By Antonia Dimou,
Reproduced by Modern Diplomacy, June 14, 2017
http://moderndiplomacy.eu/index.php?option=com_k2&view=item&id=2688:greece-israel-and-cyprus-pivotal-to-east-mediterranean-gas-development&Itemid=208
(Photo from: Tekmor Monitor)
East Mediterranean gas resources can
promote cooperation and deliver financial benefits contributing to the economic
development of Israel, Greece, and Cyprus. The challenges and prospects of gas
cooperation are at the top agenda of trilateral dialogue to overcome obstacles
and stipulate development of energy resources.
It is in this context that Greece has
been pivotal in the development of Israel’s natural gas with the acquisition of
the Tanin and Karish fields, facilitating competition in the Israeli market in
accordance with the revised Israeli regulatory framework. Energean Oil and Gas
(Energean), a Greek private E&P company, currently owns 100 percent of the
two Israeli gas fields and acts as their sole operator. The gas fields are considered
a world class asset with 2.4 trillion cubic feet (tcf) of natural gas,
contingent reserves, and over 20 million barrels of light oil, contingent, and
perspective reserves.
In fact, Israel has facilitated Greek
energy interests, which can help Europe diversify supply of energy resources.
Optimism prevails when it comes to Energean’s ability to present a reliable
Field Development Plan for both the Tanin and Karish fields so that first gas
is produced in 2020. The company emerged as a smart investor, having managed to
acquire two new licenses in Israel and another two in Western Greece during the
low point of the upstream industry cycle.
In pursuance to Greece’s strategy of
penetrating the East Mediterranean energy landscape, Athens also seeks to
develop its own gas fields in the Ionian Sea and South of Crete. The Greek
Ministry of Energy has already signed a contract with French Total’s JV, Edison
and Hellenic Petroleum. The contract secures offshore Block 2, located west of
the island of Corfu, as an outcome of the 2014 International Licensing Round.
It has to be noted however, that
reservations seem to prevail regarding the possibility of Greece to re-launch a
new Licensing tender and the related risks due to the current low price levels
and the increased exploration costs in deep and ultra-deep waters.
For its part, Israel in its quest for
natural gas development proceeded successfully in 2016 with the revision of its
gas regulatory framework thus resolving a persisting antitrust stalemate.
Impediments however continue with most prominent, the high risks for potential
buyers and uncertainty over export markets. Specifically, despite the Israeli
government’s approval of gas exports to Egypt, the seven-year deal -signed
between partners of the Israeli Tamar gas field and the Egyptian Dolphinus
Holdings- has not yet materialized. The only secured export agreement is the
Gas Sales and Purchase Agreement (GSPA) signed between Noble Energy and
Jordan’s National Electric Power Corporation (NEPCO). The agreement guarantees
the supply of approximately 1.6 trillion cubic feet (tcf) of natural gas from
the Leviathan gas field over a 15-year period for electricity production.
Out of existing export options, the
construction of a pipeline that connects Israeli Leviathan gas field to the
Turkish coast remains financially attractive. This is in spite of Israeli
reservations regarding the likelihood of tying its gas into a single market
with considerable competition. The gas pipeline project must overcome the
longstanding Cyprus conflict to proceed, as it requires crossing Cyprus’s
Exclusive Economic Zone (EEZ).
In the regional setting, energy offers
golden opportunities for Cyprus; the discovery of the Egyptian Zohr giant gas
field accelerated Cyprus’ declaration of the 3rd International Licensing Round.
The geological structures of the Zohr field are similar to the auctioned
Cypriot offshore blocks, suggesting the existence of significant gas reserves
and exploitable oil deposits.
A general vote of confidence in the
Cyprus EEZ is indicated by the attraction of international majors and the
subsequent distributions of various exploration blocks. This includes the
awarding of exploration block 6 to the ENI Cyprus Ltd and Total E&P
consortium; of exploration block 8 to ENI Cyprus; and, of block 10 to the
consortium of ExxonMobil Exploration & Production Cyprus Ltd and Qatar
Petroleum International.
No doubt that the East Mediterranean gas
discoveries present a game changer that poses all kinds of risks and
opportunities for the three countries’ economic growth. It is in this context
that policies need to center on:
First, supporting the planned Euro-Asia
Interconnector project that would connect Hadera, Israel to Athens, Greece so
that the latter emerges as a hub and/or a transit country;
Second, upholding cooperation between
Greece and Israel on joint development of infrastructure for the transportation
and marketing of gas, as well as on joint operations pertaining to the safety
of energy installations;
Third, sharing knowledge to foster a
transparent and predictable regulatory environment for foreign investors in
Greece, Cyprus and Israel, and facilitating access to external sources of
project finance and loan guarantees;
Fourth, looking into multiple exports
options so that gas is not tied to a single market where changing geopolitical
conditions can affect the sustainability of exports and thus impact negatively
the three countries’ energy wealth; and,
Fifth, establishing a regional
sponsor-supported council that would include energy companies, energy industry
service providers, energy industry associations and other stakeholders in the
region; once established, the Council could seek government participation from
the littoral states of the East Mediterranean and become an avenue of
communication between governments and industry as well as a clearing house for
ideas and plans for mutually beneficial development in the region.
Admittedly, gas discoveries in the East
Mediterranean have the potential to transform the energy outlook of individual
countries as well as foster regional energy cooperation. This is a period of financial
upheavals and political instability hence new opportunities emerge for those
who are bold and ready to work. Greece, Israel and Cyprus need to identify to
this group and serve as pillars of energy cooperation. Working from this
collective strength, they can pursue energy policies for the well being of
their peoples and the coming generations.
