The Eastern Mediterranean holds great promise for hydrocarbon riches, but there are considerable problems concerning just how that promise might be delivered. It is primarily a gas-rich area, and gas is usually much more complicated to develop than oil, not least because the costs of getting a unit of energy to market in the form of gas are roughly twice those for oil.
Moreover, the Eastern Mediterranean poses a host of trans-boundary problems in terms of getting its output to market, exacerbated by the different stages of development in the region. So, while Israel has already discovered major commercial quantities of gas, Cyprus is only just at the beginning of what it hopes will be a new gas era; it has found some gas, but not enough, as yet, to secure financing for its plans to build a national, and perhaps regional, facility to produce liquefied natural gas (LNG).
The issues concerning practical development of Eastern Mediterranean hydrocarbons essentially comprises three elements: the resource base, the prospective timing for development of these resources, and the various destinations to which these resources might be sent. This last issue, of course, embraces the complex matter of which markets should be served, as well as the transportation systems required to reach those markets.
In general, the resource base can be considered as reasonably well established already, with considerable prospects for the discovery of further hydrocarbons with Cyprus and, perhaps, Lebanon, joining Israel as owners of commercially viable offshore reservoirs. But while Israel already has one major field, Tamar, in production, and an even bigger field, Leviathan, in preparation for full field development, Cyprus has to face the problem that its sole discovery to date, Aphrodite, is currently insufficient to justify a major export-oriented project, while Lebanon has yet to even implement its current offshore block award program.
As for the final element, the immediate issue is commonly viewed in terms of whether Israeli gas might be piped to Turkey via a subsea pipeline across or around Cyprus, or whether it might opt for an LNG facility. If it were to choose LNG, then this raises a host of further questions concerning just where such a facility might be located: onshore in Israel, onshore in Cyprus, or perhaps a floating facility in the Mediterranean itself.
Nor are these the only possibilities. There are those who favor a pipeline to Greece, and there are proposals for a radical new form of export transportation using compressed natural gas. In sum, both the pace and methods of development of this new hydrocarbons province remain uncertain; what is certain is that commercial imperatives will ensure that the energy riches of the eastern Mediterranean will be developed. At present there is a window of opportunity which grants both the companies involved in actual field development and the governments seeking to develop national energy strategies a window of opportunity to decide just how far they wish to go in working cooperatively to develop the region’s resources. In commercial terms, they are helped by the fact that some of the leading companies involved in developing Israel’s offshore resources are also involved in the sole Cyprus discovery to date; in political terms, there is also the intriguing prospect that an approach to kooperative development of export routes might also contribute to movement to resolve the decades-old Cyprus dispute.
The Resource Base
As of late 2013, the Eastern Mediterranean’s proven resource base consisted of the following main fields:
- Tamar, operated by Noble Energy with Delek and Avner. Reserves: 275 billion cubic meters (bcm). Field production started in March 2013, with a major offshore platform in place. By July 2013 Tamar was producing at a rate of 636 million cubic feet per day (mcf/d), the equivalent of 18 million cubic meters per day (bcm/d), and accounting for 94 percent of Israeli gas production.
- Leviathan, operated by Noble Energy with Delek and Avner. Reserves: 481– 566 bcm. Planning is in progress to assess how best to develop the field. The type—and cost—of the development will depend on the export strategy adopted. The decision on whether Australia’s Woodside will proceed with its option to take a 30 percent stake in the venture is specifically linked to agreement on export strategy.
- Tanin, Mari-B, Noa, Dalit, Dolphin, Shimshon. Total reserves: 114–127 bcm. Minor fields which may be developed as adjuncts to Tamar and Leviathan. In July 2013, the official best estimate for recoverable reserves at Tanin was 592 bcf (16.8 bcm), a fraction of the resource base of either Leviathan or Tamar, but enough to make it Israel’s third biggest gas field (unless eclipsed by Karish).
