Three Reasons Why the East Med is Not Yet a Solution for Europe
The Russian military intervention in East Ukraine triggered various debates, the most important being centered around Europe’s energy security. Largely dependent on Russian natural gas, Europe must work towards diversifying its sources of supply in order to ensure a reliable flow of energy and thus become more robust to face dependency on Russia. In the short term, increasing imports from existing suppliers is a good starting point. In the medium term, Europe can seek to import natural gas in the form of LNG from the US and rethink shale and nuclear. In the longer term, importing gas from the Eastern Mediterranean could present itself as an option for Europe.
While the Eastern Mediterranean countries have formulated the ambition to supply natural gas to a Europe seeking to loosen Russia’s grip over the gas market, energy experts argue that despite the substantial amounts of hydrocarbon in the Levant basin, the impact of Eastern Mediterranean gas on energy security will be minimal. Importing gas from the Eastern Mediterranean might be of interest to Europe. The EU is likely to support an Eastern Mediterranean corridor involving the strategic triangle Israel, Cyprus and Turkey. However, Eastern Mediterranean gas cannot be considered by itself a solution to the EU for three reasons: the quantities are modest, the timeframe is not suitable and the region suffers from political hurdles.
About the quantities
“An estimated 122 trillion cubic feet (tcf) (mean estimate) of undiscovered, technically recoverable natural gas are in the Levant Basin Province, located in the Eastern Mediterranean region” according to a press release by the U.S. Geological Survey from 2010. However, the current proven reserves in the Eastern Mediterranean would only satisfy EU domestic needs for one year. Around 500 bcm are currently available for exports, most of which discovered by Israel in the Tamar and Leviathan fields. The Tamar field was discovered in 2009 and production started in March 2013 yielding 283 bcm of proved gas reserves. The Leviathan is estimated at 510 bcm with production expected by 2017. While the Tamar field is mostly allocated to satisfy the Israeli consumption previously reliant on Egyptian imports, the Leviathan is likely to be exported. A decision in principle has been taken by the Israeli authorities to export the gas. The Israeli Supreme Court ratified in October 2013 a June 2013 cabinet decision to export 40% of Israel’s proven reserves (approximately 410 bcm).
Neighbouring Cyprus has also commenced exploration activities conducted by Texas-based Noble Energy. The island encountered natural gas in its Aphrodite field discovered in 2011 in block 12 of its EEZ. However, the proven quantities do not justify the island’s LNG project in its Vassilikos site and therefore Cyprus is awaiting further successful discoveries before it can pursue the undertaking. Preliminary results indicate a range of natural gas volumes of 102 bcm to 170 bcm with a gross mean of 142 bcm, less than originally expected. An LNG terminal would allow the island the flexibility to reach customers including Europe and Asia. A collaboration with Israel would have facilitated the investment decision but Israel has not yet taken a decision in this direction.
About the timeframe
Given that the Tamar will be mostly used by the Israeli market, it is the Leviathan field that could be directed to Europe. Production from the Leviathan is expected by 2017 but it will take much longer for the gas to reach export markets beyond Israel’s immediate neighbours (Jordan, the Palestinian Authority and potentially Egypt). While Israel has taken a final decision in regards to allowing exports, it has not yet decided on export routes. Whether it will choose to deliver its gas via pipeline or LNG remains uncertain. Israel could opt to participate in Cyprus LNG. It could also use Egypt’s LNG export terminals although using an LNG terminal on the red sea is not free from security threats. Exporting gas via pipeline is also being discussed at the moment.
Further exploratory drilling is expected in Cypriot waters in 2014-2015. Successful results would allow Cyprus to secure the needed funds to move forward with its LNG terminal. As to Lebanon, the country has not yet launched its bidding round delayed by two pending decrees that will define the blocks open for bidding and set the model sharing agreement.
The fact that the Eastern Mediterranean countries are still at different stages of shaping their energy industries is an additional reason - along with the limited quantities of hydrocarbon discovered to date - why the Eastern Mediterranean does not - yet - constitute by itself a substitute to Russian gas for Europe.
About the political hurdles
The Eastern Mediterranean region has historically suffered from political tensions and rivalries. There is a pending maritime border dispute between Israel and Lebanon. The two countries are technically at war and both of them claim a triangular area of 850 square kilometers as their own. There is also the division of the island of Cyprus that remains to date split between the Greek Cypriots and the Turkish Cypriots. And there is the ongoing tension between Israel and Turkey. Diplomatic relations between the two countries have deteriorated since the Mavi Mara incident in 2010. Efforts to resume ties have begun in March 2013 with Israel’s apology to Turkey and the two countries seem to be together moving forward towards an energy collaboration but are not there quite yet. For the Eastern Mediterranean to find energy prosperity as a whole, cooperation needs to be established. Only then can the Eastern Mediterranean aspire to participate in Europe’s energy portfolio.
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean. Email Karen on ayat_karen@hotmail.com. Follow her on Twitter: @karenayat