East Mediterranean promise
Italy, Greece, Cyprus and Israel agreed in December to pursue the construction of the €6 billion, 2000 km EastMed gas pipeline from the Levantine Basin to Europe (transporting gas from Israel to Italy via Cyprus and Greece). This costly project seeks to secure a route to market for the untapped reserves currently residing in the Mediterranean Sea. The four countries announced in a statement that they will co-operate to bring about the necessary permits and plans for the proposed pipeline, working towards signing an intergovernmental agreement on the project later this year. The project owner will be IGI Poseidon, a JV between DEPA (Greece) and Edison (Italy).
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The creation of an eastern Mediterranean pipeline corridor is attractive to European markets, as North Sea reserves dwindle and many question Europe’s reliance on Russian gas. Any pipeline coming from the east Mediterranean to feed European markets would be a technical challenge, travelling some 2000 km, at sea depths of up to 3 km.
Feeding such a pipeline would be gas from significant recent discoveries in the Levantine Basin, situated off the coasts of Egypt, Israel, Lebanon, Syria, Turkey and Cyprus.
The EastMed pipeline would be fed by Israel’s Leviathan and Cyprus’ Aphrodite gas fields (which are estimated to hold 620 billion m3 and 140 billion m3 of gas respectively). Israel’s only commercial gas field in the region to date is Tamar, which is close to a disputed border with Lebanon (more on that later). Leviathan has been a long time in the making but holds great potential. Noble Energy operates both fields and hopes to deliver first gas from Leviathan by the end of 2019.
The Zohr field (Egypt) is the most recent of the gas field discoveries to be brought online, with first gas flow heading to Port Said in Egypt in December. Zohr, which sits 150 miles off the coast of Egypt, is the largest discovery made in the area, holding an anticipated 850 billion m3 of gas. Eni and BP will help Zohr to meet domestic demand in Egypt within the next couple of years. Egypt was a net exporter of gas for 10 years before an energy crisis in 2013, when the government failed to pay foreign companies and mass unrest saw President Morsi removed from power.
Lebanon finally began to do some exploration at the beginning of 2017 but progress following a lacklustre licensing round has been hampered by several setbacks, including the resignation of Lebanon’s Prime Minister and a new law from Israel that means it can unilaterally impose sovereignty over disputed territory at maritime borders (Israel and Lebanon have overlapping exclusive economic zones). Israel has amicably demarcated its maritime border with Cyprus, but the border with Lebanon remains in dispute.
Both Israel and Cyprus will be keen to export their newfound gas, as domestic need in both countries is relatively small. Jordan has allocated an initial US$2 million for a joint pipeline project with Israel in order to import gas from Leviathan; effectively buying in to the local gas boom.
The ambition of Israel and Cyprus to become big time exporters hinges on either the successful implementation of a large diameter pipeline such as the EastMed pipeline, or on utilising Egypt as an energy hub for the region, either by existing pipelines, through a new subsea pipeline or by conversion into LNG in Egypt.
Anyone watching season two of Netflix’s The Crown will have been reminded about the Suez Crisis in 1956. Egypt’s Colonel Gamal Abdel Nasser and his soldiers seized control of the canal, which had historically been under the control of the British army. Israeli troops (in conspiracy with, and alongside, those of Britain and France) attacked in retaliation but were swiftly rebuked by US President Eisenhower, who threatened economic sanctions if the trio of forces didn’t pull back. This proved a crushing humiliation for British Prime Minister Anthony Eden, who resigned. The episode showed the importance of the canal to the various nations it served, directly or indirectly. Today, it remains a key (if somewhat vulnerable) trade route for oil and gas. Egypt’s LNG facilities at Idku and Damietta are served by the canal, and a new LNG wharf is being built on the Gulf of Suez. If Zohr production means that Eygpt achieves gas self-sufficiency, the nation will have gone from an exporter of gas, to importer and back again in less than 10 years. Such is the power of the mighty Levantine Basin.