Weekly Overview on Eastern Mediterranean Natural Gas Matters

The past week saw three major developments in the Eastern Mediterranean: the approval by Israel’s Minister of Energy of gas exports from Israel’s Tamar field to Egyptian company Dolphinus, a meeting held between the Lebanese Prime Minister and his Italian counterpart in Beirut to strengthen energy ties and a meeting between Cyprus’ Minister of Energy and his Jordanian counterpart in Nicosia to discuss cooperation in the natural gas sector.

Israel’s Minister of Energy’s approval of gas exports from Tamar to Egypt

Israel’s Ministry of Energy announced Wednesday that its Minister has granted his first approval for gas exports from Israel’s 10 trillion cubic feet (Tcf) Tamar field to Dolphinus Holdings, an Egyptian company. Energy Minister Yuval Steinitz said the approval was a first step towards Israel’s plan to export natural gas to its regional neighbours, including Jordan and Turkey. Israel has been eyeing the Egyptian market, not only because of its neighbour’s urgent need for natural gas, but also because Egypt could help, through its underused LNG export terminals at Idku and Damietta, process Israeli gas to Europe and other lucrative markets in Asia. The approval involves the export of 5 billion cubic meters of gas over a three-year period to Dolphinus Holdings via the East Mediterranean Gas undersea pipeline. The announcement comes at a time of tension between the two countries. Earlier this month, the Egyptian Government ordered an immediate halt of the negotiations with Israel following a ruling issued by international arbitrators ordering Egypt to compensate Israel with the sum of $1.7 billion for the disruptions in the flow of gas from Egypt to Israel in the aftermath of the unrest in 2011. Prime Minister Netanyahu and Minister of Energy Steinitz are trying to resolve the dispute and plan to send a diplomatic envoy to Egypt to achieve an amicable solution. Noble Energy and its Israeli partners Delek and Avner have signed other preliminary agreements involving the sale of gas from 22 Tcf Leviathan field and 10 Tcf Tamar to Egypt. The outcome will depend on the progress in the Egyptian-Israeli relationship. Egypt is also looking to import gas from Cyprus’ Aphrodite field and has assured that the tension with Israel will not affect such plans.

Israel is suffering from tensions at home since Netanyahu’s signing of the natural gas framework paving the way for Noble and its partners to develop Israel’s largest offshore field. The deal is controversial as it strips via the application of clause 52 of the Antitrust Law the competition regulator from its overseeing power over the industry granting the economy minister the exclusive power to override decisions by the Antitrust Authority chief on issues with sensitive strategic or diplomatic implications. The application of the clause was considered artificial by the chairman of the Knesset Economics Committee and the PM’s opponents for being motivated by economic reasons rather than national interest. An appeal against the decision will be brought before the High Court of Justice which will begin hearings in February. Israel’s Antitrust Authority had accused the partners in Israel’s largest fields of constituting a cartel that would hinder competition in the natural gas market. Its former Chairman David Gilo resigned in May over Netanyahu’s decision to push the deal through. The outcome of the Court’s hearings will likely largely determine of Israel’s regional plans.

Lebanon’s PM meets his Italian counterpart in Beirut to discuss energy

Lebanese Prime Minister Tamam Salam met his Italian counterpart Matteo Renzi in Beirut on Tuesday. The two leaders discussed ways of strengthening bilateral ties, particularly in the field of energy. The Lebanese Prime Minister stressed on the importance of Italy’s expertise in the oil and gas sector, and the increasing role it is playing in the Eastern Mediterranean region. In a joint press conference, Tamam vowed to increase his efforts to help Lebanon open its first licensing round, as the country remains stuck in political ramblings. The country’s first offshore bidding has been delayed due to the government’s inability to issue two essential decrees that would delineate the offshore blocks open for bidding and lay out a model sharing exploration agreement. Lebanon attracted substantial interest when the country opened a pre-qualification round in spring of 2013. Major oil and gas companies expressed interest to tap into Lebanon’s potential hydrocarbon wealth. Out of 52 international companies that applied, 46 were successful, 12 as right-holders Operators (including Exxon Mobil, Shell, Chevron, Statoil, ENI, Maersk, TOTAL), and 34 as right-holders non Operators. The political vacuum suffered by the country leading to the major delays in opening the licensing round may deter those companies from any involvement in Lebanon. Investors are said to be losing patience, and faith in the country's ability to lead the process to fruition. The progress in the neighbouring countries, including Cyprus, Israel and Egypt may play to Lebanon’s disadvantage, unless the pending pieces of legislation are issued fast and efficient progress follows.

Cyprus and Jordan step up energy cooperation

Following a meeting held between Cyprus’ Minister of Energy Yiorgos Lakkotrypis and his Jordanian counterpart Ibrahim Saif in Nicosia on Tuesday 22 December, the two leaders announced the forming of technical committees to discuss possible cooperation opportunities in the natural gas sector. The two Ministers expressed the importance of the relationship between the two countries that they perceive as strategic and pledge to hold future tripartite meetings involving Greece, and even a four-way meeting involving Egypt. Jordan imports 97% of its energy needs. The Kingdom was previously heavily reliant on Egyptian gas for most of its natural gas needs. The flow was disrupted following the toppling of President Husni Mubarak due to attacks on the pipeline transporting gas from Egypt to Jordan. Despite several initiatives to develop indigenous resources, Jordan is on the lookout for cheap, regional natural gas to solve an energy crisis that is causing a spike in its energy bills and frequent power outages. Cyprus could be a temporary solution for Jordan but the country is also said to be involved in talks with Israel. The possibility of importing gas from Israel has caused unrest at home as many Jordanians are opposed to any deal with Israel that seems contradictory to their support of the Palestinian cause.

Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Karen is also a co-founder of the Lebanese Oil and Gas Initiative (LOGI). 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