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Legal, Political and Energy Disputes in the Eastern Mediterranean
INSS, Washington DC, September 2013
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Summary
• East Mediterranean gas discovered to date ~1000 BCM
• Moderately significant in EU (444 BCM in 2012), global context
• Very significant in regional context
• Regional markets can absorb some, but not all, gas discovered
• Other regional and international competition for markets
• Complex, disputed borders in region mostly not delineated
• Cross-border fields less important than obstacles to export
• Choice of export routes is governed by
• Politics
• But also by technical and commercial realities
• The best routes are not the most feasible, and vice versa
• Gas is an ambiguous gift – can:
• Exacerbate conflict
• Encourage rivals to cooperate
• Foster badly-needed regional economic growth
• Also potential for oil…
• Do we take a narrow definition of energy security – or an expansive one?
Resources
Regional Resource Potential
BCM Discovered to date 2010 gas demand
Demand 2013-30
Israel 978 4.8 229
Palestinian territories 40 1.1 26
Cyprus 142-227 1.5 35
Lebanon 0 (1059 potential) 3.6 84
Syria 241 16.2 317
Jordan 6 3.2 109
Egypt 2180 53.1 1404
Total 3672 (4731) 83.5 2204
• Gas demand assumes conversion of all oil-fired power to natural gas
• USGS estimates 122 Tcf (3544 BCM) recoverable gas and 1.7 billion bbl oil
from the Levant Basin
• May be conservative as pre-dates Leviathan & Aphrodite
• Abundant resources for domestic/regional markets + export Sources: Manaar research (Jordan, Egypt); Wood Mackenzie; company reports
Exploration and gas activities
Israel/ PA Lebanon Syria Cyprus
1993 Seismic acquisition
1999 Seismic acquisition
2000 Gaza Marine & Mari-B discoveries 2D seismic survey of EEZ
2003 RoC demarcates offshore border with Egypt
2004 Mari-B starts production
2005 Seismic acquisition
2006 Construction of Egypt pipeline
2007 Demarcates offshore border with Cyprus
1st offshore bid round – no awards
RoC 1st bid round – Block 12 awarded
2008 Start of Egypt gas imports
2009 Tamar & Dalit discoveries Report on EEZ endorsed
2010 Leviathan discovery Lebanon oil law passed RoC demarcates offshore border with Israel
2011 2nd offshore bid round planned
Aphrodite discovered; TNRC-Turkey border delineated
2012 Cancellation of Egypt gas imports; Shimshon discovery
First bid round planned Civil war RoC 2nd bid round
2013 Karish discovery First bid round delayed Aphrodite appraisal; Egypt to annul border?
Lebanon and Syria offshore prospective for gas (and oil?)
• Seismic data shows potential for both gas and oil offshore Syria and
Lebanon (Bowman 2011; PGS 2012)
Borders
Regional setting
Republic of Cyprus’s borders
Turkish Republic Northern Cyprus (TRNC)-Turkey border
Turkish view on Turkey/Egypt delimitation
Overlap of Turkey/RoC claims
Blocks awarded by RoC and TRNC
Aphrodite
Turkey and TRNC licences granted to TPAO
Border Demarcation
• June 2010: Nabih Berri, speaker of the Lebanese parliament said Israel’s gas wells encroached on Lebanon’s economic zone • January 2011 (shortly after Leviathan discovery): Lebanese Foreign Minister Ali Shami asked the UN to protect Lebanon’s territorial rights • July 2011: Hezbollah leader Hassan Nasrallah declares Israel would not be allowed to ‘steal’ Lebanon’s resources • Israel’s Minister of National Infrastructure Uzi Landau responded that the discoveries were entirely within Israel’s Exclusive Economic Zone • UN spokesman said the mandate of the UN Interim Force in Lebanon/SCR1701 did not include delineating the maritime border
Karish
Border Demarcation
• Tamar and Leviathan do not cross into disputed/Lebanese waters • Karish may • Aphrodite probably crosses into Israeli waters • Borders also an internal Lebanese political talking-point • Cross-border fields can be handled by unitisation or JDAs
The forgotten player? Egypt
Regional gas markets and export routes
Growing Middle East Gas Imports 1990-2010
Source: U.S. Energy Information Administration , International Energy Statistics
• Little intra-regional gas trade other than Dolphin (Qatar UAE/Oman) and Arab
Gas Pipeline (Egypt Jordan, Israel, Syria, Lebanon). Why?
