When the Texas-based Noble Energy, the largest operating partner in Israel's Tamar Gas Field project, said that the deposit has entered into operation ahead of schedule, experts assessed the event not only as the most important in the modern economic history of Israel (achieving energy independence) but also claimed it to alter region's long-standing power balance.
Experts say that the reserves of the Tamar gas field in the eastern Mediterranean Sea amount to 9tn cubic feet of natural gas, while the larger Leviathan field located roughly 81 miles west of Haifa in the Levantine basin is estimated to hold 18tn cubic feet of gas.
The United States Geological Survey (USGS) claims that the Levantine basin gross hydrocarbon reserves match to those of Saudi Arabia. This means that the Middle East's former energy order begins to crumble and Israel is becoming one of the most influential, if not the major, market players, while getting the opportunity to implement "shifts of geotectonic nature".
Israel's gas policy
Israel assesses the emergence of energy independence factor as the Good News, as the country gets rid of dependence on gas supplies from Egypt. After the overthrow of President Mubarak bilateral relations remain cool. The treasury can be replenished by tens of billions of shekels in taxes and fees.
At the same time, Israel may face a well-known syndrome of the co-called "resource curse" and radically change its socio-economic and technical image. These days the country is in repute for its high-tech export-oriented industries. Its high-tech industries, which are the driving force of the nation's economy, already suffer from the strengthening shekel against the dollar and euro. Large energy source will lead to a sharp increase in foreign exchange inflow and further strengthening of the shekel. Such a process may deprive Israeli high-tech sector of its competitiveness, lead to plant closures and unemployment growth. That is why the Good News immediately highlighted the problem of forming Israeli new gas policy.
That is why the Knesset's Zemach Committee released its Israeli gas export policy recommendations. In particular, the committee advocates for exporting 53% of natural gas extracted at the offshore fields in the Mediterranean Sea in Israel's economic waters. But there are politicians who believe that Israel is unlikely to become a major exporter of natural gas and so it is necessary first to solve the problems of the country's energy independence by pumping excess gas into underground storage facilities.
In short, Israel has yet to get used to operate in a suddenly found gas Klondike, and, so far, only demonstrates intentions whether to sell the acquired natural gas, or consider, first of all, to satisfy its own domestic needs. Moreover, Israel has no gas pipeline infrastructure. This circumstance forces it to look forward to establishing international alliances with different countries, which places the problem at the geopolitics level, requires a lot of resources and major policy decisions.
Russia enters Big Game
In mid-March, Israel's Energy and Water Resources Minister Uzi Landau sent a "letter of reprimand" to the Tamar partners, demanding that they avoid signing agreements to sell gas from the Tamar field. "According to the report submitted by the Zemach Committee, which looked into the government's policy in terms of the natural gas market, the Tamar gas reservoir must supply the Israeli market's needs. In addition, exporting gas requires a pre-approval," the minister wrote.
The letter followed reports that the Tamar partners have signed contracts to export gas to other countries through a liquefied natural gas facility. According to the reports, they inked an agreement of intent to export liquefied natural gas with the Swiss subsidiary of Russia's energy giant Gazprom. The third party to the agreement is the Levant LNG Marketing Corporation (a special purpose vehicle formed by South Korea's Daewoo Shipbuilding & Marine Engineering Co. Ltd.) which will build and operate the LNG facility.
Landau's "letter of reprimand" is preventive in nature, as potential gas exporters, especially Tamar and Leviathan consortiums are not in talks to enter gas export deals. Gazprom's agreement of intent stipulates exclusive negotiations with its partners to conclude binding agreement providing Israeli gas exports to the Asia-Pacific region in the next six months.
The deal concerns deliveries of 4.2bcm of liquefied natural gas per year and Gazprom intends to channel sufficient funds into construction of the Levant's Floating LNG (FLNG) facility. The deal also allows Gazprom to exclusively buy LNG from the Tamar project, thus expanding Gazprom's LNG exports and trading portfolio and enables it to arrange direct gas exports to markets with high prices in Japan, South Korea, China and India, which are not within reach of gas pipelines.
Moreover, since the Tamar and Leviathan projects are the US-Israeli joint ventures, the deal with Gazprom can not take place without the consent of the U.S. and Israeli partners. It is no coincidence that Russia's President Vladimir Putin after his return to the Kremlin has chosen Israel as one of the first foreign countries for paying an official visit. Discovery of large gas fields in the Eastern Mediterranean creates for Moscow a window of opportunity for a breakthrough in the region. That is why it maneuvers and establishes a new global energy map with due regard to the Eastern Mediterranean. This factor largely explains Russian steps toward cultivating relations with Lebanon, firm stance on Syria and the strategy on relations with Iran.