- Karish, operated by Noble Energy. Discovered in May 2013. Estimated resource base (with further assessments required to translate these into reserves) c. 50 bcm. Its significance is that it lies close to, but does not appear to extend into, either Lebanon’s undisputed exclusive economic zone (EEZ), or the sliver of water in which Israel and Lebanon have overlapping EEZ claims.
Aphrodite, operated by Noble Energy. Reserve base: 102–170 bcm. Planning for development is under way, but is adversely impacted by the downward revision of reserves announced on October 3, 2013.
Gaza Marine, operated by BG. Reserves: c. 28 bcm. Discovered in 2000, but no development so far due to such issues as the Intifada and poor Israeli- Palestinian relations. BG officials visited Israel in September 2013 to assess whether field development might now become possible.
Total proven reserve base, as of November 2013: 1,000–1,206 bcm.
However, additional resources are also likely to be found. In March 2010 the US Geological Survey estimated recoverable gas reserves in the Levant Basin (most of which lies within Israeli and Cypriot national or EEZ waters) at some 3.4 trillion cubic meters of gas. Major efforts are under way to discover further resources. Specific efforts include:
Cyprus: The Cypriot authorities have so far defined thirteen exploration blocks located broadly alongside or near the southern coasts of the island, and thus under clear Republic of Cyprus control, and on the Cypriot side of maritime boundary lines agreed upon by Egypt, Israel, and Lebanon. Major companies involved include Total, Eni, and South Korea’s Kogas. Charles Ellinas, the executive president of the Cyprus National Hydrocarbons Company (KRETYK), said in March 2013 that natural gas resources in the six offshore blocks already awarded could amount to 40 tcf (1.13 tcm), enough to allow for production of up to 30 million tonnes per year of LNG in the future.
Israel: Ongoing exploration. The key issue is the development of Leviathan.
Lebanon: In May 2013, Lebanon launched its first licensing round with fifty-two companies, including such giants as Shell, Total, ExxonMobil, and Chevron, reported to have expressed interest in Lebanese prospects. But lack of a properly constituted government in Beirut, which was under caretaker administration for much of 2013 in the absence of a government able to secure a parliamentary majority, has delayed license awards. There are ten blocks for which licenses are available, and awards, delayed twice already, are currently supposed to be made in January 2014. In May 2013, Lebanese Mineral Resources Minister Gebran Bassil declared that preliminary surveys show reserves of 30 tcf of natural gas in Lebanese waters. But this was based entirely on seismic studies conducted by Norway’s Spectrum and, in the absence of actual drilling, does not constitute a reliable basis for reserve projections.(1)
Palestine: In 2001 BG found the Gaza Marine field, 30 kms off the coast of the Palestinian Territories, with an estimated reserve base of one tcf (about 28 bcm). Initial development plans broke down over the price that Israel would pay for any gas not required by the Palestinian Authority. Renewed talks are currently under way, now that Israel, at least de facto, no longer requires surplus gas from non- Israeli sources.
Turkey (and TRNC): In April 2012, the stateowned Turkish Petroleum began exploratory drilling off the northern coast of Cyprus. This followed a September 2011 agreement between Ankara and the self-proclaimed TRNC concerning continental shelf delimitation, under which the TRNC granted Turkey permission to drill off all the island’s coasts, including southern coastal areas controlled by the Republic of Cyprus. So far, however, Turkish companies have made no attempt to drill in such waters, although Ankara has dispatched its Piri Reis survey vessel into waters off coastal areas controlled by the Republic of Cyprus on various occasions.
Greece: The first data sets for seismic studies covering an arc of offshore Greek EEZ extending from south of Crete to the Ionian Sea were made available in July 2013. No figures for putative reserves have yet been made available, and it may be some months before evaluations can yield even tentative estimates. There does not appear to have been any seismic activity in the areas east of Crete extending toward the Cypriot EEZ.
Syria: Damascus has officially undertaken two bidding rounds for offshore licenses. The first, in 2007, did not result in the award of any blocks. The second, in March 2011, covered 9,038 square kilometers; bids were due by September 2011, but, because of the civil war, the process was not followed up.
Prospective Timelines for Development...
