Natural gas exploration in Eastern Mediterranean increases political risk

September 27, 2011 by Ioannis Michaletos

The potential existence of a considerable amount of energy offshore Israel - gas that is neither Eurasian nor Middle Eastern - has direct geopolitical implications.

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Noble Energy has finalized details of its offshore platform in the Sea Block 12 off the Island of Cyprus in order to begin its research drills for the future exploration of presumed considerable amounts of natural gas.

At the same time, the Turkish government is warning against these preparations and has already sent warships in the wider sea region as a warning signal against the drills, prompting Israel and Cyprus to respond via increased alertness of their naval and air forces, according to all reliable sources in the region.

Cyprus started to enquire around the prospects of hydrocarbon exploration in its exclusive economic Zone (EEZ) back in late 2006.

Between 2008 and 2009 it managed to cut deals with Israel, Egypt and Lebanon in order to clarify its excusive economic zone and thereafter proceeded into an international round for potential investors where Houston-based Noble energy was selected.

The same company between 2007-2010 made research drills in the Israeli EEZ and has made known the Leviathan natural gas reserve estimated containing 450 billion cbm.

The potential existence of such a considerable amount of energy offshore Israel has direct geopolitical implications. Tel Aviv may well become, for the first time in its history, totally independent in energy security terms from oil imports while at the same time, create its own national energy industry, thus changing to an extent the balance of powers in the region to its favour.

Moreover, according to previous geophysical and seismic surveys in the Cypriot Sea Block 12 by a French company, the assumed reserves are estimated at around 270-300 Billion cbm.

Greek geologists from the national centre for geological studies in Athens have presented figures that the total reserves in both the Cypriot and the Israeli EEZ's may well exceed 850 billion cbm. In the mid-term, this could supply the international market with approximately 30-35 billion cbm per annum, thereby fully satisfying the needs of both Cyprus and Israel (4 billion cbm), with the rest directed mostly to European markets.

The Athens-based institute for energy in Southeastern Europe claims in recent analyses that the most efficient way to transport is through the construction of deep-water pipelines from the prospective natural gas platforms in the Eastern Mediterranean onto Cyprus, where liquefaction infrastructure can be constructed and LNG vessels could be shipped to the international markets.

For an LNG terminal to be established, which would cover the markets long-term needs, a 10 billion Euro investment is needed. This includes the cost of the pipelines.

The above estimations point out that the potential investments are considerable compared to the size of the island of just 700,000 people and 9,300 Sq. Km in size. At the same time, they can potentially diversify the EU's import share that is mainly dependent on Russia and Algeria for its natural gas consumption.

Moreover, the economic and consequently geopolitical alignment of Israel and Cyprus (with Greece as the latter's guarantee power) could potentially alter the long-standing balance of powers in the Eastern Mediterranean, which has already witnessed dramatic changes due to the Arab Spring revolutions.

At present, all available information demonstrates that Turkey stands to lose its own position as a future primal energy hub in the region. It is also likely that Turkey will create obstacles, though the probability of direct military action seems low due to the inability of the Turkish Navy to project its force close to the Israeli EEZ, as a result of the latter’s air supremacy.

The complexity of the situation could raise political and economic risk in the region considerably. Particularly if one adds the trial by the Palestinian Authority to proclaim its independence in the forthcoming UN general assembly, the ongoing civil conflict in Syria, and the political instability in Egypt.

Last but not least, the potential exploration of the Cypriot and Israeli offshore natural gas reserves changes considerably the extent of the EU’s Southern corridor policy. It presents another source of gas that is neither Eurasian nor Middle Eastern, a development with multiple consequences for a whole range of political and geostrategic issues in the region between the Balkans and the Caspian Sea.

Already companies such as French Total and Russian Gazprom have unofficially reached out to the Cypriot government in order to take part in future hydrocarbons research in other sea blocks, according to reliable information streaming from the Cyprus ministry of energy.

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Ioannis Michaletos
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