EastMed gas pipeline increasingly doubtful - CYPRUS MAIL

December 2, 2018
Charles Ellinas

So far it has been easier finding gas in the region than exporting it. The story behind the much-vaunted EastMed pipeline explains why

The EastMed gas pipeline from Israel through Cyprus and Greece to Europe is back in the limelight.

It was reported on November 24 that the governments of Israel, Cyprus, Greece and Italy reached agreement on the construction of this pipeline based on the results of a feasibility study funded by the EU. However, government sources from Cyprus said that even though an inter-governmental agreement is in sight, a few weeks are still needed to complete the process and obtain approval by the European Commission (EC).

The project is being performed by Edison, an EDF Group company, and Greece’s Depa with about €35 million in funding from the EC, as a project of common interest (PCI). In a recent presentation Depa reported the capacity of the pipeline to be 10-16 billion cubic metres per year (bcm/yr). The project is currently designed to initially carry 10bcm/yr from the East Med to Greece, about 1900km, where it will connect to the Poseidon pipeline in Italy, about 300km.

Even though for the East Med region exporting 10bcm/yr gas is quite important, it is only about two per cent of annual European gas consumption. This should put into context exaggerated claims from the region that the EastMed pipeline will “to some extent minimise Arab influence on Europe!”

The EastMed pipeline so far has the support of the four governments and the EC, but no international oil company (IOC) or investor has yet expressed interest to join.

The four governments and the EU cannot fund the project. This requires IOC and investor participation, and above all it requires buyers for its gas.

Drilling down: Dana Gas CEO Dr Patrick Allman-Ward - ARABIAN BUSINESS

Saturday, 14 January 2017, 1:16 AM
Neil Halligan

Years of frustration appear to be ending for Dana Gas, who look set to capitalise on investments in both Kurdistan and Egypt to spur its next cycle of growth.

Dana Gas should have made more headlines than it has.

The Middle East’s largest private sector natural gas company has the potential to become one of the major regional players in the energy industry. But its less-than-expected real growth has little to do with the fall in oil prices, and more to do with government frustrations and a lack of opportunities.

When the Sharjah-based firm listed in 2005, investors clamoured for the opportunity to take part in the initial public offering. The interest saw the share price skyrocket five-fold within a week, but it has since crashed from AED4.71 ($1.28) in December 2005 to 55 fils (15 cents).

But prospects are brightening.

Russian plane incident puts Turkey in a Difficult position on energy | Natural Gas Europe

January 14th, 2016 

With the downing of the Russian war plane on October 24, 2015, Turkey found itself in an unenviable position on the energy front, more particularly natural gas. Not only is the country’s ability to meet its daily energy needs on a precariously thin line but the options to replace Russian gas in the short term are virtually non-existent.

In the meantime, with the plane incident now receding in memory, and gas shipments from Russia still continuing unimpeded, Turkey has lapsed into complacency on energy supply for daily needs. But complacency may turn into a rude awakening. The specter of a debilitating energy shortage in Turkey, while appearing unlikely at present, remains a serious risk.

The Turkish Stream project aimed to bring Russian gas to Thrace, Turkey and onward to Europe across the Black Sea is now frozen – at least officially. But this is the least of Turkey’s concerns.

The critical connection

A look at the gas scene in the country says it all. Turkey’s energy needs are heavily dependent on imports. According to 2014 statistics, some 99% of its natural gas consumption is met by imports, with 27bn m³/year, or 55%, coming from Russia. The volume of Russian gas for 2015 is expected to be higher. Russian gas is delivered through the 14bn m³/yr West Route over the Balkans, and the 16bn m³/yr Blue Stream across the Black Sea. The gas purchase contracts on these two routes will terminate in 2021 and 2025, respectively.

Of gas consumed in Turkey, 48% is used for electricity generation, 25% in the industry, and 20% for residential needs including heating and cooking. According to 2013 data, the share of natural gas in installed power capacity is 36%. Gas is used in all 81 provinces, in half of the homes.

What that means is that, should the Russian gas stop coming, some 20% of electricity generation in the country will be cut off, and the industry and residents will be widely affected. Industry will be partly paralyzed. The area most affected will be Istanbul and the Marmara region, where the power generators and industry are concentrated.

