The Gaza Marine field: Left Behind

The East Med is natural gas-rich 

The Eastern Mediterranean region’s transition into a potential player in the natural gas market has been highly publicised in the recent years. The discovery by Texan Noble Energy of substantial natural gas deposits under Israel’s seabed, with the Leviathan and Tamar fields estimated at respectively 22 and 10 Trillion Cubic Feet (Tcf) of natural gas, has triggered exploration activities in neighbouring Cyprus. The island was successful in 2011 when Noble Energy discovered Aphrodite, located in Block 12 of Cyprus’ Exclusive Economic Zone (EEZ) and estimated at 4.54 Tcf. The island pursued its search efforts for more hydrocarbon in its waters, but the Italian-North Korean consortium ENI/KOGAS licensed to conduct exploratory drilling in Block 9 of the island’s EEZ faced two dry holes and it is uncertain if it will conduct further drilling. France’s TOTAL, licensed to drill in Blocks 10 and 11 of the island’s maritime zone has withdrawn from the island for not having identified 'drillable prospects'. Rumours that TOTAL may be resuming its activities offshore the island have not yet been confirmed yet as the French company pursues its talks with the Cypriot government. Noble Energy is now in the process of finalising a development plan for the Aphrodite field to submit to the Cypriot government in the coming weeks that may involve selling natural gas to natural gas-thirsty Egypt. Lebanon too has began efforts to tap into its offshore riches: Lebanon's pre-qualification round, launched in spring 2013, attracted some of the world’s biggest players in the energy scene including TOTAL, ENI, Shell, Statoil, Chevron, and ExxonMobil. Forty-six companies were qualified, including 12 operators. But despite Lebanon’s high appeal in the pre-qualification round, the country has failed to launch its first licensing round delayed by its inability to issue two decrees that are essential for tendering Lebanon’s offshore blocks, one delimitating the blocks open for bidding and the second laying out a model for future Exploration and Production Agreements (EPA). 

Sixteen years after its discovery, Gaza Marine has still not been developed

Geopolitical tensions may stand in the way of the successful development of the Levant Basin’s offshore riches. And despite technical difficulties encountered in the path towards natural gas production, there is no doubt that the hydrocarbon discoveries in the Eastern Mediterranean are important, if not on an international level, at least for the parties directly concerned. Once heavily dependent on imports to satisfy domestic demands, Cyprus, Israel and perhaps one day Lebanon, will have enough gas to satisfy domestic demands for decades and become net natural gas exporters, at least regionally. The untold truth is that the Palestinians too, have gas. In fact, British giant BG discovered a field in 1999 estimated at 1 Tcf and located 30km off the coast of the Gaza Strip at a water depth of 603 km. Former Palestinian leader Yasser Arafat called it at the time 'A gift from God'. Sixteen years later, the field has still not been developed and Palestinians remain almost entirely dependent on Israeli gas to satisfy domestic demand.

BG failed to secure a buyer for Palestinian gas

Natural Gas Europe spoke to a person on the ground highly involved in the case who requested to remain anonymous. ‘The reason why the Gaza Marine field has not been developed to date is because BG failed to find a buyer for the Palestinian gas’, said the source. The development of the field is an expensive endeavour that is not possible without securing a customer first. Several negotiations took place, including the options of selling the gas to Egypt’s export LNG terminals and then shipping the gas from Egypt to far-reaching market in the liquefied form, supplying domestic demand and sending the gas to the Israeli market, but none of the scenarios came to fruition. ‘Now that Israel has discovered enough gas to satisfy its domestic demand for decades and sell some of its gas to export markets, it is even less interested in the Palestinian gas and less likely to allow for the development of the field’, added the source. One of the main objection advanced by the Israelis is the concern around how the Palestinians would spend gas revenues. Despite various measures and reforms adopted by the Palestinians to increase transparency after September 11, the Israelis kept advancing the lack of transparency as the main reason for their reluctance to support the sale of Palestinian gas that would generate an inflow of revenue.

Israel no longer interested in Palestinian gas

The future of the Gaza Marine field looks even grimmer now that the Israelis are no longer dependent on gas imports to satisfy domestic demands. “Why would they support the development of the Gaza Marine field, if they don’t need the gas anymore. For them [the Israelis], either they take the gas, or no one does”, said the source. Technically, the Gaza Marine field, being located in shallow waters and relatively close to the shore, is easy to exploit. The problem seems however political, more than anything else. “Israel controls a security zone between Palestinian and Israeli territorial waters, and any access to these waters must be cleared by Israel. The Mari-B field [which began production in 2004], and the Noa well [located 20 km west of Mari-B, estimated at 1.5 to 2 Tcf (combined)], should have fallen within Palestinian waters” added our source. ‘Electricity in the West Bank and Gaza is one of the most expensive in the region’, added our source, which led to a debt by the Palestinian electrical companies to the Israeli Electrical Corporation (IEC), their main supplier of almost 2 billion Shekels. Furthermore, the Gaza strip suffers from frequent power outages, with over 6 hours of shortage per day.

Israelis could benefit from a better quality of life for Palestinians

‘If Palestinians had a better life, conflict will be less recurrent.  Palestinians want to live a normal life and have access to the basics: water, electricity, and communications. The Palestinians have their hands tied and their future depends on the Israelis’, added the source. Asked about whether Shell’s acquisition of BG may have an impact on the development of the Gaza Marine field, our source tells us that despite being present in the region for 25 years, BG failed to reach the stage of the development of the field. There is a hope that Shell will adopt new approaches that may move things forward. But it is highly unlikely.