Toward an Eastern Mediterranean Integrated Gas Infrastructure?
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FOREIGN AND SECURITY POLICY PAPER 2016 | NO. 20 TOWARD AN EASTERN MEDITERRANEAN INTEGRATED GAS INFRASTRUCTURE? SHAUL ZEMACH © 2016 The German Marshall Fund of the United States Please direct inquiries to: The German Marshall Fund of the United States 1744 R Street, NW Washington, DC 20009 T 1 202 683 2650 F 1 202 265 1662 E [email protected] This publication can be downloaded for free at http://www.gmfus.org/listings/research/type/publication. The views expressed in GMF publications and commentary are the views of the author alone. About the Foreign and Security Policy Program The Foreign and Security Program (FSP) at GMF comprises a stream of activities furthering objective analysis and debate on geopolitical questions of transatlantic concern. The program spans regional and functional issues, from NATO affairs to energy security, including challenges and opportunities in Europe’s East, the strategic environment in the Mediterranean, and the role of Turkey as a transatlantic partner. About GMF The German Marshall Fund of the United States (GMF) strengthens transatlantic cooperation on regional, national, and global challenges and opportunities in the spirit of the Marshall Plan. GMF contributes research and analysis and convenes leaders on transatlantic issues relevant to policymakers. GMF offers rising leaders opportunities to develop their skills and networks through transatlantic exchange, and supports civil society in the Balkans and Black Sea regions by fostering demo- cratic initiatives, rule of law, and regional cooperation. Founded in 1972 as a non-partisan, non-profit organization through a gift from Germany as a permanent memorial to Marshall Plan assistance, GMF maintains a strong presence on both sides of the Atlantic. In addition to its headquarters in Washington, DC, GMF has offices in Berlin, Paris, Brussels, Belgrade, Ankara, Bucharest, and Warsaw. GMF also has smaller representations in Bratislava, Turin, and Stockholm. On the cover: Satellite image of Mediterranean Sea. Toward an Eastern Mediterranean Integrated Gas Infrastructure? April 2016 | No. 20 Shaul Zemach1 Preface by Sir Michael Leigh Preface . 1 Toward an Eastern Mediterranean Integrated Gas Infrastructure? . 3 The Levant Basin 3 Potential Natural Gas Resources 3 Long-Run Supply-Demand Imbalance 3 Short-Term Supply-Demand Imbalance 5 The Levant Basin’s Puzzle 5 Egypt’s Singular Position 6 Integrated Infrastructures 7 The Eastern Mediterranean Integrated Gas Infrastructure 8 International Players and Interests in Eastern-Mediterranean 10 The Mechanism for Cooperation and a Possible EU Role 11 Conclusion 12 1 Shaul Zemach is a former director general of Israel’s Ministry of Energy and Water Resources. He thanks Sir Michael Leigh for his editorial suggestions and insights and Charlotte Brandsma for her support and assistance. Preface 1 Sir Michael Leigh uring my last visit to the Eastern international conflict. Yet even the most tenacious Mediterranean, a leading statesman threw conflicts eventually end or, at least, subside. Israel Ddown the following challenge: imagine maintains diplomatic relations and various forms the region without its current political conflicts of cooperation with Egypt and Jordan, and may and try to map out what rational cooperation be on the path to eventual normalization with on energy infrastructure would look like. This Turkey. Renewed efforts are underway to achieve a Zemach’s willingness question matched perfectly a concept that Shaul lasting cessation of hostilities in Syria and to reach Zemach, former director general of Israel’s Ministry a comprehensive solution to the problem of the to think creatively of Energy and Water Resources, had mentioned division of Cyprus. puts current conflicts to me when interviewing him for the German into perspective Marshall Fund’s Eastern Mediterranean Energy Whether or not such moves succeed, it is timely and will encourage project. Zemach has devoted considerable attention to consider how regional cooperation could help regional leaders, the both at the ministry and subsequently to working to optimize the potential benefits of offshore industry, and public out possible arrangements for energy cooperation gas discoveries for the peoples in countries opinion to reflect on bordering the Eastern Mediterranean Sea. This with other countries in the region, with the active the concrete benefits paper considers what regional cooperation on support of the United States and the European that a collaborative Union. infrastructure and related matters might look like, assuming, however improbable at present, that approach to developing In this paper, he develops these ideas further long-standing political conflicts are