Weekly Overview on Eastern Mediterranean Natural Gas Matters
Israel
Israeli waters may hold more natural gas than previously expected. On January 17, an Israeli gas exploration group led by Isramco Negev and Modiin Energy announced it had encountered indications of a possible natural gas field off the country’s coast. The Daniel East and Daniel West licenses may contain up to 8.9 trillion ft³, according to a report by the companies.
Israel’s largest discoveries to date are the Tamar field, estimated at 10 trillion ft³, and the Leviathan, estimated at 22 trillion ft³. The country has not yet been able to develop the giant Leviathan delayed by domestic regulatory disputes.
A natural gas framework was approved by the Israeli government in December of last year paving the way for the commercial development of the field. The signing of the deal by prime minister Benyamin Netanyahu was controversial as it stripped the antitrust authority of its overseeing power over the industry via the application of Clause 52 of the antitrust law granting the economy minister the exclusive power to override decisions by the antitrust authority on issues with sensitive strategic or diplomatic implications.
The use of the clause was considered unjustified by many politicians and activists and an appeal against the decision was filed before the High Court of Justice.
Drilling will be carried out to assess the prospects of the potential natural gas field as announced by Ron Maor, CEO of Modiin Energy, who said that the new find could compete with Israel’s existing offshore natural gas reserves.
Israel is eyeing the regional market as a first destination for its natural gas fields. Previously heavily dependent on Egypt, Israel will now be able to ensure its natural gas independence for decades and turn the country into a net natural gas exporter.
Egypt’s natural gas crisis turned the country into an importer of natural gas, at least in the short term. The Zohr field, discovered by Eni in August of last year and estimated to hold up to 30 trillion ft³ of natural gas, will reach production stage by 2018-2020 as the Italian company plans to fast-track its development. In the meantime, Egypt could turn towards Israel to satisfy its rising demand.
Before such a deal is sealed, the two countries must normalise their relations in the aftermath of a ruling by international arbitrators ordering Egypt to compensate Israel for the disruptions in the flow of natural gas in 2011. Jordan is also a potential customer for Israel. The kingdom depends on imported energy for nearly 98% of its needs and is struggling to meet electricity demand. The fruition of the regional deals will largely depend on Israel’s ability to overcome domestic regulatory hurdles.
Cyprus
Cyprus approved BG’s entry into the Aphrodite field in Block 12 of its Exclusive Economic Zone (EEZ). Discovered by US Noble Energy in 2011, it holds an estimated 4.54 trillion ft³܆ Noble Energy sold a 35% stake to BG and retained a 35%. Israeli companies Avner Oil Exploration and Delek Drilling hold a 15% interest each. The partners in the Aphrodite field are engaged in talks with BG to provide gas from the field to BG’s little-used two-train LNG terminal at Idku in Egypt. BG’s entry into Block 12 will likely facilitate the closing of the $30bn deal which will allow Cypriot gas to reach the Egyptian domestic market, and from Egypt to far-reaching export markets in the form of liquefied natural gas.
Cyprus’ president Nicos Anastasiades warned against the excessive optimism that peace talks will lead to the reunification of the island in 2016. Anastasiades and Turkish Cypriot leader Mustafa Akinci made an unprecedented joint appeal to the world’s political and business elite in Davos to support their efforts to reach a settlement.
The reunification of the island of Cyprus could play a significant role in turning Cyprus into the regional natural gas hub it aspires to become. Cypriot gas could reach Europe via Turkey and the gas discovered in Israeli and Egyptian waters could feed Turkey by pipeline via Cyprus if a settlement is achieved.
Egypt
In Egypt, all efforts are focused on fast-tracking the development of the country’s indigenous natural gas. Eni discovered the Zohr field in August and the Italian company presented to the Egyptian government the field’s development plan. The first well and seismic data indicate that Zohr could hold up to 30 trillion ft³ of natural gas.
Britain’s BP also aims to double natural gas production in Egypt in the next four years as part of Egypt’s efforts to recover from its energy crisis. BP produces 30% of Egypt’s natural gas. BP is the operator of an LNG plant in Damietta in northern Egypt.
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