Gas storage capacity is woefully inadequate. The facility near Silivri, off Istanbul, has a withdrawal capacity of 25mn m³/day, not enough to meet even a single day’s of imported Russian gas. The facility at Tuz Gölü, in the interior, will come into operation at the end of 2017. Another facility is planned at Mersin, on the Mediterranean coast.

The Nabucco project, which was dropped in late 2011 in favor of the TransAnatolian Pipeline (Tanap) project, had a proposed provision for reverse gas flow from Europe to met Turkey’s needs in case of emergency. Tanap has no such provision.

New gas sources

The assurances given and suggestions made by Turkish authorities that the country’s gas needs will be met, or shortages mitigated, if Russian gas is cut off, are far from comforting.

One solution that has been brought up, to expedite Tanap (due onstream 2018) and increase Turkey’s share from 6bn m³/year, is hardly convincing. Tanap’s throughput is committed to customers, and accelerating production will be at the expense of project optimization. No significant relief in the short term can be expected from Tanap.

Qatari gas is another possible solution/ Right after the plane incident, the government approached Qatar, and a provisional agreement was signed. But Qatari gas can only come after four or five years and the relief provided will be limited. The North Field, which feeds Qatar’s gas exports, has been on plateau since 2012 and new development on the field is frozen. The back-up Barzan project at a green-field site is not onstream yet.

Besides, the Qatari gas will come as LNG, and Turkey does not have sufficient storage and regasification capacity to handle new imports. Building new LNG facilities will take time and require major investment.

Another suggested source is gas from the Kurdistan Regional Government (KRG) in northern Iraq. The “Kurdish gas,” as it is called, is also four or five years away and will probably come at a rate of 10bn m³/year. Other than a cooperative agreement signed in 2013, there is no commercial agreement or commitment on gas sales to Turkey, and the Turkey-Iraq border area is riven with violence.

Separate from security concerns, in today’s low gas prices the investment needed for development and monetization of “Kurdish gas” resources will be hard to come by. Any development will also require the consent of the Iraq central government – a thorny issue. Turkey-Iraq relations are strained.

The Israeli gas in the eastern Mediterranean could have been a good alternative for Turkey; but the Davos and “Mavi Marmara” incidents have blocked progress on this front. Stung with the prospect of a gas shortage, the Turkish government is now trying to normalize relations with Israel. Despite denials by the authorities, Israeli gas is no doubt in the government’s mind.

Relations between Turkey and the Cyprus government are even shakier. In addition to the Northern Cyprus question, there is also a territorial dispute over an exclusive economic zone, in the area to the south of Cyprus where the Aphrodite field is [Note: One-sided claim by Turkey with no legal basis under UNCLOS]. It is also the area through which a pipeline carrying Israel’s gas to Turkey would normally pass.

The irony of the conundrum in the east Mediterranean gas scene is that, Turkey, with its relative proximity to the gas fields, its geographical location for gas transit to the EU, and with its burgeoning energy consumption – 7% growth/year – is the economically logical landing-point for east Mediterrnean gas.

The discovery of the Zohr gas field, the largest so far in the region, by the Italian major Eni in the Egyptian waters in August 2015, has effectively removed Egypt as an export outlet for the Israeli and Cyprus gas, making Turkey even a more attractive market for such gas. On a fast track-development, Zohr will come onstream in 2017-18, and the production will be used initialy for Egypt’s own use.

But considering Zohr’s resources – 850bn m³ gas-in-place and likely to go up – Egypt will probably become a gas exporter again, to compete with Israel and Cyprus. Zohr gas will probably be sold as LNG using Egypt’s export terminals at Idku and Damietta on the Mediterranean coast.

It remains to be seen how the negotiations between Turkey and Israel will transpire. Cyprus should be included in the negotiations. All parties need to consider that, with shared goals, and given good will and vision, the solution of energy problems can lead to better geopolitical relations too. The Israeli and Cyprus gas projects should ideally be integrated, with first gas in 4-5 years and export volumes reaching a potential 10-15bn m³/yr.

The foregoing discussion makes it clear that the suggestions made by the Turkish government for replacing the Russan gas, while feasible, are nonetheless unrealistic in the short term.