When Noble discovered the Aphrodite field in late 2011, it appeared quite reasonable to contemplate the possible development of the field in conjunction with the Israeli offshore fields, Tamar and Leviathan, being developed by Noble. There was a difference in scale, but there was—and still is—a reasonable prospect that there might well be further discoveries in Block 12, Noble’s Cypriot concession. This encouraged both Cypriot leaders and Noble itself to consider the possible development of an LNG liquefaction complex at Vasilikos on the southern coast of Cyprus to serve Israeli as well as Cypriot fields. To this end, on June 26, 2013, Noble and Delek signed a memorandum of understanding with the Cypriot government to build an LNG facility at Vasilikos.
But the time frames for developing Cypriot and Israeli resources now seem out of sync. Tamar is already under development, and the Israelis, naturally enough, want to see Leviathan developed as quickly as possible. However, on October 3, 2013, the Cypriot government received some very bad news indeed: Noble had revised its previous estimate for the reserve base at Aphrodite, down from a mean of 198 bcm (its original December 2011 assessment) to just 141.5 bcm.(2)
…And their Impact on LNG
This has profound implications for the timing of any liquefaction project at Vasilikos. Senior Cypriot officials have told the author they think that in practice, it is likely to lead to a two-year delay in developing the plant. Before the reserve revision, the Cypriot government was hoping that it would be able to negotiate a framework agreement for the Vasilikos LNG plant by the end of 2013; to complete heads of agreement with the various parties by the end of 2014; to secure a final investment decision in the third quarter of 2015; to start actual construction in 2016; to have gas delivered to Cyprus in the third quarter of 2018; and to have the first LNG export train operational in the third quarter of 2019.
But an LNG project is a complex business. The upfront costs in terms of site purchase, preparation, and infrastructure development, including loading facilities, ensure that the cost of building an initial LNG train is roughly double that of any subsequent train. Since it takes some 7 bcm of gas input to produce 5 mt (million tonnes) of gas output, the Cypriot authorities considered that their initial understanding that Aphrodite possessed 198 bcm was, broadly speaking, sufficient to feed the first train, which they hoped would come on-stream in late 2019, for the standard thirty-year cycle required to secure project financing. (In practice, of course, LNG trains may operate for much longer than this.) They would then rely on further discoveries in Cypriot waters and/ or the provision of gas from Israeli fields to provide input for the all-important second train.
So in reducing the initial available Cypriot resource base to around 140 bcm (and it may be better to use an approximation, as prospective investors will now be looking much harder to see how Noble Energy further refines its Aphrodite figures), Aphrodite’s operator has highlighted just how great is the disparity between what the Cyprus government would like to do and the indigenous resources available for transforming its dreams to reality.
Moreover, it is by no means clear that the Israelis—either in the form of the actual developers of the offshore fields, or as the government—are prepared to commit sufficient gas at this stage to justify the development of Vasilikos on anything like the timetable envisaged by Nicosia. And while it remains important to restate the key point that it is the same group of companies that is developing the major fields on both sides of the Israel–Cyprus EEZ boundary, it is also true that so far, no LNG plant has yet been developed that relies on feedstock from an external supplier; or, more to the point, no provider of gas has yet been willing to see its gas processed into LNG in a foreign country.
At present, it looks as if both the Israeli government and the field developers favor a twin-track approach that would envisage exporting some 8 to 13 bcm/y of gas by pipeline to Turkey, and a further 5 bcm/y processed as LNG at Vasilikos. This concept was discussed privately at a conference on Eastern Mediterranean energy at Paphos in early September, but at this stage, such figures should be considered as indicative of volumes that might be made available, rather than as specific proposals for actual project implementation.
Israeli Volume Available for Export
The availability of Israeli gas for general export is, in the short run, constrained by the Israeli government’s decision in July 2013 to retain some 540 bcm of proven reserves to cover anticipated domestic consumption over the next twenty-five years. This decision owed much to the fact that in 2012, Israel had expected gas to fuel as much as 40 percent of its power supply, only to discover that, as a result of persistent cutoffs in gas supplies from Egypt, there was only enough gas to account for 14 percent of its power generation. With Israeli electricity already close to 70 percent reliance on gas (largely as a result of Tamar coming online), a strong domestic focus is quite understandable.