Nevertheless, Russian politics on these issues have a lot of ambiguousness. It is no coincidence that certain Israeli politicians are beginning to bind the deal with Gazprom with the possibility of reduction of strategic relations between Russia and Iran, especially in the sale of weapons. At the same time, they realise that it is difficult to bar Russia from reaching the Eastern Mediterranean energy reserves, especially if it does not abandon intention to build LNG plants in Cyprus, which are to process gas from Israeli's Leviathan and Cyprus Aphrodite gas fields. Noble Energy advocates the project.
Russia's biggest advantage is its unique position enabling it to effectively navigate in the turbulent waters of the Eastern Mediterranean, a region of heated debates over maritime boundaries and exclusive economic zones between Greece and Turkey, Israel and Lebanon, Cyprus and Turkey, Syria and Turkey.
Creation of strategy
Maritime boundaries in the Eastern Mediterranean are defined by a series of bilateral agreements, particularly between Israel and Cyprus, Cyprus and Lebanon, Lebanon and Turkey. Apart from a disputed area on the Lebanese-Israeli border, there is a conflict on the economic waters of Cyprus, as Turkey refuses to recognise the rights of the Cypriot government on the part of the marine area, which fell under control of the unrecognised Turkish Republic of Northern Cyprus. So the Eastern Mediterranean could potentially turn into another global trouble spot.
Therefore it is unlikely that the countries of the region will be able to easily dispose of the unexpectedly acquired natural wealth. Although all proven gas deposits are located in the exclusive economic zone of Israel, nevertheless Turkey, Lebanon, Israel, the Republic of Cyprus and the Turkish Republic of Northern Cyprus might start a real battle for the energy resources.
In this regard, special attention should be given to the position of Turkey, which claims to be the main energy transit hub in the Middle East due to reserves of the Caspian region. Now gas hub shifts to Cyprus and Israel. Turkey won't allow to explore energy resources at the western shelf divided into Turkish and Greek part and will dismiss the companies, which will take part in this work, from implementation of energy projects on its territory, the Turkish Foreign Ministry said last May. "Turkey has repeatedly declared that it would not allow any activities in these areas," the ministry noted.
Experts note certain military preparations in Eastern Mediterranean. The process has been joined by some Arab countries, which feel decreasing European dependence on their oil and gas supplies. That is why the countries of the region face the problem to prevent transformation of the already existing gas crisis into the global armed clash. By the way, in early March the USA, Israel, Greece and Cyprus for the first time had to hold a joint two-week Mediterranean naval exercise codenamed "Noble Dina" focused, in particular, on protecting marine structures from submarine and warship attacks, to throw cold water on the Turkish fervor.
Currently, the list of political problems, which stand in the way of development of gas fields in the Eastern Mediterranean, is topped by the issue of delimitation of maritime borders between Cyprus, Egypt, Israel, Lebanon and Turkey. Israel and Cyprus inked a relevant bilateral agreement. Cyprus has also signed an agreement on maritime borders with Lebanon, but parliament refused to ratify it. There are big problems with the delimitation of maritime borders between Greece and Turkey, between Israel, Lebanon and Egypt.
So far, Israel has made a proposal to Turkey to lay a pipeline through its territory to pump its own gas to Europe. But the fact is that legalisation process of the Trans-Anatolian gas pipeline project (TANAP) has been already completed. And it concerns not only the issue of the Azerbaijani gas deliveries to Europe, but also Caspian gas shipments to European states via Turkey. Besides, export routes of the Nabucco gas pipeline project are also to be confirmed this summer. In its turn, Baku offered Tel Aviv to channel its gas to TANAP pipeline, which can be designed as a large-scale geostrategic energy project, where Turkey becomes the major energy transit hub in the Middle East. But it decreases Israel's ability to have Turkey on a tight leash, as it receives the so-called "alternative gas" from the Caspian region.
The danger of such a course of events for Israel is also in the fact that Turkey is on the way to rapid Islamisation. Because of its claims to be a leader of the region's Muslim states, in future Turkey may simultaneously provoke tensions with Israel, Cyprus, Greece, or play the card with Israel on the energy market. As a part of this global strategy, Turkey will seek to gain control over gas and crude flows from Russia, Azerbaijan, Turkmenistan, Iran and Libya to hold dominant positions in the energy supply of the EU countries and North Africa.
Moreover, the Turkish projects designed to re-export gas from Iran and the Central Asia, can completely deprive Israeli gas export to Europe of any economic viability. In such a case, the situation in the Mediterranean could become even more intriguing. Recently, geologists suggested that Greece could have natural gas deposits around Crete with reserves from 1.5tn cu m to 3.5tn cu m that may be as significant as those in the Levantine Basin between Cyprus and Israel in the Eastern Mediterranean. If these undersea gas reserves are proven, then the Israel-Cyprus-Greece gas pipeline project will become even more economically viable.
The start of gas production at the Tamar field leads to forming contours of a new global policy in the Eastern Mediterranean. For Moscow, it is important to preserve the exceptional position on the European energy market, "not to lose" Turkey and maintain strategic partnership with Israel. So, nowadays the Eastern Mediterranean and the Middle East face formation of intricately woven plots of the upcoming Big Game.