Cool-headed decision by Russia

The plane incident caused a deep division in Turkish-Russian relations. Russia, however, decided not to cut the gas flow. Russia obviously did not want to give up a lucrative gas export market, especially in today’s low oil-price environment. Turkey is Gazprom’s largest customer after Germany. Russia also did not want to be seen as an unreliable gas supplier in the world market.

Turkey could also appeal to international arbitration and seek compensation for failure to fulfill contractual obligation.

The Russian government must have also taken into consideration that the Turkey-Russia trade balance is decidedly in Russia’s favour. According to one report, since 1990, but in particular after 2003 when Blue Stream became operational, Turkey had a consistent trade deficit vis-a-vis Russia. The deficit in 2004 alone was $10bn.

Russia may also have wanted to revive the now-frozen Turkish Stream. In fact, there are signs that the project may be put back on track. Should the project be shelved for good, Turkey will forego some benefits from this project, but by losing a gas export route to reach central and southeastern Europe, Russia’s loss will be greater.

The unsettling geopolitical fact for Turkey is that, Russia’s future behavior cannot be predicted. Should relations between Turkey and Russia further deteriorate, Russia’s president Vladimir Putin may well put economic considerations aside and turn off the gas valve to Turkey as a punitive measure. That will cripple part of the industry in Turkey, and millions of Turkish people will suffer. On top of that, the country is trying to deal with more than 2 million refugees.

Turkey’s president Tayyip Erdogan has tried to patch up relations with Putin after the plane incident but this met with no reciprocity from Putin. In sombre reality, Turkey’s energy security is at risk.

Separate from the natural gas issue, Russia has put into effect boycott of Turkish imports and businesses and discouraged Russian tourism to Turkey. According to one report, the boycott will cost Turkey between $8.5bn and $12bn/yr.

So, gas flow or not, Turkey is in no-win situation. The Russian plane incident has been a bitter reminder for Turkish energy planners of the need to diversify foreign energy sources and routes. Turkey has long enjoyed, as it should have, good trade exchange with its neighbor Russia, and it was natural that energy was one of the components in such relation. The mistake was to put so many of the eggs in one basket.

Ferruh Demirmen is an independent petroleum consultant based in Houston, Texas. He previously worked at Royal Dutch Shell as corporate advisor in production geology, including technology and new business opportunities, for Europe, Southeast Asia and South America.
SOURCE

Russian project jeopardizes Turkey’s energy advantage | Hurriyet Daily News

Russian project jeopardizes Turkey’s energy advantage

Barçın Yinanç - barcin.yinanc@hdn.com.tr

Russia’s proposal to sell gas to Europe via Turkey with the so-called ‘Turkish Stream’ will jeopardize Ankara’s strategic importance, according to an energy expert. Turkey’s advantage stems from providing an alternative to decrease Europe’s dependence on Russia, says Mithat Balkan, a former Turkish energy envoy

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Accepting Moscow’s proposal would make Turkey even more dependent on Russian gas, says Mithat Balkan adding saying no to Russia would not hamper bilateral ties. HÜRRİYET photos, Levent KULU

Russia’s proposal to sell gas to Europe via Turkey, the so called “Turkish Stream,” to replace the South Stream may jeopardize Turkish interests, according to an energy expert. “Turkey’s advantage is to provide an alternative gas supply to Europe; the Turkish stream will risk this advantage,” said Mithat Balkan, a former ambassador.

Were you surprised when Russia canceled the South Stream project?

I was surprised, but it seemed to come with the stance the EU had taken against Russia. With the unbundling issue [EU provision, which requires the separation of gas production and sale operation from the transmission networks, to the effect that a single company may not both own and operate a gas pipeline] and the EU’s strict attitude to not have Russia dominate that part of Europe; it seemed it was going to happen, but such a swift action was a surprise for everyone.

Where you among those who never believed in the project?

I was always skeptical about it, but one has to go back to the past to assess the presence. Baku-Tbilisi-Ceyhan (BTC) and Baku-Erzurum-Ceyhan (BTE) projects were policy decisions made by Turkey, Azerbaijan, Georgia and the United States with the objective to provide Caucasus and Central Asian energy sources to European markets, which would guarantee their [the energy producing states] independence and to giveEurope and the world an alternative with regard to Russia.