In addition, there is also the strongly held view in some Israeli governmental circles that, in order to bolster relations with its immediate neighbors (in effect, to ensure a degree of economic dependence on Israel), a portion of Israel’s reserves should be used to provide around 2.5 to 3 bcm/y to regional markets in the Palestinian Territories and Jordan.
However, it should be noted that although Israeli accounts have reported that this meant Israel was seeking to retain more than 60 percent of the gas discovered in its Eastern Mediterranean fields for domestic use, such calculations were based on an assumption that the putative figure of 900 bcm for Israeli reserves used by the government’s Tzemach Committee as the basis for its deliberations was no more than an assumption, albeit a reasonable one as of early to mid-2013. But, unlike Cyprus, and as the Karish discovery further demonstrated, Israeli reserves do show good prospects for continued expansion, while the commercial imperatives for getting an export project up and running will make it hard for Israeli lawmakers to secure legislation that limits the amount of gas that can be exported in any given year.
In general, it is far better to assume that while Israel will retain around 600 bcm for domestic use or supply to its immediate neighbors over a twenty-five-year time frame, this does not carry any automatic connotation that some 24 bcm have to be used at home in any given year, not least because actual current Israeli demand is running at about 7 bcm/y. By the time Israeli demand has risen to the average 21.6 bcm, envisaged by the government in setting its 540 bcm retention figure, actual reserves are likely to have grown sufficiently that there will be then, as now, far more gas potentially available for export than is required to meet domestic requirements, whether in terms of actual consumption or envisaged long-term energy security.
Export Markets and the Way they Might be Reached
Pipelines and the development of LNG facilities constitute the main contemporary systems for large-scale gas exports. The first is generally reckoned to be far more cost-efficient up to distances of around 2,000 nautical miles; the latter generally works better for longer distances(3). But further elements also need to be considered. There is no single global gas market. And Europe—surrounded by gas producers in Russia, the Caspian, the Middle East, North Africa, and now North America—not only has some output in the North Sea, in increasingly interesting frontier areas off Norway, but also constitutes a massive import market that is becoming increasingly competitive.
In contrast, the Asia/Pacific region constitutes an even bigger import market—and one which is likely to grow both rapidly and steadily, as gas consumption increases in contrast to the somewhat hesitant growth prospects for European gas imports, which depend far more on Europe’s declining indigenous gas production than on any anticipated growth in actual gas consumption.
Moreover, if Europe is to be regarded as the destination for Eastern Mediterranean gas, then the obvious initial market is Turkey, since Turkey is the one European country with a steadily increasing demand for gas that can—until or unless the Turks themselves make a major gas discovery in the Black Sea—only be fulfilled by imports. And while there are other prospective suppliers in the region, notably in Azerbaijan and northern Iraq, the proximity of the Eastern Mediterranean fields to Turkey provides an obvious commercial basis for developers to explore, to see just how their gas might be delivered to the most rapidly growing market in the region.
As for the Asia/Pacific markets, precisely because they are so far away from the bulk of their suppliers, by and large they have to be supplied by LNG. And the nature of the LNG trade is such that LNG facilities tend to be developed with firm arrangements already in place for the long-term supply of dedicated volumes of gas to designated customers, according to specific price formulas intended to secure both a return on the high cost of developing the initial LNG liquefaction, shipping, and regasification facilities, and to provide some kind of link to ensure that developers can profit from any subsequent, moregeneral increase in energy prices.
Theoretical Pipeline Options
In trying to reach Turkey by pipeline, prospective East Mediterranean developers will have to resolve a combination of political and boundary problems. The political issues relate to the ongoing Cyprus dispute; the boundary problems, to the fact that there is no direct pipeline route to Turkey from Israel’s offshore EEZ that currently involves passage through waters that are either uncontested, or considered by Israel to be friendly to Israeli interests.
