East Med: Increased Attractiveness Amid the Ukraine Crisis
The political crisis in Ukraine has further encouraged the belief that Eastern Mediterranean natural gas will play a key role in diversifying Europe’s energy supply and loosening Russia’s grip over its natural gas market. Israel in particular has made important offshore gas discoveries that could potentially be directed towards a Europe looking for ways to reduce its dependence on Russia.
With substantial discoveries off its shores, Israel has the ambition to satisfy some of Europe’s gas needs. The Tamar field located in Israel’s EEZ 80 kilometers west of Haifa was discovered by Noble Energy in 2009. The field has gross mean resources of 10 trillion cubic feet (tcf) of natural gas and came online in 2010. With gross mean resources of 19 Tcf, the Leviathan field represents the largest exploration success in Noble Energy’s history. It was discovered in 2010 about 135 kilometres from the Israeli port city of Haifa in waters 1,600 metres deep. Gas production from the Leviathan is expected by 2017-2018.
Noble Energy has also made a natural gas discovery offshore Cyprus. The Aphrodite field was discovered in late 2011. The Cypriot government had high hopes that substantial amounts of natural gas in the Aphrodite field in Block 12 of Cyprus’ EEZ would allow it to build an LNG terminal in its Vasiliko coastal site. In October 2013, Noble made an announcement following its appraisal drilling downsizing the field to a range of 3.6 tcf to 6 tcf with a gross mean of 5 tcf, less than earlier tests had suggested. The revised estimates and Israel’s uncertainty around its export options led the Cypriot LNG plan to be put on hold until further exploration activities in Cyprus’ waters commence.
Companies such as Total and ENI/Kogas plan to start exploration activities off Cyprus’ shores in the next two years. The ENI/KOGAS consortium that was awarded a licence for hydrocarbons exploration in blocks 2, 3 and 9 of the Cyprus EEZ, is planning to drill in the third quarter of 2014, while France’s Total holding the licence for blocks 10 and 11 will drill in 2015. Successful natural gas encounters would allow the island to bring its LNG project to fruition and reach potential customers, including Europe.
If the Eastern Mediterranean is blessed with natural gas, it is cursed with complicated geopolitics that render the transportation of the hydrocarbon a difficult endeavor. A lengthy debate over whether to export natural gas or to reserve it all for national consumption divided Israel until a final decision was ratified by the Supreme Court in October 2013 confirming that the country will export 40% of the natural gas found in its waters. How the gas will reach export markets remains uncertain. Israel will start by exporting to its thirsty immediate surrounding as a starting point while it figures out whether to opt for a pipeline or LNG scenario. Without effective solutions to the various Eastern Mediterranean geopolitical conflicts, Europe will have to wait a little longer before it can diversify its energy portfolio.
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