG terminal in Idku, in addition to a memorandum with the Spanish Union Fenosa Company operating the gas liquefaction plant in Damietta. Another memorandum was signed with the Jordanian Electric Power Company (JEPCO).

The United States supports the ongoing negotiations since such relations would lead to normalization. Memorandums of understanding between companies require the approval of the concerned governments, and this has yet to happen. Egypt and Jordan are negotiating with other sources to fulfill their gas needs. The final decision depends on the price and volume of supplies.

Negotiations between Turkish and Israeli companies to export gas to Turkey are ongoing but intermittent in light of worsening Israeli-Turkish relations. There are also projects proposed by European companies to build a gas pipeline through Cyprus and Greece and connect it to the European gas network. However, some of the projects that are being negotiated indicate that Israel is attempting to tap into local markets.

Link to source: http://www.al-monitor.com/pulse/business/2014/09/httpalhayatcomopinionwalid-khadouri4688395--.html#