In theory, there are four prospective routes for delivery of gas from Leviathan to Turkey. These are:
- Onshore through Lebanon and Syria. Even in the absence of a civil war in Syria, this is not a realistic prospect for Israeli-sourced gas.
- Offshore through Lebanese and Syrian waters. This entails the same political/ security constraints as above, and can thus be ruled out for the foreseeable future.
- Through waters that constitute the EEZ of Cyprus. This is doable, so long as there is a Cyprus settlement. A variant on this would be through the Cypriot EEZ, then through Cyprus territorial waters and onshore, across the island itself, before heading offshore again for a connection from northern Cyprus to Turkey. Again, this requires the resolution of the Cyprus problem.
- A maritime route to the west of Cyprus. This raises the vexing question: Who possesses the EEZs through which such a line would pass? Turkish opinion asserts that its EEZ shares a common boundary with Egypt’s EEZ; Greek opinion states that its EEZ shares a common boundary with the Cypriot EEZ. These contradictory claims raise problems which almost certainly rule out immediate consideration of a pipeline to connect Leviathan to Turkey by such a route. In addition, they raise problems concerning the somewhat long-term possibility of a pipeline to connect Aphrodite and any other Cypriot discoveries by pipeline to Greece.
The Pipeline Issue and the Cyprus Dispute
In considering the transit of pipelines through the EEZs of Eastern Mediterranean states, the main point is simply that although the owners of an EEZ cannot legally refuse permission for third parties to build such lines, they have the right to require full environmental impact assessments, and to play a role in determining the exact route that such a line should take. This, in practice if not in theory, ensures that their cooperation must be secured for the development of such pipelines. This is why any line from Leviathan requires the cooperation of the Cypriot government, and, given the poor state of relations (to be polite) between the Republic of Cyprus and the government of Turkey (which no longer recognizes the Republic of Cyprus), such cooperation cannot reasonably be expected in the absence of a more-general Cyprus settlement.
In this context, however, it is important to note that both Turkish and Israeli government officials appear to believe that they can, somehow, finesse the Cyprus issues and develop a pipeline in the absence of a Cyprus settlement. Almost certainly, this simply reflects a misunderstanding of attitudes in both the Greek and Turkish Cypriot communities that underpin the Cyprus problem.
Nonetheless, it is possible to envisage that a pipeline connecting the Eastern Mediterranean gas fields to Turkey might be secured within the context of a resolution of the Cyprus problem. Efforts are currently under way to revive the peace process, not least by instituting twin dialogues: one between Ankara and the internationally recognized government of Cyprus, which in practice administers the large, Greek-populated, and southern 62 percent of the island; the other between Athens and the self-declared Turkish Republic of Northern Cyprus, which in practice—and with Turkish military protection—administers the largely Turkish-populated and northern 38 percent of the island.
In addition, with the European Commission moving to reopen talks on Turkish entry into the European Union, prospects for improving relations throughout the region, including the Cyprus problem itself, are better than they have been at any time since the failure of the last Cyprus peace effort in 2004.
In this context, two elements are worth considering. The first is whether there should be an energy track added to the bicommunal discussion process between the Greek- and Turkish-Cypriot communities; the second is whether, in order to save time in the event that a Cyprus settlement were to make such a pipeline possible, the United States and/or the EU might fund a preliminary survey of potential pipeline routes.
Although no one has yet carried out a full pipeline feasibility study (or, indeed, a full LNG feasibility study), at least one Turkish group, Turcas, has attempted to cost a pipeline project to Turkey. In September 2013, Turcas formally unveiled a proposed 16 bcm twin-pipe, 470-km pipeline from Leviathan to either Çekisan or Mersin, in southern Turkey, estimating the project’s cost at $2.55 billion. In addition, during the course of 2013, Israel’s Delek Group stated that it is also assessing the possibility of a pipeline to Turkey.
Israeli LNG Prospects
There is, of course, the possibility that Israel might seek to develop its own LNG facilities, particularly in light of a prospective delay to the development of Vasilikos. Israel has various options, and all are under study. However, they all have drawbacks.