Then came the Nabucco project. At the beginning, it was United States supporting these projects; the EU was a spectator, it was reluctant vis-a-vis Nabucco, which started with the objective to provide an alternative to Russian gas.

Then came Russia’s counter moves. Russia’s aim was to bypass Ukraine, as well as to block Nabucco; these two objectives gave life to South Stream. Even at the beginning, South Stream did not seem realistic financially, yet Russia insisted on it for political reasons.

After a while, the EU came to the picture; when the EU was coming in, United States was going out.

Was it because of the advent of shale gas?

It started even before that. Democrats supported these projects and when Republicans came to power they were less supportive, as they considered it the Democrats’ projects. With decreasing U.S. support, the EU’s ambivalent policies and lack of sufficient supply to be provided to Nabuccu, the project faded away. As a result, South Stream came to the forefront and it seemed more probable. Southern European countries had no alternative and had no choice but to accept it. In the meantime; what I call the ‘half-Nabucco,’ TANAP [Trans-Anatolian pipeline project that would carry Azerbaijani gas to Europe via Turkey] came into being.

TANAP will provide 10 billion cubic meters of gas to Europe and 6 billion to Turkey; but it has the potential for receiving gas from Iran, Iraq and even Turkmenistan. It can be expanded and provide alternative gas to Europe. The EU was not so willing to acceptRussian gas on Russian conditions, so it came out with the idea of conditionality, the unbundling; you cannot own the pipelines, you have to leave the pipeline business to private companies, etc. 

If Europe had wanted Russian gas, it could have easily provided an exception and some of the European energy companies, like ENİ and others, insisted that this project is being given an exception. But the EU acted on political, rather than economic, grounds.Russian President Vladimir Putin had no alternative but to give up the project.

Was the EU’s stance hardened due to Russia’s regional assertive policies, like in Ukraine?

Even before the Ukraine crisis, I believe the EU was motivated by avoiding being too dependent on Russian energy. At the present situation; Russia has decided to provide gas to Europe through Turkey; it will bring it to Thrace. The pipelines will not be under its control; so it would have been the same situation with South Stream, had it accepted European conditions. 

But what will Turkey gain from it? 

We don’t know whether EU countries will agree to buy Russian gas, and if so, under what conditions?

Would any investment be possible without taking into consideration how this gas will be sold and how much of it under what conditions? I believe such investment would not be realistic. There are many that questions need to be answered. 

In addition, there is the economic situation. Will Russia be able to invest such a deal of money at a time when financing from Western markets is not possible and when theRussian economy is under sanctions?

I have my doubts about the realization of this so called ‘Turkish Stream.’ In the short term, it might be useful for Turkey. Nobody is sure what will happen in Ukraine. Turkey’s supply line from Ukraine could be interrupted. Although we have Blue Stream, an additional attentive might be useful in the short term.

But in the long term, the project being actualized could take some time. In addition to that; the 60 billion cubic meters of Russian gas coming to Europe through Turkey will jeopardize the expansion of TANAP.

I think TANAP will be realized, but what is at risk is the expansion of TANAP; 60 billion plus 16 million; it would be too much. Europe will again be dependent of Russian gas. 

Looking from this point, we need to ask what Turkey’s importance for Europe is as far as energy is concerned. It is to provide an alternative gas supply to Europe so that it can be independent from Russia. That advantage from Turkish Stream might be at risk.

It was a political decision perhaps on the part of Turkish government; not seeing a future on its relations with the EU; it might have sought to strengthen its relations with Russia.

Do you think Turkey no longer values being an alternative energy supply to the EU?

That would be too strong; Turkey is trying to balance these two interests. Perhaps it also wants to give some messages to the EU.

But could Turkey say ‘no’ to Russia, when Putin came with this proposal. Can it risk antagonizing Moscow?

We are already too dependent on Russia, why should we be more dependent on Russia? In addition, Russia and Turkey have always been on good terms, they need to be on good terms. They need each other. All Turkish and Russian governments in the past have been careful not to disrupt their relations in spite their differences on many political issues. They were able to compartmentalize their differences and move forward on issues on which they had mutual interests. I don’t think our refusal would have in any way hampered our relations 

So Turkey could have said ‘no’ to Russia, without worrying about being antagonizing?

