Noble Energy's Pipeline Strategy in the East Med
The Eastern Mediterranean is in its early days of natural gas development. Speculations around export strategies and routes have occupied energy experts and geo-political commentators in the region and beyond. Noble Energy’s recent moves have revealed an inclination towards a pipeline strategy for both Israel and Cyprus. The Texas-based company has made significant natural gas discoveries in the Levant basin. The most important newly discovered deep-water fields being the Tamar and Leviathan fields offshore Israel, and the Aphrodite offshore Cyprus.
Until spring 2014, Israel was involved in serious talks with Woodside for the purpose of the acquisition of 25% of the 21 Tcf Leviathan field by the Australian giant. The failure to reach an agreement due to disputes between Woodside and the Israeli authorities revealed that Israel had other options for exporting its gas, not involving the construction of its own LNG/FLNG facility in the immediate term.
Israel is now in talks to supply natural gas to its immediate neighbours Egypt and Jordan, both undergoing energy crisis at home. Exporting gas to Egypt would also allow Israel access to global markets by using Egypt’s unused export terminals. Once an net natural gas exporter, Egypt has reduced its exports due to a declining production and a growing national consumption. The country is now looking for suppliers to address the frequent power outages it is suffering from.
Neighbouring Cyprus had adopted the construction of an onshore export LNG terminal as its national strategic project. However, modest quantities of gas encountered in the Aphrodite field (3.6 to 6 Tcf with a mean of approximately 5 Tcf) did not allow a final investment decision for the construction of the multi-billion dollar facility. The island is awaiting further discoveries to justify the commercial viability of the endeavour. The ENI/Kogas consortium is currently undertaking exploration activities in Block 9 of Cyprus’ EEZ. TOTAL and Noble are also expected to commence exploration activities offshore Cyprus in 2015. Positive results would encourage the construction of a one-train LNG facility in Vassilikos.Whilst CNG (compressed natural gas) has been advanced as an option for monetizing natural gas, Noble’s John Tomich dismissed the method, adding that pipelines to regional markets were the most likely scenario.
The Eastern Mediterranean holds a substantial hydrocarbon potential. Lebanese waters are also believed to be home to deposits of natural gas. But like always in this part of the world, politics are an impasse. Renewed tensions between Cyprus and Turkey have also threatened the island’s hydrocarbon progress. The island received EU, international and Israeli backing and exploration continues despite the friction. Long term growth will however largely depend on regional cooperation that involves all the interested parties.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. 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