East Med Overview: Regional Co-operation
Israel, Cyprus and Greece discuss regional cooperation
Following a trilateral summit in Nicosia to discuss energy issues in the region, the prime ministers of Israel, Cyprus and Greece announced they were considering a project to build a pipeline that would link the eastern Mediterranean region to Europe.
The project, criticised by some energy experts as unfeasible for commercial and political reason, indicates nevertheless a regional diplomatic effort to strengthen energy ties and the security of energy supply. Europe has been looking to diversify its gas supplies.
The summit stressed the importance of natural gas in building a solid foundation for cooperation in the region. The leaders agreed that natural gas could be a catalyst for peace in the region, namely for achieving a solution to the division of Cyprus.
The eastern Mediterranean has recently emerged as a natural gas producing region and has been eyeing the European market as one of the destinations for its newly found riches. Israel has made large discoveries off its coast, the Leviathan field being its biggest discovery to date and estimated at 22 trillion ft³, followed by Tamar which holds 10 trillion ft³, but has been struggling to get its gas to market, delayed mainly by domestic regulatory disputes. Earlier in January, an Israeli exploration group announced it had discovered signs of another 8.9 trillion ft³ off Israel’s coast at the Daniel East and West fields.
Cyprus has made a less significant discovery in its waters, the Aphrodite field estimated at 4.54 trillion ft³, but efforts continue to search for more gas off the island’s coast. The most significant discovery in the region to date was made by Italian company Eni in the Shorouk Block of Egypt’s exclusive economic zone. The Zohr field is estimated at up to 30 trillion ft³, enough to guarantee Egypt’s re-entry into the export market and the end of its natural gas problems.
Egypt is being eyed by its neighbours Israel and Cyprus as a potential customer for their newly found gas as the country looks for a cheap and reliable source of natural gas to bring relief to the energy crisis it is undergoing, caused by a rising domestic consumption, previous export obligations and a flat production. A four-way summit between Cyprus, Israel, Greece and Egypt will likely take place in 2016 to discuss regional opportunities and the role Egypt could play in facilitating the transport of gas to market.
Noble Energy visits Israel
In another development, a team representing Noble Energy headed by Keith Elliott, Senior Vice President of the Eastern Mediterranean region, has flown into Israel to present Israel’s energy minister Yuval Steinitz and a government team an initial development plan for the Leviathan field. Noble Energy reiterated its commitment to meet the deadlines set up in the development plan and to pursue talks with regional neighbours to finalise gas export deals. On January 31, Noble’s Israel Country Manager Bini Zomer released a statement saying that the Leviathan partners should reach a final investment decision by the end of 2016 and that it would be possible to have gas flowing from Leviathan by the first quarter of 2019. The announcement comes at a time of heightened doubt over the ability of the partners to meet the deadlines for the development of the field. The partners also announced Sunday they had reached a preliminary agreement to sell $1.3 billion worth of Leviathan gas to the Edeltech Group and its Turkish partner, Zorlu Enerji, for domestic power plants.
Netanyahu to defend gas deal
Israel’s high court of Justice began hearings ~February 3 on the controversial natural gas deal approved by PM Netanyahu paving the way for the partners in Israel’s largest offshore natural gas field to develop it and bring the gas to market. The appeal was brought to the court by Netanyahu’s opponents who contest the legality of the deal, and believe the natural gas framework distorts competition in Israel’s domestic natural gas market.
The appeal also criticises the signing of the deal via what they consider as an artificial application of Clause 52 of the Antitrust Law. Steinitz argued that it was of a strategic importance to permit the development of the Leviathan with only the Tamar field pumping gas into the domestic market.
In an unprecedented move, Netanyahu will be allowed to appear before the court to defend his position and the reasons behind his signing of the natural gas framework. The court approval of the deal will make it final and allow the consortium to finalise gas deals and monetise the Leviathan field.
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