With so much attention focused on Syria, Iran, Saudi Arabia, Lebanon and Turkey lately, I wish to shed some light on some significant developments happening in the eastern Mediterranean that will draw together the likes of Greece, Cyprus, Turkey, Israel, Lebanon, Egypt and even Syria into a pool of common interests: recently discovered natural gas deposits in the Levantine basin. This stands to undoubtedly impact geopolitics in the Levant and Europe in the coming years.
After some initially unfruitful exploratory work, large gas deposits were first discovered in the eastern Mediterranean sea, off the coast of Israel in 2009, in what is known as the Tamar gas field, by US energy company Noble Energy. The Tamar gas field boasted recoverable reserves of 255bcm. In the following year, Noble Energy made an even larger discovery, – the Leviathan gas field, boasting 481bcm of natural gas. This was a big break-through for Israel, which now faces becoming a net energy exporter for the first time, and a major energy player in the Middle East. In the same year of 2011, Noble Energy discovered yet another gas field, this time in Cypriot maritime waters, the Aphrodite gas field, with about 200bcm projected in gas reserves. But the largest find of all in the eastern Mediterranean sea, was discovered in 2015 by Italian energy giant ENI, – the Zohr gas field, falling under Egyptian maritime territory. Zohr boasts about 850bcm of recoverable gas reserves, almost twice the size of Leviathan. Lebanon, Turkey and Syria most likely have deposits too. But they currently lag behind Israel, Cyprus and Egypt in terms of developing them.
With recent discoveries, there comes potentially more. Some of these gas reserves already spill over into the maritime zones of neighbouring countries,- Cyprus, Turkey, Lebanon and Egypt. Greece stands to become an important energy hub of Levant gas into Europe, if the West seizes on this opportunity to deliver Israeli gas into Europe, the largest proximate market. It would effectively bypass some demand for Qatari and Russian gas in the process. It also stands to make for some potential military clashes, with rival Lebanese, Turkish, Egyptian, Israeli and Cypriot stakes pitting themselves at odds, unless fruitful cooperative frameworks are worked out between stakeholders. The race is on to exploit the boon in new-found Mediterranean energy.
A complicated and competing landscape
Recent news in the past few years have been making noises about Turkey and Cyprus attempting to work out a settlement to their long-simmering dispute since 1974, under Western oversight. The reason for this is quite simple: demarcate maritime claims on these natural gas reserves before more serious production begins. However, this has proven not to be a smooth process. Northern Cyprus is only recognised by Turkey, and Turkey is using its controversial claims over Cyprus to lay a stake on the energy bounty. This has caused Cyprus and Greece to object to any production sharing agreements with Turkey. Turkish warships were sent in 2014 to patrol sections of the sea near Cyprus, angering both Cyprus and Greece. Despite Turkish threats, Cyprus began drilling without incident, while Turkey sought its own drilling endeavours off the coast of Northern Cyprus. Turkey likely understands that its claims on Cypriot gas reserves have limitations, in the eyes of the other Levantine participants, yet at the same time, it doesn’t want to miss out on any potential gains either. As such, the Cypriot issue remains unresolved despite an initial surge in interest to find a settlement due to Turkish blustering. This is largely due to the fact that Turkey feels its long-sought ‘energy-hub’ status under threat by Cyprus and Greece, who stand to gain energy hub leverage into Europe, at the expense of Turkey. Turkey has thus accelerated its own exploration and drilling into its maritime claims on the Mediterranean seabed.
Israel on the other hand, has stepped up its maritime cooperation with Greece and Cyprus, and has demarcated common maritime borders with Cyprus, due to the proximity of the Leviathan gas field to the Aphrodite gas field. Cyprus has demarcated its maritime borders with Egypt (2003), Lebanon (2007) and Israel (2010). Egypt on the hand, which is one of Israel’s main gas suppliers, has not yet demarcated maritime borders with Israel. Nevertheless, Egypt signals readiness to import Israeli gas, despite having much larger reserves. Egypt is also the only country in the region to host liquefaction terminals, which convert natural gas into liquefied form (LNG), – a much more transportable form for export by shipping and/or pipeline. As such, Israel and Cyprus are eyeing Egyptian LNG terminals for potential utilisation for their own gas needs.
With Lebanon, after having demarcated its maritime borders with Cyprus, it remains a laggard in the race to drill gas. This is partly due to several reasons. Lebanon’s domestic political situation is quite tenuous and faces unity issues. On top of this, Lebanon and Israel are technically still in a state of war, and maintain minimal diplomatic relations. This has lead to a potential clashing point in the Levantine gas basin. In 2009, Israel took advantage of the Lebanese-Cypriot maritime demarcation to fix its own maritime border with Lebanon up to the same point, effectively ensuring that its existing Karish gas deposits do not fall under Lebanese waters. Lebanon filed a complaint with the UN, and the US suggested a compromise in return, implicitly acceding to the Israeli claim. This still remains an issue of contention, and Lebanon and Israel have yet to formalise maritime borders. Lebanon is stuck in political limbo, and exploratory drilling is only just beginning on Lebanese prospective deposits, while Israel is already preparing for on-stream extraction by 2020.
