Egypt's Sisi (left), Greece's Tsipras & Cyprus' Anastasiades
Frederick Deknatel Friday, Sept. 16, 2016
In recent years, Egypt, Israel and Cyprus have all discovered huge natural gas fields off their coasts, raising export potential and perhaps the prospects for better political ties in the region through new energy partnerships. At least this is the scenario that the United States is hoping for. Last month, U.S. Secretary of State John Kerry’s envoy on energy affairs, Amos Hochstein, told Bloomberg that “we’re just beginning to open the spigots of what is the potential for the broader region.”
That is already evident in the improved ties between Israel and Turkey after their June rapprochement, motivated by gas diplomacy. And there is even the possibility of detente between Ankara and Cyprus, since any potential new gas pipeline from Israel to Turkey would need to travel through the island, the north of which has been occupied by Turkey since 1974. Washington, according to Bloomberg, is bullish on the eastern Mediterranean for another reason. “Even as the region struggles with regulatory uncertainty and an abundance of geopolitical risks, the U.S. is seeking to turn it into another corridor for gas supplies to Europe, which is trying to diversify its sources away from Russia.”
The abundance of natural gas has made the Mediterranean a more strategic space for Israel, Egypt and Cyprus. Israel has boosted its navy to protect its offshore gas fields and reached out to Cyprus, Greece and Turkey as potential energy partners. Prime Minister Benjamin Netanyahu joined his Cypriot and Greek counterparts for a summit last January in Nicosia—a sign of closer ties that included talks about joint military exercises and coordinated economic cooperation with Egypt. The previous month, in Athens, Egyptian President Abdel-Fattah el-Sissi met with Greek and Cypriot leadersto discuss offshore gas rights. Most recently, in late August, Egypt and Cyprus agreed to a deal for transfers of Cypriot gas to the Arab’s world most populous country through a new pipeline, which wouldn’t be operational until at least 2020.
Given its small domestic market, Cyprus needs deals with Egypt and Israel to cover the costs of developing its deepwater gas fields. The Levant Basin under Cypriot and Israeli waters holds some $700 billion in proven gas reserves, and could even be three times that, according to Israel’s energy minister. Egypt had its own deals for exporting some liquefied natural gas to Israel, Syria and Jordan in recent years, and its energy outlook got a major boost in the past year with several significant discoveries, including the “supergiant” Zohr gas field being developed by Italy’s energy company, Eni—which may be the largest gas find in the Mediterranean.
The abundance of natural gas has made the Mediterranean a more strategic space for Israel, Egypt and Cyprus.But this gas bonanza, as many analysts have called it, is set to do more for Egypt’s domestic market, rather than feed new exports. The country went from being a gas exporter to a gas importer last year, as economic and political turmoil in the years after former President Hosni Mubarak’s fall in 2011 led to chronic gas shortages and a reliance on billions in Gulf aid. With a glut of new gas being exploited offshore, Egypt has other plans, aiming “to transform itself into an export hub” for other gas-producing countries in the eastern Mediterranean, according to the Financial Times. That means Cyprus and Israel.
Last month’s deal with Cyprus was an initial step in that direction. “Egypt already has a large gas infrastructure, so it represents an exit for gas from Cyprus and Israel,” Mohamed Shoeib, a former head of Egypt’s state-owned natural gas company, EGAS, told the FT. Liquefied natural gas facilities that have been idle amid the halt in Egyptian exports can, the government hopes, be repurposed. The promise of the Egyptian energy market has attracted multibillion-dollar development deals with Eni and BP.
Israel is watching Egypt closely and may be trying to emulate its neighbor. It has offered drilling leases in its territorial waters for the first time, after four years of stalling over how to develop and regulate its newfound gas fields. “Although the regulatory issues are largely resolved, Israel may get a chilly investment reception, given the weakness in the energy markets, the country’s political risk and the general uncertainty in the region,” The New York Times warned earlier this month. Gas prices have tumbled, limiting companies’ budgets for new projects. And the largest oil companies, the Times noted, may be wary of investing in Israel given the business they already have in many Arab countries that dominate the region’s natural gas market, especially Qatar, the world’s largest exporter of liquefied natural gas.
“A lot of the talk is pie in the sky,” Michael Leigh, a senior fellow at the German Marshall Fund in the United States, told Reuters in June about the various dreams and schemes for better ties and trade through Mediterranean gas. Tense relations can always get in the way, and the rosy predictions for lucrative gas deals must contend with the reality of political instability throughout the eastern Mediterranean. And what about the risk of new rivalries, if deals fall apart and progress is slow on getting the gas flowing?
Frederick Deknatel is the senior editor of World Politics Review.
Source: http://www.worldpoliticsreview.com/trend-lines/19943/gas-finds-in-egypt-israel-and-cyprus-redraw-the-mediterranean-energy-map