• Regional political rivalries and relations
• Security of supply issues
• Pricing expectations for pipelined gas
• Nevertheless, the economic dynamics should drive more intra-regional trade
• Gas shortages in some countries; high oil prices
• Gas surpluses in Iraq, Eastern Mediterranean offshore
0
200
400
600
800
1000
1200
BC
F
United Arab Emirates
Syria
Oman
Kuwait
Jordan
Israel
Iran
Turkey’s Vital East-West Role
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South Stream
Blue Stream
TAP SCP
Existing Gas Pipeline Planned Gas Pipeline
TANAP
Iran
Russian Gas -West
Source: Manaar; European Rim Policy and Investment Council (ERPIC)
Iraq / KRG
Nabucco
Cyprus-Turkey
Israel-Turkey
Turkish market large & gives access to EU: 2020 figures
21 Source: Manaar; European Rim Policy and Investment Council (ERPIC)
Domestic demand 66
BCM
Export options
Pro Con
Israel
LNG • One-country control • Avoids borders
• Land use? Probably needs to be floating • Expensive; market glut (?) • Issues at Eilat (land, security, export route)
Regional pipelines (PA, Jordan, Egypt)
• Fast, low-cost • Builds regional relations
• Political opposition • Sabotage • Markets limited; competitors
Pipeline to Turkey • Large, liquid market • Low cost • Repairs relations
• Political disputes • Has to transit Cypriot territory
Cyprus
LNG • One-country control • Avoids borders
• Needs additional volumes to be economic • Expensive; market glut (?)
Pipeline to Turkey • Large, liquid market • Low cost • Political solution
• Needs (interim?) solution to Cyprus dispute
Pipeline to Greece • Political compatibility • Very expensive • Border disputes (avoiding Turkey lengthens
route)
Political implications
Israel
• Cannot sell or transit gas to Syria or Lebanon without a dramatic political realignment
• Israeli gas supply to the Palestinian territories, Jordan and maybe Egypt would further
increase its political and economic influence there
Cyprus
• Could sell gas to Lebanon (and Syria), and cooperate with Israel but (currently) not
Turkey
• LNG a likely fall-back
Lebanon
• Major need for gas given debt load, power shortages, oil dependence and Israeli
successes
• However political deadlock, corruption and spill-over from Syria likely to slow progress
• But best-placed geographically/politically for exports
Turkey
• Transit role is potentially key, but hampered by Syrian uprising, Cyprus dispute and
cold relations with Iraq
• Needs (interim?) deal with RoC to receive Cypriot or Israeli gas
Political implications – other players
Syria
• Civil war will prevent any progress on gas exploration or transit
Iraq
• Major, low-cost potential supplier to the Mashreq countries, and could compete with
Egypt and Israel to supply Jordan
• But needs policy decision – has not awoken to reality of East Mediterranean
competition, and its potential role
Egypt
• Influence waning due to diminishing availability of gas for export, and cut-off of
supplies to Israel
• Cut-off of Israel exports is extremely popular in Egypt, but Egyptian public (and
expert) opinion has not awoken to the fact this was only a short-term setback for
Israel
• May even import Israeli gas (or toll it through LNG)
Conclusions
• Gas discussions hostage to wider political issues
• Cyprus division
• Arab-Israeli peace
• Egypt-Israel relations
• Turkey-Israel relations
• Syrian conflict & Lebanese politics
• But political debates on gas easily forget technical & commercial realities
• Competition for regional markets
• LNG/EU gas windows
• Need for LNG sites
• Pricing; domestic vs export markets
• Expense of subsea pipelines
• Do we take a narrow definition of energy security – or an expansive one?
• Narrow definition favours single-country or bilateral solutions (LNG, domestic
use)
• Wide definition favours regional interconnections, multilateral deals (maybe
interim), shared facilities, export pipelines – and regional economic growth
Contact Details
Robin Mills,
Head of Consulting,
Manaar Energy Consulting,
Dubai, United Arab Emirates
+971 4 326 6300
www.manaarco.com
Key facts: Israel
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• Mari-B field sole source of domestic gas
• Noa North field under development despite small reserve
• Gas imports from Egypt suffered repeated sabotage and cancelled in April – short term shortages and higher electricity costs
• Development of Tamar gas field (255 BCM) for domestic use targeted for late 2013
• Discovery of Leviathan field in 2010 (453 BCM)
• Development expected to focus on LNG export.
• Delimitation Agreement with Cyprus.
• In dispute with Lebanon over maritime border delineation
• More exploration on the way (and oil)
• More gas consumption (replacement of oil/coal) Source: CIA Fact book, BP Statistical Review.
