It is in this context that Greece has been pivotal in the development of Israel’s natural gas with the acquisition of the Tanin and Karish fields, facilitating competition in the Israeli market in accordance with the revised Israeli regulatory framework. Energean Oil and Gas (Energean), a Greek private E&P company, currently owns 100 percent of the two Israeli gas fields and acts as their sole operator. The gas fields are considered a world class asset with 2.4 trillion cubic feet (tcf) of natural gas, contingent reserves, and over 20 million barrels of light oil, contingent, and perspective reserves.
In fact, Israel has facilitated Greek energy interests, which can help Europe diversify supply of energy resources. Optimism prevails when it comes to Energean’s ability to present a reliable Field Development Plan for both the Tanin and Karish fields so that first gas is produced in 2020. The company emerged as a smart investor, having managed to acquire two new licenses in Israel and another two in Western Greece during the low point of the upstream industry cycle.
In pursuance to Greece’s strategy of penetrating the East Mediterranean energy landscape, Athens also seeks to develop its own gas fields in the Ionian Sea and South of Crete. The Greek Ministry of Energy has already signed a contract with French Total’s JV, Edison and Hellenic Petroleum. The contract secures offshore Block 2, located west of the island of Corfu, as an outcome of the 2014 International Licensing Round.
It has to be noted however, that reservations seem to prevail regarding the possibility of Greece to re-launch a new Licensing tender and the related risks due to the current low price levels and the increased exploration costs in deep and ultra-deep waters.
For its part, Israel in its quest for natural gas development proceeded successfully in 2016 with the revision of its gas regulatory framework thus resolving a persisting antitrust stalemate. Impediments however continue with most prominent, the high risks for potential buyers and uncertainty over export markets. Specifically, despite the Israeli government’s approval of gas exports to Egypt, the seven-year deal -signed between partners of the Israeli Tamar gas field and the Egyptian Dolphinus Holdings- has not yet materialized. The only secured export agreement is the Gas Sales and Purchase Agreement (GSPA) signed between Noble Energy and Jordan’s National Electric Power Corporation (NEPCO). The agreement guarantees the supply of approximately 1.6 trillion cubic feet (tcf) of natural gas from the Leviathan gas field over a 15-year period for electricity production.
Out of existing export options, the construction of a pipeline that connects Israeli Leviathan gas field to the Turkish coast remains financially attractive. This is in spite of Israeli reservations regarding the likelihood of tying its gas into a single market with considerable competition. The gas pipeline project must overcome the longstanding Cyprus conflict to proceed, as it requires crossing Cyprus’s Exclusive Economic Zone (EEZ).
In the regional setting, energy offers golden opportunities for Cyprus; the discovery of the Egyptian Zohr giant gas field accelerated Cyprus’ declaration of the 3rd International Licensing Round. The geological structures of the Zohr field are similar to the auctioned Cypriot offshore blocks, suggesting the existence of significant gas reserves and exploitable oil deposits.
A general vote of confidence in the Cyprus EEZ is indicated by the attraction of international majors and the subsequent distributions of various exploration blocks. This includes the awarding of exploration block 6 to the ENI Cyprus Ltd and Total E&P consortium; of exploration block 8 to ENI Cyprus; and, of block 10 to the consortium of ExxonMobil Exploration & Production Cyprus Ltd and Qatar Petroleum International.
No doubt that the East Mediterranean gas discoveries present a game changer that poses all kinds of risks and opportunities for the three countries’ economic growth. It is in this context that policies need to center on:
First, supporting the planned Euro-Asia Interconnector project that would connect Hadera, Israel to Athens, Greece so that the latter emerges as a hub and/or a transit country;
Second, upholding cooperation between Greece and Israel on joint development of infrastructure for the transportation and marketing of gas, as well as on joint operations pertaining to the safety of energy installations;
Third, sharing knowledge to foster a transparent and predictable regulatory environment for foreign investors in Greece, Cyprus and Israel, and facilitating access to external sources of project finance and loan guarantees;
Fourth, looking into multiple exports options so that gas is not tied to a single market where changing geopolitical conditions can affect the sustainability of exports and thus impact negatively the three countries’ energy wealth; and,
Fifth, establishing a regional sponsor-supported council that would include energy companies, energy industry service providers, energy industry associations and other stakeholders in the region; once established, the Council could seek government participation from the littoral states of the East Mediterranean and become an avenue of communication between governments and industry as well as a clearing house for ideas and plans for mutually beneficial development in the region.
Admittedly, gas discoveries in the East Mediterranean have the potential to transform the energy outlook of individual countries as well as foster regional energy cooperation. This is a period of financial upheavals and political instability hence new opportunities emerge for those who are bold and ready to work. Greece, Israel and Cyprus need to identify to this group and serve as pillars of energy cooperation. Working from this collective strength, they can pursue energy policies for the well being of their peoples and the coming generations.