Look at Russian policies: They proposed a 5 percent reduction in the price of the natural gas they sell us, whereas the oil prices have decreased almost 50 percent and gas prices are usually calculated in accordance with oil prices. This 5 percent reduction is ridiculous; they should have given us this reduction even before oil prices dropped.

They are bargaining like they are at the Turkish bazaar; that’s not fair and I understand that the Turkish government does not agree and they are trying to increase the reduction. We need to insist on it.

As a former diplomat, you were part of an establishment for which foreign separate relations with Iraqi Kurds was a taboo; what do you think about the current situation on energy?

I worked with [former late President Turgut] Özal. I was Özal’s adviser for more than two years. I am a student of Özal in this respect. Özal always had the solution of the Kurdish problem in his mind; to forge strong economic links both with Iraq and northern Iraq. He always said it is through these relations that we can strengthen Turkey. I believe in those policies, so I think, here, the government should pursue the same line. 

How do you think Turkey’s overall energy policies evolved in the course of, say, the last two decades?

We have taken very important steps by realizing the BTC and the BTE, as well as initiating TANAP. 

We are too reliant on Russia. We should limit our reliance on Russia and we need to balance it more carefully. We should not discard Russia; it is an important player both in terms of energy and international politics. But we should play the game taking into account Turkish interests and its relations with both Europe and the West. I think that balance is being disrupted to some extent in favor of Russia.

Who is Mithat Balkan ?

Born in 1944, former Envoy Mithat Balkan graduated from the University of Ankara’s Faculty of Law in 1967 and entered the Foreign Ministry in 1968.

He served at the Turkish embassies to Tehran and Washington, at the Turkish delegation to the Council ofEurope and at the Permanent Mission of Turkey to the European Union.

 He served as adviser for foreign affairs to former presidents Turgut Özal and Süleyman Demirel.

 He also served as ambassador to Iran and to Austria, as permanent representative to the World Trade Organization and as the deputy undersecretary for economic affairs. He last served as coordinator and adviser for energy affairs at the Foreign Ministry before retiring in 2007.

He subsequently worked as a senior adviser at Çalık Enerji until 2011.

December/29/2014

Source: http://www.hurriyetdailynews.com/turkish-stream-risks-turkeys-advantage-as-an-alternative-to-russia.aspx?pageID=238&nID=76205&NewsCatID=348

The Launch of the Modified Southern Gas Corridor | Natural Gas Europe

September 26th, 2014

The Launch of the Modified Southern Gas Corridor

image source: wikipedia

The construction of the second branch of the Baku–Tbilisi–Erzurum gas pipeline began on 20 September in Baku. Azerbaijan announced that this is the official inauguration of the construction of the Southern Gas Corridor. The presidents of Azerbaijan and Bulgaria, the prime ministers of Georgia, Greece and Montenegro, the energy ministers of Turkey, the United Kingdom and Italy, and a US representative were all present at the ceremony.

There are plans to build the second branch of the Baku–Tbilisi–Erzurum gas pipeline, the trans-Anatolian route TANAP running through Turkey and the trans-Adriatic gas pipeline TAP from Greece to Italy as part of the new gas supply route to Europe and Turkey. Along with TAP, Azerbaijan has an overwhelming majority of shares in the planned infrastructure, and will have full control of it. In turn, Nabucco, the project the EU was lobbying for and which for years was seen as a key element of the Gas Corridor, will not be built.

Commentary:

• The infrastructure currently being planned would make it possible to export small amounts of Azerbaijani gas (10 billion m3 annually starting from 2019) to the European market and would in this context fulfil part of the assumptions of the EU’s Southern Gas Corridor concept devised in 2008. The fact that this goal of the EU’s policy is being implemented allows Azerbaijan to refer to the planned infrastructure elements as the Gas Corridor, although its transport capacity is much lower than what had been envisaged in Brussels’s ambitious plans (60 billion m3) and despite the fact that the EU is not in fact participating in its construction. It is Azerbaijan (and in the case of TANAP, also Turkey) who is the main constructor of the new gas export route and who will control the greater part of the infrastructure being built, and not the EU as had originally been planned by the European Commission. Contrary to Baku’s expectations, no European firm (with the exception of BP) has joined the project.
• The present shape of infrastructure for transporting gas to Europe has been determined by Baku and Ankara, whose energy policy has become much more assertive with regard to the West partly because the regional position of the two countries has improved. The planned routes will above all serve the interests of Baku and Ankara. Baku will be pleased due to the diversification of routes and gas export independent of Russia, and those of Ankara because it is interested in increased gas supplies from Azerbaijan and in building a gas hub in Turkey in the future. Thus the infrastructure which is referred to as the Gas Corridor is to a very limited extent an instrument of the EU’s policy with regard to these countries. The absence of an EU representative during the inauguration of the project spoke volumes (the only sign of the EU’s presence was a video message from the president of the European Commission, Jose Manuel Barroso).
• The fact that Azerbaijan, and to a certain extent Turkey, have taken control of the corridor and that this project is no longer treated as a priority issue by the West may prove to be a mistake, with Azerbaijan and Turkey having overrated their own capabilities. Since Western firms are not participating in the construction of the transport infrastructure and have been withdrawing from Azerbaijani fields, the cost-effectiveness of this project is dubious (most investment costs will have to be incurred by Baku). At the same time, Moscow is putting more pressure on Azerbaijan, as it still sees the corridor as Baku’s tool to liberate itself from Russian influence. In this context, Russia is likely to make attempts to take control of or join the projects planned by Azerbaijan.

Aleksandra Jarosiewicz is a Senior Fellow with OSW in the Department for Turkey, Caucasus and Central Asia

The Centre for Eastern Studies is a research institution dealing with analyses and forecast studies of the political, social and economic situation in the countries neighbouring Poland and in the Baltic Sea region, the Balkans, the Caucasus and Central Asia.  

Link to source: http://www.naturalgaseurope.com/launch-modified-southern-gas-corridor-bte-tanap-tap

EU options on Russia energy strangehold few and pricey | Reuters

By Henning Gloystein

updated 3/21/2014 10:22:14 AM ET

LONDON (Reuters) - Russia's seizure of the Crimea and its threat to cut off gas to Ukraine, a transit route to the rest of Europe, have revived calls to reduce the EU's reliance on Moscow for energy, but the blocs options are limited and costly.

The European Union made some progress in improving its energy security after rows over unpaid gas bills between Kiev and Moscow led to the disruption of supplies to western Europe in 2006 and 2009.

By improving its pipeline network, the EU is better prepared for a new supply disruption, but it has not managed to reduce Russia's share of European energy supplies.

Russia today is Europe's biggest supplier of oil, coal and natural gas, meeting around a third of demand for all those fuels, according to Eurostat data, and receiving in return a thumping $250 billion a year.

European leaders said on Friday that the stand-off with Moscow over Crimea made them more determined than ever to end decades of dependence on Russian gas, but they will have to work hard to convince the skeptics.

"The curious feature of the energy policy that emerged from the middle of the last decade is just how little serious effort has been put into security - in particular Eastern security," said Dieter Helm of Oxford University in a research paper this week.

While buyers can switch oil and coal suppliers relatively quickly and easily, Europe receives most of its gas through pipelines that are fed by only one supplier, chief among them Russia's state-controlled Gazprom.

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"Gazprom's market share in Europe is increasing (due to decline of European production). So the aim of diversification of our supply is not going to be achieved this side of 2020," said Thierry Bros, gas analyst at French Bank Societe Generale.

"The question of diversification of supply post 2020, what is now in discussion in Brussels, is going to be very difficult to achieve, as with (gas) prices just below $10 per million British thermal units (mmBtu), Russia is making alternative developments for Europe less profitable," he added.


WHAT IS TO BE DONE?

Even so, there are alternatives.

The Baltic states of Estonia, Latvia, Lithuania and Poland, which used to be part of, or dominated by, the Soviet Union but are now EU and NATO members, all rely almost completely on Russian gas supplies.
To reduce Moscow's energy grip, the region is planning to build several small-scale LNG import terminals.
U.S. LNG company Cheniere Energy, which expects to begin exporting gas in the next two years, is one of the companies in talks to supply the Baltic region.