overcome or, at the region’s natural gas and puts forward the outline of a proposal least, stabilized. resources could bring for an Eastern Mediterranean Integrated Gas Infrastructure. This proposal, while seemingly Functional cooperation on energy could be a idealistic, is in fact pragmatic, taking as its point stimulus for innovative policies in the Eastern of departure existing pipelines and LNG plants. Mediterranean. It could, for example, make The proposal is scalable, setting out what could be desalinization more widely available, easing the accomplished now and what could be developed in problem of water supply, which, according to the medium to long term if conditions permit. He new analysis, is deteriorating rapidly in several identifies an important role for the United States countries, threatening the economic growth, and the European Union in bringing the project to national security, and the region’s stability. In fruition. Zemach’s willingness to think creatively turn, this would make increased food production puts current conflicts into perspective and will possible where, today, it is too costly. The U.S. encourage regional leaders, the industry, and public Department of State is actively promoting such opinion to reflect on the concrete benefits that a cooperation. collaborative approach to developing the region’s Access to a stable and affordable energy supply natural gas resources could bring. can have a major impact on the region and At a time of increased tension and violence in Syria beyond, because of the energy-water-food nexus. and other countries in the broader Middle East, A collaborative approach could help meet human it may appear unrealistic to propose an initiative needs in a sustainable manner, with positive side designed to promote regional cooperation on effects for global issues such as migration and energy infrastructure in the Eastern Mediterranean. climate change, influencing the situation far beyond Energy cooperation requires a modicum of trust the borders of the Eastern Mediterranean region. and cannot replace political moves to resolve Toward an Eastern Mediterranean Integrated Gas Infrastructure? G|M|F 1 This paper is an invitation to authorities in This approach is pragmatic rather than naïve. neighboring states, as well as the European A scalable strategy, building on existing Union (EU) and the United States, to reflect infrastructure, is a realistic approach. A on an innovative collaborative approach. The collaborative initiative to develop physical region’s hydrocarbon resources are small by global infrastructure in the region is a win-win standards but potentially highly significant for proposition for neighboring states, the companies the countries directly concerned. There have been involved, and hydrocarbon consumers in the significant delays in realizing potential benefits Eastern Mediterranean and other potential markets. because of political, regulatory, judicial, and financial constraints and because of the high cost of infrastructure development, particularly if it involves inefficient parallel facilities. 2 G|M|F April 2016 Toward an Eastern Mediterranean 2 Integrated Gas Infrastructure? The Levant Basin Cyprus has estimated gas resources of 120 bcm5 he Eastern Mediterranean region includes and additional potential of almost 1,000 bcm. These eight significant basins (Cyprus Basin, latter estimates should be re-evaluated in light of Eratosthenes High, Latakia Basin, Levant recent surveys by Total in Block 10 and 11 in the T Cyprus exclusive economic zone (EEZ), which had Basin, Judea Basin, Nile Delta Basin, Western failed to find tangible evidence of reserves by early Arabian Province, and Zagros Province), with most Stable flows of natural historical hydrocarbon production occurring in the 2016. By contrast, ENI’s recent discovery of gas in Egypt’s Zohr reservoir might lead to an upward gas can significantly Nile Delta Basin, the Western Arabian Province, improve the quality of and the Zagros Province (see Figure 1). revision of estimates of the potential of Block 11, which is directly adjoining. life through a steady The Levant Basin Province comprises supply of electricity and, approximately 83,000 square kilometers (km2) These indications of potential resources should be potentially, desalinated of the Eastern Mediterranean Sea. The area is interpreted with care. There is no certainty that the water, to a region that is bounded to the east by the Levant Transform Levant Basin will be explored and developed to its perhaps the least water- full extent. There are numerous political, technical, Zone, to the north by the Tartus Fault, to the secure in the world northwest by the Eratosthenes Seamount, to and financial obstacles that would need to be the west and southwest by the Nile Delta Cone overcome. Discoveries are