Legal, Political and Energy Disputes in the Eastern Mediterranean. INSS, Washington DC, September 2013

Transcription

1 Legal, Political and Energy Disputes in the Eastern Mediterranean INSS, Washington DC, September

2 Summary East Mediterranean gas discovered to date ~1000 BCM Moderately significant in EU (444 BCM in 2012), global context Very significant in regional context Regional markets can absorb some, but not all, gas discovered Other regional and international competition for markets Complex, disputed borders in region mostly not delineated Cross-border fields less important than obstacles to export Choice of export routes is governed by Politics But also by technical and commercial realities The best routes are not the most feasible, and vice versa Gas is an ambiguous gift can: Exacerbate conflict Encourage rivals to cooperate Foster badly-needed regional economic growth Also potential for oil Do we take a narrow definition of energy security or an expansive one?

3 Resources

4 Regional Resource Potential BCM Discovered to date 2010 gas demand Demand Israel Palestinian territories Cyprus Lebanon 0 (1059 potential) Syria Jordan Egypt Total 3672 (4731) Gas demand assumes conversion of all oil-fired power to natural gas USGS estimates 122 Tcf (3544 BCM) recoverable gas and 1.7 billion bbl oil from the Levant Basin May be conservative as pre-dates Leviathan & Aphrodite Abundant resources for domestic/regional markets + export Sources: Manaar research (Jordan, Egypt); Wood Mackenzie; company reports

5 Exploration and gas activities Israel/ PA Lebanon Syria Cyprus 1993 Seismic acquisition 1999 Seismic acquisition 2000 Gaza Marine & Mari-B discoveries 2D seismic survey of EEZ 2003 RoC demarcates offshore border with Egypt 2004 Mari-B starts production 2005 Seismic acquisition 2006 Construction of Egypt pipeline 2007 Demarcates offshore border with Cyprus 2008 Start of Egypt gas imports 2009 Tamar & Dalit discoveries Report on EEZ endorsed 1 st offshore bid round no awards RoC 1 st bid round Block 12 awarded 2010 Leviathan discovery Lebanon oil law passed RoC demarcates offshore border with Israel nd offshore bid round planned 2012 Cancellation of Egypt gas imports; Shimshon discovery Aphrodite discovered; TNRC-Turkey border delineated First bid round planned Civil war RoC 2 nd bid round 2013 Karish discovery First bid round delayed Aphrodite appraisal; Egypt to annul border?

6 Lebanon and Syria offshore prospective for gas (and oil?) Seismic data shows potential for both gas and oil offshore Syria and Lebanon (Bowman 2011; PGS 2012)

7 Borders

8 Regional setting

9 Republic of Cyprus s borders

10 Turkish Republic Northern Cyprus (TRNC)-Turkey border

11 Turkish view on Turkey/Egypt delimitation

12 Overlap of Turkey/RoC claims

13 Blocks awarded by RoC and TRNC Aphrodite

14 Turkey and TRNC licences granted to TPAO

15 Border Demarcation June 2010: Nabih Berri, speaker of the Lebanese parliament said Israel s gas wells encroached on Lebanon s economic zone January 2011 (shortly after Leviathan discovery): Lebanese Foreign Minister Ali Shami asked the UN to protect Lebanon s Karish territorial rights July 2011: Hezbollah leader Hassan Nasrallah declares Israel would not be allowed to steal Lebanon s resources Israel s Minister of National Infrastructure Uzi Landau responded that the discoveries were entirely within Israel s Exclusive Economic Zone UN spokesman said the mandate of the UN Interim Force in Lebanon/SCR1701 did not include delineating the maritime border

16 Border Demarcation Tamar and Leviathan do not cross into disputed/lebanese waters Karish may Aphrodite probably crosses into Israeli waters Borders also an internal Lebanese political talkingpoint Cross-border fields can be handled by unitisation or JDAs