The options are:
Onshore on the Mediterranean Coast: At first sight, this is the most logical site for an Israeli LNG facility, but in practice there are few sites that could really work. There would be considerable opposition from environmentalists, who quite naturally want to preserve as much of the country’s limited stretches of relatively undeveloped coastline as they can for recreational purposes.
Onshore in the Gulf of Aqaba: A plant on the Red Sea is a logical choice, since the markets Israel would hope to reach are those in the Asia/Pacific region. A terminal on the Red Sea would ensure that tankers would not have to pass through the Suez Canal en route to their prospective destinations—or have to go all the way around Africa were the canal to be closed for any reason. But Israel only has a few kilometers of coast on the Red Sea, and it is all taken up with existing docks or beaches serving the port and people of Eilat. One suggested alternative is construction of a facility at the industrial area of Jordan’s adjoining port of Aqaba. But whether the Israeli government would be willing to risk such an investment beyond its borders, even though it has a peace treaty with Jordan, remains highly uncertain.
There is, however, one intriguing variant on the Red Sea concept, and that is the development of a liquefaction facility some 15 or 20 kms inland from Eilat, in the Negev Desert, with the liquefied output then conveyed to LNG tankers via both onshore and subsea cryogenic pipelines.
Offshore in the Mediterranean: There are three current international projects to develop floating liquefied natural gas (FLNG) facilities. In effect, these are giant, purpose-built supertankers carrying full liquefaction trains on board. This option poses considerable security problems, as such a vessel would be an obvious potential target for anti-Israeli forces, notably Lebanon’s Hezbollah.
CNG—the long shot: Although pipelines and LNG constitute the backbone of current international gas-delivery systems, there is the intriguing possibility that both could lose out to a third option: maritime transport in the form of compressed natural gas (CNG). This is an untried technology, although at least one company, Calgary-based Sea NG, has secured certification from the American Bureau of Shipping for tankers capable of carrying anything from 66 to 600 million cubic feet of gas (1.87 to 17 million cubic meters [mcm]). Presentations by Sea NG officials represent the option as one that would be competitive with pipelines, even over short distances, and with LNG over distances of up to 2,000 kms.
Australia’s Woodside, which is assessing an option to take a 30 percent stake in Leviathan, is also assessing the introduction of a compression unit as part of the design process for a production platform at Leviathan. If CNG is as competitive as its promoters suggest, then it constitutes a way to deliver Israeli gas to regional markets such as Turkey without any of the trans-boundary problems associated with construction of a direct pipeline. Against this are the uncertainties associated with being the first developer of a new system. There are logical arguments as to why it should prove commercially attractive, but, as yet, there is no experience of it actually working in practice.
Who Determines the Choice of Options?
All cross-boundary energy projects require both a commercial and a political green light (as do many projects within individual states). Commercially, an attractive case can be made both for delivering gas to Turkey in the near term and then, in the medium to long term, taking advantage of Turkey’s increasing role as a physical hub to deliver gas to European markets beyond Turkey. In the longer term, the lure of a major market in the Asia/Pacific region is extremely strong; as and when the resource base justifies the initial costs involved in the development of LNG facilities, commercial developers would naturally wish to take advantage of such a market.
But timing is crucial. The Turkish market is on the Eastern Mediterranean doorstep, and Turkey is a market that could take gas as soon as it was actually available in the Eastern Mediterranean; in other words, within two or three years. As for the Asia/ Pacific market, sometime around 2020, a host of new, export-oriented LNG projects will come on-stream in Australia and the waters between Australia, Indonesia, and East Timor. These will almost certainly have a profound impact on prospects for other suppliers seeking to secure contracts to deliver gas to customers in China, Japan, and South Korea.
