How the Eastern Mediterranean Could Supply Natural Gas to Europe

The Wall Street Journal – The Experts
Apr 3, 2015
By Dr. Ariel Cohen

ARIEL COHEN: As Europe is seeking sources of natural gas to serve as an alternative for the politically sensitive Gazprom supply, a massive gas source presents itself for exploration and production. Whether this will happen or not depends on Turkey, a potential transit country.

The development of the Leviathan field offshore Israel and of the Aphrodite natural-gas field offshore Cyprus is a potential game-changer. If the East Med gas pipeline is built via Turkey, offshore Israel and Cyprus may become serious gas suppliers for Europe.

Until recently, the lack of natural resources effectively excluded the two countries from being big players. Leviathan boasts recoverable reserves of 17 trillion cubic feet of gas and 1.6 billion barrels of oil equivalent. The Cypriot offshore Aphrodite field boasts estimated reserves of 7 trillion cubic feet.

The European Union has publicly recognized that to ensure energy security and reach its climate-change goals, it must engage with its neighbors to establish diversity of energy sources and supply routes. The Eastern Mediterranean should play a vital role in reaching these goals by supplying a portion of the additional 100 bcm of natural gas a year that will be needed in Europe the next 15 years.

The energy cooperation between Cyprus and Israel is a crucial piece of the Eastern Med puzzle. The two countries will require the creation of a gas pipeline to Europe and of an LNG terminal. The proposed East Med pipeline would bring gas from offshore Israel and Cyprus to the EU through Greece or Turkey. So far, Turkey is blocking a shorter and cheaper pipeline through occupied Northern Cyprus and Turkey proper, which would be the optimal solution.

Cyprus is also conducting talks with Jordan and Egypt to purchase its gas. Israel signed deals with both Amman and Cair—from the Tamar field owned by the Texas-based Noble Energy and the Delek Group of Israel, to the Dolphinus Group, and from Leviathan to the British Gas facilities in Egypt. The Tel Aviv Oil & Gas Index, buoyed by the expectations of successful conclusion of gas deals, jumped more than 7% on the news of the Netanyahu victory last week.

The offshore East Med development would bring strategic and economic benefits, including budget revenue, hosting international companies, job creation, as well as developing the needed infrastructure and expertise.

Eastern Med projects may also be helpful in terms of resolving long lasting tensions between Cyprus and Turkey and between Israel and the Palestinians. If the parties build a natural gas pipeline from Israel and Cyprus fields to Turkey, Ankara would receive massive gas transit tariffs. However, the win-win project would not be realized without President Recep Tayyip Erdogan’s blessing, and such cooperation is not likely without close U.S. and EU engagement with Ankara.

Ariel Cohen (@Dr_Ariel_Cohen) is director of the Center for Energy Natural Resources and Geopolitics at the Institute for the Analysis of Global Security and principal at International Market Analysis, a political risk advisory firm in Washington, D.C.