From a technical standpoint, the East Mediterranean is a challenge because the seabed is generally more than one thousand meters below the surface. Ultra-deep water, in industry parlance. From a geopolitical standpoint, the complexity is arguably even greater.
Many problems among a variety of neighbors
Production of East Med gas began in Egypt in the late 1960s. Activity remained localized for over thirty years until discoveries were made off Israel and the Gaza Strip in 1999 and 2000. For political reasons, the relatively small Gaza find remains undeveloped, while exploration continued apace offshore Israel, resulting in discoveries – namely Tamar in 2009 and Leviathan in 2010 (see map below) – that have helped spark intense interest in the so-called Levantine Basin, a subsea structure shared by Lebanon, Israel, the Palestinian Authority, Syria, Cyprus, and Turkey, at least from Turkey’s perspective. In 2012, Cyprus was elated by news of the Aphrodite discovery, but for all the gas Israel and Cyprus have found, not a molecule has yet been exported. In fact, most of the gas (including everything in Tamar, Leviathan and Aphrodite) remains buried for lack of a clear means to move it out of the region, among other reasons.
In essence, there are two ways to move gas: via pipeline or in liquid form. Shipping gas as a liquid requires liquefying it, which itself requires very costly infrastructure (think hundreds of millions of dollars) regardless of whether the facility is built onshore or offshore. Back in 2013, Cyprus was touting plans to build an onshore liquefaction plant, although the country’s lone discovery did not – and still does not – justify the cost, meaning without more gas (from Israel, for example), there would not be sufficient reason to build an onshore plant, and this plan is currently on hold apparently in favor of a pipeline to Greece. Egypt was also an export route option for East Med gas. As noted, Egypt has been in the natural gas business for decades. However, it has not been the best manager of its resources. Egypt has two onshore liquefaction plants, evidence of past export hopes. Domestic demand far exceeded expectations, however, and for years now the liquefaction plants have either not been used or were used far below capacity, opening an export opportunity for Israeli and/or Cypriot gas. The late 2015 discovery of the “supergiant” Zohr gas field in Egypt’s offshore near the maritime border with Cyprus may change just how much spare liquefaction capacity Egypt can actually offer. In that context, politics have re-entered the equation. The latest Israeli-Cypriot export plan involves a very long subsea pipeline to Greece, and then on to the rest of Europe. Pipeline plans come and go, but a Europe desperate to diversify its gas supplies (over 30 percent of European gas imports come from Russia), an Israel desperate for a political line to Europe, and currently stranded gas earning nothing for anyone could give life to a project that might have been dismissed in a different geopolitical context.
[pullquote] For all the gas Israel and Cyprus have found, not a molecule is yet being exported [/pullquote]
What this means for Lebanon
Even before the Zohr discovery, available evidence suggested Lebanon’s coastal waters were well worth exploring. Zohr changed the game and in the past year, companies prequalified to bid on Lebanon’s offshore blocks have successfully won acreage offshore both Cyprus and Egypt (see company table). While this is no guarantee companies prequalified in Lebanon and working in the neighborhood will bid here, it is a positive sign. In contrast, Israel is also holding a bidding round, but extended its closure from April until July, reportedly due to lack of interest from the major oil and gas companies currently working in Egypt and Cyprus. Receiving bids, of course, is only the first step on a long journey.
It is arguably too early to delve deep into potential export routes for Lebanese gas (remember, we have not found anything yet and have not even really begun searching), but it is worth noting that Lebanon is arguably in a better position than Cyprus or Israel, namely because of existing onshore infrastructure. The Arab Gas Pipeline (AGP) already connects Lebanon to potential buyers in Syria, Jordan and possibly even Egypt, depending how much domestic demand gas from Zohr will meet. How much damage the AGP has sustained during six years of conflict in Syria is unclear, but fixing stretches of a pipeline is clearly cheaper than building an entirely new one. On top of that, building a relatively short additional leg out of Syria can connect the AGP to Turkey, and Lebanese gas to Europe (although the hypothetical leg connecting Homs in Syria to Turkey is currently a war zone, meaning this is not a short-term option).It’s also important to remember the commercial aspects of the oil and gas business. Lebanon is not drilling for resources, profit-driven companies are. Barring a serious disruption in the energy industry, natural gas is expected to be an important part of the global energy mix even if the world keeps its climate change commitment to reducing the use of fossil fuels and stemming the global rise in temperatures. Floating gas liquefaction technology was born to bring stranded gas to market. If companies find quantities worth selling in Lebanon, history suggests they will manage to find a way to bring it to market.