17 The forgotten player? Egypt

18 Regional gas markets and export routes

19 BCF Growing Middle East Gas Imports United Arab Emirates Syria Oman Kuwait Jordan Israel Iran Little intra-regional gas trade other than Dolphin (Qatar UAE/Oman) and Arab Gas Pipeline (Egypt Jordan, Israel, Syria, Lebanon). Why? Regional political rivalries and relations Security of supply issues Pricing expectations for pipelined gas Nevertheless, the economic dynamics should drive more intra-regional trade Gas shortages in some countries; high oil prices Gas surpluses in Iraq, Eastern Mediterranean offshore Source: U.S. Energy Information Administration, International Energy Statistics

20 Turkey s Vital East-West Role Russian Gas -West South Stream Blue Stream TAP TANAP SCP Iran Nabucco Israel- Turkey Iraq / KRG Cyprus- Turkey Source: Manaar; European Rim Policy and Investment Council (ERPIC) Existing Gas Pipeline Planned Gas Pipeline 20

21 Turkish market large & gives access to EU: 2020 figures Domestic demand 66 BCM Source: Manaar; European Rim Policy and Investment Council (ERPIC) 21

22 Export options Israel Pro LNG One-country control Avoids borders Regional pipelines (PA, Jordan, Egypt) Fast, low-cost Builds regional relations Pipeline to Turkey Large, liquid market Low cost Repairs relations Cyprus LNG One-country control Avoids borders Pipeline to Turkey Large, liquid market Low cost Political solution Con Land use? Probably needs to be floating Expensive; market glut (?) Issues at Eilat (land, security, export route) Political opposition Sabotage Markets limited; competitors Political disputes Has to transit Cypriot territory Needs additional volumes to be economic Expensive; market glut (?) Needs (interim?) solution to Cyprus dispute Pipeline to Greece Political compatibility Very expensive Border disputes (avoiding Turkey lengthens route)

23 Political implications Israel Cannot sell or transit gas to Syria or Lebanon without a dramatic political realignment Israeli gas supply to the Palestinian territories, Jordan and maybe Egypt would further increase its political and economic influence there Cyprus Could sell gas to Lebanon (and Syria), and cooperate with Israel but (currently) not Turkey LNG a likely fall-back Lebanon Major need for gas given debt load, power shortages, oil dependence and Israeli successes However political deadlock, corruption and spill-over from Syria likely to slow progress But best-placed geographically/politically for exports Turkey Transit role is potentially key, but hampered by Syrian uprising, Cyprus dispute and cold relations with Iraq Needs (interim?) deal with RoC to receive Cypriot or Israeli gas

24 Political implications other players Syria Civil war will prevent any progress on gas exploration or transit Iraq Major, low-cost potential supplier to the Mashreq countries, and could compete with Egypt and Israel to supply Jordan But needs policy decision has not awoken to reality of East Mediterranean competition, and its potential role Egypt Influence waning due to diminishing availability of gas for export, and cut-off of supplies to Israel Cut-off of Israel exports is extremely popular in Egypt, but Egyptian public (and expert) opinion has not awoken to the fact this was only a short-term setback for Israel May even import Israeli gas (or toll it through LNG)

25 Conclusions Gas discussions hostage to wider political issues Cyprus division Arab-Israeli peace Egypt-Israel relations Turkey-Israel relations Syrian conflict & Lebanese politics But political debates on gas easily forget technical & commercial realities Competition for regional markets LNG/EU gas windows Need for LNG sites Pricing; domestic vs export markets Expense of subsea pipelines Do we take a narrow definition of energy security or an expansive one? Narrow definition favours single-country or bilateral solutions (LNG, domestic use) Wide definition favours regional interconnections, multilateral deals (maybe interim), shared facilities, export pipelines and regional economic growth

26 Contact Details Robin Mills, Head of Consulting, Manaar Energy Consulting, Dubai, United Arab Emirates robin.mills@manaarco.com