This is one quite genuine reason why Cyprus has been so keen to press ahead with an LNG plant at Vasilikos as fast as possible: It wants to not only sign up customers in the Far East, but also to be able to supply them before the next wave of Australian LNG comes on-stream. This is why the downward revision of initial reserves at Aphrodite is such bad news for the Cypriot authorities, since it makes it highly improbable that they will be able to secure financing for an LNG plant until new resources are discovered, and then transformed into proven reserves. This, in practice, means waiting for such companies as Eni and Total to succeed in their exploration efforts. So while it is reasonable to assume that, in time, further discoveries will be made, in practice such discoveries have to be made and confirmed by actual drilling. Eni and Total are not due to start their drilling activities until 2014, almost certainly ensuring at least a two-year wait for any significant upward revision of Cypriot reserves.
So this throws the spotlight back on Israeli plans for LNG, or on Israeli willingness to supply gas from Leviathan as feedstock for Vasilikos.
The involvement of Noble and Delek on both sides of the boundary line between the Israeli and Cypriot EEZs, and the difficulties posed by the development of an LNG facility in Israel itself, do make it quite possible to envisage the eventual development of Vasilikos as a plant designed to serve both Israeli and Cypriot gas fields. But in the short term—in effect, until the next round of the Cyprus exploration campaign produces its results (or lack thereof) in late 2014, or sometime in 2015—Israel would have to commit around twice as much gas as Cyprus to make the plant viable. And Israel, while wanting to keep the Vasilikos option alive, quite clearly considers that it should only constitute one element in a multipronged export. In particular, it is highly unlikely that Israel will wish to support the development of an LNG facility at Vasilikos if it were to be designed, as a result of limited supply from Cypriot fields, primarily to serve Israeli gas exports, since a plant that essentially existed to serve Israeli interests would almost certainly come to be seen by radical anti-Israeli forces in the region as an Israeli enclave in Cyprus, and thus, a prospective target for sabotage or direct attack.
However, the idea that Israeli gas might supply both an LNG terminal at Vasilikos and be piped to Turkey was discussed privately at a conference on Eastern Mediterranean energy at Paphos in early September, with Michael Lotem, Israel’s special envoy for regional gas issues. Lotem told the conference attendees: “I truly believe that an energy facility in Cyprus and a pipeline to Turkey are not competing options for Israeli gas; they are complementary options. The model is that one strengthens the other.”(4)
The difference in the time frames for developing Israeli and Cypriot gas make it hard to envisage any early start to a Cypriot LNG plant along the timeline favored by the Cypriot government. This raises the issue of how far the Israeli government—and, more importantly, the companies developing Leviathan—will go in pursuing the concept of a joint LNG project rather than focusing on alternative export options, notably a pipeline to Turkey, but perhaps also including development of CNG.
Both a pipeline to Turkey and development of a maritime CNG option would appear to provide export options for Israel that would enable both companies and the government to monetize the resources of Leviathan much more quickly than by waiting for the development of a viable multi-train LNG facility at Vasilikos. But while a pipeline to Turkey would almost certainly constitute the fastest way for Israeli gas to reach a major export market, such a line can only be laid with the explicit support of the government of Cyprus. And, in practical terms, such support cannot be expected unless there is also a settlement of the decades-old Cyprus question.
The next six to twelve months should be sufficient to demonstrate whether current efforts by the United Nations and the United States to revive the Cyprus peace process are getting anywhere, and whether the European Commission’s promised revival of EU membership talks with Turkey are helping to serve détente, if not rapprochement, between the governments of Cyprus and Turkey, and, more importantly, between the two Cypriot communities themselves.
There is a considerable degree of flux in Eastern Mediterranean geopolitics at present, and it is reasonable to argue that the development of export routes for Eastern Mediterranean gas—and, thus, the development of the biggest discovery to date, Leviathan—will very largely depend on just how much the region’s geopolitics change in the next year or so.
John Roberts is senior partner with Methinks Ltd, a consultancy specializing in the inter-relationship between energy, economic development, and politics.
His article was first published only a few weeks ago in "A Eurasien Energy Primer: The Transatlantic Perspective/Atlantic Council" Dec 2013, http://www.atlanticcouncil.org/images/publications/EEFI_book_final.pdf