Sir Michael Leigh on the Eastern Med and Europe's energy security
Natural Gas Europe had the pleasure of speaking with Sir Michael Leigh on the role of Eastern Mediterranean natural gas in diversifying Europe's energy supply. Sir Michael Leigh is senior adviser to the German Marshall Fund. This interview draws on an earlier opinion piece published by GMF.
The Ukraine crisis has reminded Europe of its pressing need to diversify its energy sources away from Russia. How best can Europe strengthen its energy security?
The EU has been committed for the past decade to diversifying its sources of energy and has taken various steps in this direction. However, little concrete has resulted until now. The Ukraine crisis draws attention to the urgency of the matter. Europe needs to diversify both the geographical sources of its energy imports and its fuel mix.
Europe must also improve interconnectors between national energy networks so that countries can switch quickly from one source of energy to another and thus be less vulnerable to sudden interruptions of supply. The EU needs to make sure that sufficient strategic natural gas reserves are in place, push for greater energy efficiency and think again about unconventional sources of energy. European reservations about shale oil and gas can be overcome by more stringent measures to control methane emissions and risks to ground water.
Countries which have decided to phase out nuclear energy may also need to revise at the very least the time-table for this. In the short term, the EU needs to increase imports from its existing suppliers (Qatar, Norway and Algeria). In the medium term, the EU will be able to import LNG from the US, once this has been authorized, though US companies may be tempted by higher prices in Asian markets.
What role will the Eastern Mediterranean play in diversifying Europe’s energy supply?
It will be a while before the Eastern Mediterranean is in position to export significant quantities of natural gas. Even then, the Eastern Mediterranean will have a minimal impact on Europe’s energy security given the relatively modest quantities of natural gas that would be exported. If all the gas available in the Levant Basin were exported to the EU, it would amount to no more than one year’s overall EU consumption.
Israel has taken a decision in principle to export natural gas but is still exploring various markets and export routes. It is likely to export pipeline gas to Jordan and Egypt to ease supply bottlenecks there and is considering using Egypt’s LNG plants to reach lucrative Asian markets. However, many factors need to be considered, including security and political risks. Israel is also considering pipeline exports to Turkey. But political obstacles need to be overcome and the underlying economics carefully examined.
As to Cyprus, its proven reserves are too modest for the moment to attract the necessary investment in an LNG plant. It will take another two years before the results of further exploratory drilling offshore indicate whether such a plant is commercially viable.
Which markets will the Eastern Mediterranean region target?
The initial markets for Eastern Mediterranean gas are the countries themselves. Cyprus and Israel will first look to satisfy domestic demand by providing households and commercial users a relatively clean, reliable source of energy. Israel has also agreed to supply natural gas to Jordan. Palestinians could be potential customers for Israeli gas if political conditions permit. Beyond the domestic markets and the immediate neighbours, the Eastern Mediterranean countries could export LNG to Europe or Asia. However, major investment decisions are required to permit this. Given that the future of gas prices is unpredictable, and the payback period for major new investments will stretch to 2040, considerable risk is involved in locking into long term export contracts,
Will the pending maritime border dispute between Israel and Lebanon constitute an obstacle to the effective development of their respective hydrocarbon resources?
Various efforts have been made by third party mediators to solve the delimitation dispute between Israel and Lebanon, which are technically in a state of war with each other. No concrete result has been achieved thus far. However, both countries dispose of large exclusive economic zones which contain considerable hydrocarbon resources. They do not need to authorize exploratory activities in the relatively small disputed triangular area of 850 square kilometers until a resolution of the conflict is achieved. Meanwhile both sides need to exercise restraint to avoid escalating this dispute.
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