I noted earlier Richard
Heinberg’s dim forecasts for expanded fracking in Europe, once the expected
venue of a geopolitical revolution sparked by energy. Similar hopes have been
held out for the Near East. In 2012, Walter
Russell Mead heralded the emergence of Israel as an energy superpower, “a
tiny nation whose total energy reserves some experts now think could rival or
even surpass the fabled oil wealth of Saudi Arabia.” As these extracts from the
Economist show, Israel’s political
isolation constitutes a serious obstacle to the exploitation of these reserves. The regional situation
is unbelievably tangled, but it is likely, argues the Economist, that the governments of the Levant
are fooling their people [and probably deluding themselves] with false promises
of an offshore gas bonanza.
The sceptics say that the main
brake is a lack of regional co-operation rather than a shortage of oil and gas.
The Americans’ official Geological Survey estimates that from Gaza’s coast to
southern Turkey the eastern Mediterranean holds 122 trillion cubic feet of gas,
comparable to the reserves of Iraq. But Lebanon’s caretaker government lacks
the authority to pass the legislation needed to persuade foreign oil companies
to start drilling; a heralded auction is again likely to be delayed. America’s
effort to mediate over a disputed maritime boundary between Lebanon and Israel
is stalling progress. The civil war in Syria is scaring away big oil companies.
And drilling off the Lebanese coast has yet to begin.
It has done so off Cyprus, but
estimates of the amount of gas and oil to be found there have been inflated,
too. Delek Drilling and Avner Oil, two Israeli firms involved in exploration,
say that Aphrodite, Cyprus’s only proven gasfield, has reserves of just 4.1
trillion cubic feet—barely enough to meet long-term local demand.
Oil companies, including Italy’s
Eni and France’s Total, may find more gas there. If not, Cyprus’s LNG venture
will depend on getting it from elsewhere, perhaps from Israel’s Leviathan
field. In any case, Turkey and Cyprus both claim some of the same stretches of
water. The Israelis, for their part, have prevented the Palestinians from
developing Gaza Marine, a field off the coast of Gaza where BG (formerly
British Gas) found gas a decade ago.
Israel, alone, is romping along. It
has verified finds of 35 trillion cubic feet. Noble, an American company that
has so far dominated Israel’s production, says that gas from its Tamar field,
which began flowing this year, already supplies 45% of the country’s
electricity. But development of the much larger Leviathan field, farther west,
is slow. Fearing an outcry over the sale of public assets, Israeli ministers
have delayed the timetable.
There are other obstacles. Asian
buyers, who tend to pay the highest prices, are reluctant for security reasons
to ship Israeli gas through the Suez Canal. Turkey, whose energy needs are
soaring, might have been an attractive export market for Israel. Construction
of a pipeline on the seabed between Turkey and Israel could prove more
profitable than an LNG plant, because upfront costs are lower and Turkish gas
prices quite high, says Robin Mills, head of consulting at Manaar Energy, an
advisory firm in Dubai. But such a pipeline might have to pass through
officially recognised Greek Cyprus and the Turkish-ruled north of the island,
so an agreement with both would be needed. That will be tricky. An alternative
route, under Syrian and Lebanese waters, would be trickier still.
In any case, Israel is loth to
strike an export deal with Turkey at a time when that country’s foreign policy
has become unpredictable and its prickly prime minister, Recep Tayyip Erdogan,
could turn off the tap whenever he feels piqued. An Israel-Cyprus deal could
make matters worse. Egypt’s decision to discard a Mubarak-era agreement to
supply 40% of Israel’s gas serves as a warning against doing business amid
unresolved conflicts. “Without peace with the Palestinians, we can’t sell our
gas to Egypt, Jordan, Turkey and—who knows?—maybe even to the Europeans,” says
an Israeli former energy minister, Josef Paritzky.
Tangled in red tape and regional
disputes, even oil companies in Israel may flag. Woodside Petroleum, an
Australian firm with LNG expertise, is still pondering an ambitious plan to
build a floating LNG platform. Noble lacks the capacity to go it alone. Few
developers will invest without secure long-term contracts. And buyers in Asia,
the best market, are banking on getting an alternative deluge of gas from new
finds in the United States. Without exports, regional prospects are less sunny.
Ploughing billions of dollars into platforms, rigs, offshore pipelines or
costly LNG plants is feasible only if drillers are confident of shipping gas to
foreign markets.
* * *
“Israel’s
and Palestine’s Gas and Oil: Too Optimistic?” The Economist, January 25, 2014.
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