27 Key facts: Israel Mari-B field sole source of domestic gas Noa North field under development despite small reserve Gas imports from Egypt suffered repeated sabotage and cancelled in April short term shortages and higher electricity costs Development of Tamar gas field (255 BCM) for domestic use targeted for late 2013 Discovery of Leviathan field in 2010 (453 BCM) Development expected to focus on LNG export. Delimitation Agreement with Cyprus. In dispute with Lebanon over maritime border delineation More exploration on the way (and oil) More gas consumption (replacement of oil/coal) Natural Gas Proved Reserves Source: CIA Fact book, BP Statistical Review. 25 TCF/708 BCM BCM Production 1.55 Consumption 3.25 Exports 0.0 Imports 1.7 Crude Oil Proved Reserves 1.9 million Barrels Barrels/Day Production Consumption Exports Imports

28 Key facts: Palestinian Territories Gaza Marine offshore field: Reserves 1.4 TCF (39 BCM) as of No known gas resources in the West Bank BG Group signed 25-Year Exploration and Development Agreement with Palestinian Authority in November 1999 Israel insisted that natural gas production be piped through Ashkelon to Gaza Strip BG Group broke off negotiations with Israeli government No further development Power demand Gaza 350 MW; current generating capacity 120 MW. Requires BCM/year West Bank 885 MW; current generating capacity 62.5 MW. Requires BCM/year 28

29 Key facts: Lebanon Imports all its hydrocarbons Passed Hydrocarbon Law in 2010 Petroleum Administration should have been formed before end-2011 but still in progress Plans first Licensing Round in 1Q Has signed Delimitation Agreement with Cyprus, not ratified. Difficult political situation exacerbated by Syrian crisis Maritime border with Israel not agreed Natural Gas Proved Reserves 0 BCM Production 0 Consumption 0 Exports 0 Imports 0 Crude Oil Proved Reserves 0.0 Barrels/Day Production 0 Consumption Exports 0 Imports Source: CIA Factbook, BP Statistical Review. 29

30 Key facts: Cyprus First Licensing Round in February 2007 Block 12 awarded to Noble Aphrodite discovery ~7 Tcf (198 BCM) EU Member Cyprus has received international support for offshore exploration. Exploration activity disputed by Turkey, described by Ankara as illegal Second Licensing Round 1Q Possible LNG Exports Natural Gas Proved Reserves ~200 BCM (?) Bn Cu Ms Production 0.0 Consumption 0.0 Exports 0.0 Imports 0.0 Crude Oil Proved Reserves 0 Barrels/Day Production 0 Consumption Exports 0 Imports Source: CIA Factbook, BP Statistical Review. 30

31 Key facts: Egypt Gas policy since early 1990s was highly successful in expanding production, domestic use and exports LNG plants at Damietta (5 Mtpa), Idku (7.2 Mtpa), but running under capacity Exports gas through Arab Gas Pipeline (AGP) to Jordan, Syria, Lebanon, with original plans to extend to Turkey Was exporting gas to Israel through Al- Arish Ashkelon offshore pipeline until deal cancelled in April (corruption, pricing and political opposition) Growing domestic demand impact on future ability to export gas. Current political situation prevents strong action on gas consumption or pricing Indeed, Egypt may become a gas importer (from Israel?) Maritime border with Cyprus demarcated Natural Gas Proved Reserves 78 TCF/2.2 TCM BCM Production Consumption Exports Pipeline 5.46 LNG 9.71 Imports 0.00 Crude Oil Proved Reserves 4.4 billion barrels Barrels/Day Production Consumption Exports Imports Source: CIA Fact book, BP Statistical Review. 31

32 Key facts: Syria Hydrocarbon production significantly reduced due to sanctions, sabotage and conflict Natural Gas Proved Reserves BCM Bn Cu Ms Current crude oil production around barrels/day Exports of barrels/day of Souedie (heavy) crude curtailed EU sanctions imposed against Syrian crude imports in September. Sanctions imposed by Arab League Increasing need for gas imports, partly met by Arab Gas Pipeline prior to curtailments Failed bid round in 2007 (one bid, not accepted) Offshore Licensing Round planned for 2011 will clearly be indefinitely delayed Source: CIA Fact book, BP Statistical Review. Production 6.19 Consumption 7.1 Exports 0.0 Imports 0.91 Crude Oil Proved Reserves 2.5 Billion Barrels Barrels/Day Production Consumption Exports Imports 55,