In a decade of offshore exploration in the eastern Mediterranean, energy companies have uncovered vast reserves of natural gas that could transform the fortunes of regional states and provide alternative supplies for energy-hungry Europe.
A new gas supply chain that could potentially fuel Europe for 20 years has obvious attractions. The eastern Mediterranean would allow European buyers to reduce their dependence on Russian gas, which can potentially be turned on or off in line with Moscow’s geopolitical interests.
But as some of the largest projects prepare to move from the exploration to the production phase, country rivalries in an already volatile region have emerged as a complicating factor in the future exploitation of the undersea bonanza.
Embattled energy company executives must frequently reflect that finding the stuff is the easy part compared with the diplomatic manoeuvres required to get it to market.
The key national players in development of the so-called Levantine Basin are Israel, Egypt, Cyprus and Lebanon. Turkey, which already possesses a pipeline network for shipping gas from the Middle East to Europe, is also heavily involved.
One of the biggest offshore resources is Israel’s aptly named Leviathan field, which its operator, Houston-based Noble Energy, estimates contains 22 trillion cubic feet of natural gas. Noble, which is partnered on the project by Israel’s Delek group and other investors, plans to deliver the first gas from the field in 2019.
Leviathan’s reserves are outstripped only by the 2015 discovery of Egypt’s offshore Zohr field, so far the largest gas discovery in the eastern Mediterranean.
Noble is also the lead partner in developing Cyprus’s offshore Aphrodite field under a production-sharing agreement with the Nicosia government. In 2015, it sold a third of its stake to British Gas, now owned by Shell.
This is where the diplomacy gets complicated. As a member of the European Union, Cyprus has the full backing of its partner states in exploiting and potentially exporting the gas located around its shores. EU officials were on hand when representatives of Cyprus, Greece, Israel and Italy met in Tel Aviv in April to sign a preliminary deal on a pipeline project to link their countries.
While some analysts speculate whether the project merits the more than €6 billion investment and question whether it will ever be carried out, Turkey has stepped in to challenge Cyprus’s rights and to demand that any pipeline should go through its territory.
Ankara insists any benefits from offshore gas must be equally shared across the whole island, with Cyprus still famously divided between parts backed by Greece and Turkey. The latest north-south talks, that might have resolved the impasse, broke down earlier this year.
Turkey, which has some 30,000 troops stationed in the north of the island, reinforced the pressure during the summer by sending in a ship to monitor drilling activity. President Recep Tayyip Erdogan also used a speech at the World Petroleum Forum in July to warn energy companies about reaching deals with Nicosia. “Energy companies who involve themselves in irresponsible steps taken by the Greek Cypriot side can never be met with understanding,” he said. “They could lose a friend in Turkey.”
Since then, Ankara has been pushing Israel to use its influence to promote a Turkish pipeline option. With an improvement in relations following an extended diplomatic rift, Israel seems at least willing to examine its options. Israel and Turkey are now on course to finalise a deal on a pipeline connecting their two countries, although Israel has not given up on the EU-backed alternative. Israeli energy minister Yuval Steinitz has described both projects as important and said: “Don’t force me to choose.”
Countries and operators will all at some stage get trumped by price however. If the complex supply chains and even more complex politics of the region make the gas too expensive, European customers will inevitably stick with the Russians, and that will be in the interests of no one in the eastern Med.