Who exactly is drilling?
The eastern Mediterranean sea is divided into Exclusive Economic Zones (EEZs) for each littoral country, agreed to on the basis of both international maritime law and bilateral negotiation. These are further divided into blocks, whereby various international energy consortiums are allocated ‘blocks’ to explore, drill and develop. The Tamar, Leviathan and Aphrodite gas fields fall under various blocks across a few EEZs (Israel and Cyprus), and are chiefly being developed by Noble Energy, along with several other partners including Israeli energy consortium Delek. Cyprus has also utilised other energy firms, – Total (France), ENI (Italy) and Kogas (South Korea) to help explore its other blocks. Recently, there have been some unsuccessful results from this venture. Despite this, Cyprus remains enthusiastic for its many other outstanding blocks, giving concessions to ExxonMobil and Qatar Petroleum for further exploration. Perhaps the most interesting development here is the presence of Russian Gazprom, which is eyeing an interest in developing Israel’s Leviathan gas field. Israel doesn’t seem to be resisting either, much to US chagrin. It could also be that Israel is open to seeking diversification away from too much US reliance and seeking Russian security insurance against possible conflict with Lebanon.
Meanwhile, the Egyptian Zohr field is being developed by Italian firm ENI, which has had a long-time presence in Egypt ever since the time of Nasser. ENI along with Royal Dutch Shell operate Egypt’s two LNG terminals. ExxonMobil is also interested in exploring the Egyptian EEZ.
Turkey has enlisted the help of ENI and Kogas to explore some of its blocks, however, progress on these projects is difficult to find. That could be due to the much more significant energy deals inked with Russia recently (Turkish Stream), consolidating Turkey as a major energy hub. As such, Mediterranean gas deposits could be put on the back burner.
Lebanon appears to be the real laggard in this race. There is ample interest in international energy firms in exploring and drilling in its EEZ, however, political deadlock has stalled any progress in allocating exploratory rights to its blocks. This is partly due to mismanagement, ongoing disputes with Israel and and a fragmented political landscape. If Lebanon manages to overcome these hurdles, it stands to gain a large windfall from energy profits, that will undoubtedly help its economy.
If cooperative frameworks are agreed, and conflicts avoided, the spoils of the Levantine basin stand to boost the economies of the Levant significantly. The worst case scenario would be war between Lebanon and Israel, and the continuation of a diplomatic dead-lock between Cyprus (EU) and Turkey. The best case scenario would be a diplomatic success story in a region traditionally beleaguered with Byzantine politics. Israel stands to become energy-independent in a troubled region, and a net exporter of gas to Egypt, Jordan, Turkey and possibly Europe. Egypt will likely consume the majority of its gas deposits for its own demanding needs, while Cyprus will lift itself out of dependence on gas imports and even export a surplus abroad. Turkey and Lebanon may well also hold large spoils, but are currently not focused on them as they probably should be, due to differing political situations. Syria similarly cannot focus too much attention on exploration while a war rages on. If Levantine gas proves to be a viable source for European markets against competing Azeri, Russian and Qatari gas, it will alleviate pressure from pushing through controversial pipeline projects through the Middle East by imperial powers. Greece stands to benefit economically as a key transit point of Levantine gas into Europe, or perhaps even finding some spoils for itself. Greece in this regard serves to become a direct competitor to Turkey as energy hub. Syria may also hold its own offshore gas deposits, which could go a long way in helping with reconstruction and development funding after a brutal foreign backed war that wreaked untold carnage on the country. Russia’s presence in Syria could help develop any potential deposits further down the track.
With Russia entrenching a firm presence and influence in the Levant, particularly in Syria, Turkey and Cyprus, and US energy firms along with their Russian and European counter-parts investing heavily with extracting Mediterranean gas deposits, there stands a much greater need for cooperation rather than conflict in the Levant in the coming years, especially given how sensitive energy remains to the region. The need for cooperation will be certainly tested with Lebanon/Israel and Turkey/Cyprus. Russia holds a much greater mediating factor than the US, which has worn out its utility in being impartial. In particular, Russia stands to play a critical role in reducing Israeli-Lebanese tensions, especially if selected to develop Lebanese gas deposits. Gazprom is also being considered in extracting gas from Israel’s Leviathan field, which quite possibly could be Israel signalling a desire for hedging its bets with Lebanon and the US. Whatever the outcomes may be, the geopolitics of the region and beyond stand to be significantly impacted by the new-found gas spoils in the Levant.