Ever since the discovery of giant offshore gas-fields Tamar, Leviathan and Zohr, the East Med has been the focus of attention by the international oil companies. But while Egypt has been forging ahead with developing its gas-fields and liberalizing its gas sector, Israel and Cyprus have been struggling to secure export markets. However, given the increasing appetite of global markets for LNG, is this about to change? Will local challenges and competitive global gas prices be overcome? And is the promising gas potential of the East Med about to be unlocked?
In Israel Tamar has proved to be a great success, having secured a captive domestic market. But the same cannot be said for Leviathan. Noble Energy and its partners are in the process of developing phase 1A of the project, with the first-gas expected end of 2019, destined for the Israeli domestic market. This is underpinned to by a gas sales agreement secured earlier in the year to supply 45 bcm gas to Jordan’s NEPCO over 15-years, but more buyers are needed. With 625 bcm of gas, Leviathan needs to secure export markets, but this is proving to be a major challenge. Export options such as the EastMed gas pipeline to Europe, exports to Turkey and more recently to Egypt are all proving to be challenging commercially and often politically. It is this lack of export routes that have been thwarting attempts by Israel to launch new, successful, offshore licensing rounds.
Lebanon next door is progressing with exploration, having succeeded to lease two blocks to a consortium of Total, ENI and Novatek, but under a cloud due to EEZ-boundary disputes with Israel.
Having discovered the Aphrodite gas-field in 2011, and the 170-225 bcm Calypso earlier in the year, Cyprus is still beset with challenges due to the unresolved Cyprus-problem and threats by Turkey. Aggressive naval intervention earlier in the year by Turkey stopped ENI from drilling in block 3. In the meanwhile, talks for possible sales of gas from Aphrodite to Shell’s Idku liquefaction plant in Egypt are progressing, but there are still serious commercial issues to be resolved. However, all eyes are on ExxonMobil’s planned drilling later in the year in the very promising block 10, only a few kilometres from Zohr. In addition, much hangs on discussions at the UN in New York later in September on a last-ditch attempt to find a solution to Cyprus-problem this year.
Egypt, though, is a different ball-game. The discovery and development of Zohr and a number of other smaller gas-fields are proceeding at a fast-pace, turning Egypt from an importer of LNG to self-sufficiency this year and an exporter early next year. With exploration in full swing, Egypt is also launching new licensing rounds in the Red Sea and the Mediterranean.
Having secured a loan from IMF, Egypt is in the process of turning its economy around and liberalizing its energy and gas sectors. With the support of the EU, it aspires to become the regional gas-hub, keen to act as a conduit of Israeli and Cypriot gas exports, should these materialize.
Given its burgeoning demand for energy to support its ever-growing population, the country has also embarked on a massive wind and solar power development programme, attracting considerable international investment.
However, the East Med limelight now is on the drilling later this year, with great anticipation that ExxonMobil’s very promising block 10 offshore Cyprus and ENI’s Noor prospect offshore Egypt may lead to significant new gas discoveries. Such discoveries could completely alter East Med gas development plans and unlock its export potential.
Would you like to hear more from Mr Ellinas? Book your place for 2018’s EAGC 7-9 November in Berlin to hear his discussion on ‘East Mediterranean gas playing field: Who are the movers and shakers?’ Register your delegate place today!
Image courtesy of EGAS