“The eastern Mediterranean has become prolific in natural gas,” an executive at E-C Natural Hydrocarbons told Third Bridge Forum. There have been a number of major discoveries in the region since 2000, including in Cyprus, Israel, Egypt, Turkey and Greece, the expert said. In Cyprus there have been three discoveries; Aphrodite with 120-130bn cubic metres of natural gas, Glafcos with between 140-230bn cubic metres, and Calypso, the amount of which is still unclear. In Turkey, just over 400bn cubic metres have been discovered in the Black Sea, we were told, while in Egypt, gas has also been found in the Zohr field.
However, the specialist told us that Israel is “where things are happening”. Two functioning gas fields – Tamar and Leviathan – are being used to power approximately 70% of Israel’s electricity. In the Interview, they told us there are opportunities to export excess gas from these areas to Egypt – an “aspiring” energy hub – and then on to Europe as liquified natural gas (LNG).
Israel was also highlighted as an important natural gas region by a former senior advisor at Noble Energy. They told us energy company Energean is in the “best position” compared to other oil and gas majors to build a portfolio in the country. The expert said Energean faces little competition in the region and has good local knowledge. Importantly, it also has the support of the Israeli government to drill, with officials “very keen” to ensure Chevron did not monopolise the region after its takeover of Noble Energy in 2020. It has already made discoveries in gas fields at Tanin, Athena and Karish. They told us there are “multiple undrilled prospects” in Tanin that could contain a few hundred billion cubic feet of natural gas. The specialist believes the success of finding gas there was “90% plus”. The expert estimated the cost of drilling in these areas could be approximately USD 60m, based on the cost to drill in the region four years ago. The former advisor called the Karish gas field a “complex animal” where drilling has only become commercially viable since the recent rise in gas prices. Though potentially difficult to drill, our expert said it could contain “some absolute nuggets” of natural gas.
Energean has also been active in Egypt, where the expert said the government is “encouraging” international companies to invest. The former advisor believes Energean has greater opportunities to expand in Egypt than Israel but that it is a riskier market to invest in given its maturity. Egypt is also a “thermal hydrocarbon-type province” whereas Israel and Cyprus are biogenic gas and therefore the gas in this area needs to be treated differently, the expert said. However, the former advisor also said it could be lucrative. “If a significant amount of gas could be discovered… [Energean] would be in a very good position to either build new LNG plants or to build on existing ones”.
The amount of gas available in the eastern Mediterranean could be one of the answers to Europe’s natural gas emergency. But it also faces a number of significant challenges getting these projects up and running.
Firstly, our experts agree Europe’s need for natural gas is relatively short term. The bloc is aiming to cut all natural gas consumption by 30% by 2030 and 80% by at least 2050, making it less enticing for oil and gas majors to invest. “[Majors] are looking at short-term, low-investment possibilities to get as much as possible and not go beyond. One of the reasons is because the messages from Europe, from the US, about the longer-term future of oil and gas, are confusing”, the executive at E-C Natural Hydrocarbons said.
A former VP at BP we interviewed agreed, questioning whether the eastern Mediterranean was a viable option given how long it would take to extract gas from the region. BP’s commitments in Azerbaijan also make it unlikely to invest further in the area, they said, despite BP having a strong relationship in Egypt with energy group Eni and the fact that there could be significant amounts of gas under the Nile Delta. The President of Egypt, Abdel Fattah Saeed Hussein Khalil el-Sisi, and his energy ministers have also made it clear that renewables are its future, not hydrocarbons. “Egypt is an incredibly windy, sunny place, so I think [renewables] will be part of the opportunity set, going forward”, the former VP said.
Drilling in these areas is also tightly controlled by national governments, according to the former advisor at Noble. For example, the Egyptian and Israeli governments retain tight control over gas exports – the latter of which has an influential local lobby that has successfully kept most of the resource inside the country. The former advisor said this is one of the reasons majors stay away from both countries, even though they also said Chevron and BP have established presences in these areas.
A number of countries in the region are set to have elections either this year or next, potentially upholding future cross-country energy decisions. The eastern Mediterranean is also fraught with geo-political tension, particularly between Greece and Turkey over “the Cyprus problem”. We heard that exporting gas from Israel would require a pipeline to Turkey via Cyprus, something the executive at E-C Natural Hydrocarbons does not think Cyprus would agree to. “Even if Israel decides to export any gas to Turkey, it still has to go through Cyprus Exclusive Economic Zone. Is Cyprus going to agree with that? I’m not so sure, so it really presents problems”.
Such political turmoil means it would take “increased momentum” to realise an eastern Mediterranean pipeline, according to the former advisor at Noble. The “extraordinary expense” and potential 7-8 year construction timeline also makes it “a huge risk” for anyone who invests in it, they said. Rather, the former advisor believes further investment in LNG facilities in the region that could export gas to Europe now would be more likely. “They could do that a lot quicker and get it to market a lot quicker and help resolve the problems that countries are having now, that they might not have in five years’ time”.
Whatever decision is made, Europe has agreed to start cutting its reliance on Russian gas from next month. But our experts are sceptical that natural gas from the east Mediterranean can plug the gap anytime soon.
* Q1 2022: the future of energy
* Reuters
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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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