Such terminals offer an alternative should Russia use gas for political leverage, but LNG is too costly to meet the bulk of demand.

U.S. plans to export LNG largely have Asian customers in mind, as prices there are almost twice as high as in Europe, so Europeans would have to match those prices to secure supply.

"European LNG imports have declined steadily since early 2011, reaching a nine-year low in 2013 as Asian and Latin American demand continued to grow," BG Group, a major LNG shipper, said in its global trade summary published this month, adding that it did not see this trend changing soon.

Europe may, however, be able to tap a much bigger and closer gas source.

Almost one trillion cubic meters of recoverable natural gas has been discovered in Israeli and Cypriot waters, enough to supply Europe for more than two years.

Although export projects are at early stages and politically difficult due to the region's instability, increased efforts are being made to make some of its gas available to Europe, and with Cyprus the EU would gain a new and internal supply source.

"With recent events in Europe ... and the aspiration of different countries to diversify their gas supply, that puts another spotlight on our massive resources," said Gideon Tadmor, CEO of Avner Oil, a leading developer of the region's resources, at a conference this month.

But accessing East Mediterranean gas will be expensive. Cost estimates to develop Cyprus's gas export project alone are as high as $10 billion and would be the largest investment in the island's history.

Building gas export facilities in the region will also be politically challenging.

"Someone will have to win a Nobel Peace Prize before getting the region's gas flowing," one source involved in exploration said.

It also might not succeed in cutting out the Russian interest; Gazprom is one of the companies that is interested in developing the region's gas fields for export.

SHALE FAIL?

Though Europe's conventional gas reserves are declining, some still harbor hopes that Europe could repeat the U.S. success in developing shale gas.

While Europe has estimated reserves about three-quarters of the U.S. figure, its geology is more complicated and it will be more costly to extract. The politics also look more fraught, with governments such as France, Bulgaria and Germany already halting exploration in the face of public opposition.

Measures to increase the share of renewables also haven't helped to address Russia's gas supply dominance.
Since their output varies strongly depending on weather conditions, renewables still require back-up by conventional power stations such as coal, nuclear or natural gas.

Coal is unpopular, given Europe's emissions reduction targets, and the prospects of increasing use of atomic power have been undermined by Germany and others' decision to give up on nuclear.

History shows limited success in loosening Russia's grip.

Europe's biggest recent effort was the Nabucco pipeline, which was supposed to meet 5 percent of Europe's gas demand from producers in Central Asia and break Russia's almost complete supply monopoly in Central and Southeast Europe.


But cost overruns, a lack of available gas, as well as Russian lobbying meant that the alternative, smaller Trans Adriatic Pipeline project was chosen, which will meet around 2 percent of EU demand by pumping Azeri gas via Albania, Greece and into Italy, which is already a well diversified gas market.

"On Nabucco, it has been game, set and match to the Russians," said Oxford's Helm.

Nabucco's failure has left the field open for Gazprom to build its huge South Stream gas pipeline, which plans to meet 10 percent of Europe's demand by pumping gas via the Black Sea into Southeast Europe towards the end of the decade, cementing its dominant role in the region.

(Additional reporting by Barbara Lewis in Brussels and Oleg Vukmanovic in London; Editing by Will Waterman)

(c) Copyright Thomson Reuters 2014. Check for restrictions at: http://about.reuters.com/fulllegal.asp

Link to source: http://www.nbcnews.com/id/54738835/ns/business-stocks_and_economy/

Russia Finds Path Into Mediterranean Gas Through Syria | Forbes

1/16/2014 @ 11:47AM

With the Eastern Mediterranean emerging as a possible alternative to Russian gas for European consumers, Moscow has found a point of entry of their own – Syria. Shortly before the New Year, Russia’s SoyuzNefteGaz signed a $90 million deal to support Syria’s first offshore effort. According to Oil Price, the deal will finance necessary testing for offshore and gas reserves to see if it is sufficient to pursue further infrastructure and extraction investment.

The agreement allows Syria to become the latest regional actor to get in on the Eastern Mediterranean energy rush, following in the footsteps of Cyprus, Lebanon and most actively, Israel.