Natural Gas
Proved Reserves 25 TCF/708 BCM
BCM
Production 1.55
Consumption 3.25
Exports 0.0
Imports 1.7
Crude Oil
Proved Reserves 1.9 million Barrels
Barrels/Day
Production 4 029
Consumption 238 000
Exports 86 000
Imports 282 200
Key facts: Palestinian Territories
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• Gaza Marine offshore field: Reserves 1.4 TCF (39 BCM) as of 2002. No known gas resources in the West Bank
• BG Group signed 25-Year Exploration and Development Agreement with Palestinian Authority in November 1999
• Israel insisted that natural gas production be piped through Ashkelon to Gaza Strip
• BG Group broke off negotiations with Israeli government
• No further development
• Power demand • Gaza 350 MW; current generating capacity 120 MW. Requires 0.1-0.33 BCM/year • West Bank 885 MW; current generating capacity 62.5 MW. Requires 0.06-0.8
BCM/year
Key facts: Lebanon
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• Imports all its hydrocarbons
• Passed Hydrocarbon Law in 2010
• Petroleum Administration should have been formed before end-2011 but still in progress
• Plans first Licensing Round in 1Q 2012.
• Has signed Delimitation Agreement with Cyprus, not ratified.
• Difficult political situation exacerbated by Syrian crisis
• Maritime border with Israel not agreed
Source: CIA Factbook, BP Statistical Review.
Natural Gas
Proved Reserves 0
BCM
Production 0
Consumption 0
Exports 0
Imports 0
Crude Oil
Proved Reserves 0.0
Barrels/Day
Production 0
Consumption 106 000
Exports 0
Imports 78 760
Key facts: Cyprus
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• First Licensing Round in February
2007 – Block 12 awarded to Noble
• Aphrodite discovery ~7 Tcf (198 BCM)
• EU Member Cyprus has received
international support for offshore exploration.
• Exploration activity disputed by Turkey, described by Ankara as ‘illegal’
• Second Licensing Round 1Q 2012.
• Possible LNG Exports
Source: CIA Factbook, BP Statistical Review.
Natural Gas
Proved Reserves ~200 BCM (?)
Bn Cu Ms
Production 0.0
Consumption 0.0
Exports 0.0
Imports 0.0
Crude Oil
Proved Reserves 0
Barrels/Day
Production 0
Consumption 61 000
Exports 0
Imports 61 000
Key facts: Egypt
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• Gas policy since early 1990s was highly successful in expanding production, domestic use and exports
• LNG plants at Damietta (5 Mtpa), Idku
(7.2 Mtpa), but running under capacity • Exports gas through Arab Gas Pipeline
(AGP) to Jordan, Syria, Lebanon, with original plans to extend to Turkey
• Was exporting gas to Israel through Al-
Arish – Ashkelon offshore pipeline until deal cancelled in April (corruption, pricing and political opposition)
• Growing domestic demand – impact on
future ability to export gas. Current political situation prevents strong action on gas consumption or pricing
• Indeed, Egypt may become a gas
importer (from Israel?)
• Maritime border with Cyprus demarcated
Natural Gas
Proved Reserves 78 TCF/2.2 TCM BCM
Production 62.69 Consumption 44.37 Exports 18.32 Pipeline 5.46 LNG 9.71 Imports 0.00
Crude Oil Proved Reserves 4.4 billion barrels
Barrels/Day Production 662 000 Consumption 740 000 Exports 163 000 Imports 177 000
Source: CIA Fact book, BP Statistical Review.
Key facts: Syria
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• Hydrocarbon production significantly
reduced due to sanctions, sabotage and conflict
• Current crude oil production around 270 000 barrels/day
• Exports of 150 000 barrels/day of Souedie
(heavy) crude curtailed
• EU sanctions imposed against Syrian crude imports in September. Sanctions imposed by Arab League
• Increasing need for gas imports, partly met by Arab Gas Pipeline prior to curtailments
• Failed bid round in 2007 (one bid, not accepted)
• Offshore Licensing Round planned for 2011 will clearly be indefinitely delayed
Source: CIA Fact book, BP Statistical Review.
Natural Gas
Proved Reserves 240.7 BCM
Bn Cu Ms
Production 6.19
Consumption 7.1
Exports 0.0
Imports 0.91
Crude Oil
Proved Reserves 2.5 Billion Barrels
Barrels/Day
Production 401 000
Consumption 292 000
Exports 263 000
Imports 55, 280