Eastern Mediterranean Energy: Challenges and Opportunities
Offshore energy discoveries in the eastern Mediterranean offer Israel and Cyprus a comparatively clean, low cost, indigenous source of energy that will provide for their needs well into the second half of the 21st century. If managed wisely, as part of a balanced overall energy strategy, these resources will bring down costs for industrial and domestic users, contribute to competitiveness and economic development, improve public health, and significantly lower carbon emissions in both states. In Cyprus, natural gas should help consolidate recovery from the country’s economic and financial crisis when it comes on stream, probably around the end of the decade. In Israel, energy security will be reinforced by reducing and eventually eliminating dependence on imports. In both countries, sound management of the resources will be needed to avoid the loss of economic diversity that has afflicted most if not all energy-producing countries. Far-sighted leadership in the private and public sectors can help Israel and Cyprus to develop various upstream and downstream services. Construction of energy-related infrastructure will generate employment, at least during the start-up phase. Training of specialized skilled labor should be a priority. A good energy mix, including renewables, will be required to meet the countries’ needs, ensure redundancy to cope with unforeseen contingencies, and to protect the environment. Protection of the marine and terrestrial environment is important to retain the support of the population for development of the energy sector. The safety of offshore energy installations is the responsibility of the companies concerned, working within the regulatory and legislative frameworks established by the coastal states. As new energy producers, Israel and Cyprus will need to update their existing laws on occupational safety and the prevention of pollution. Since oil spills and other forms of pollution know no borders, agreements should be negotiated with all countries bordering the eastern Mediterranean to permit rapid, cross-border intervention in the event of accidents. Various international conventions as well as the EU’s new offshore safety directive can provide guidance in adopting the necessary laws. Both Israel and Cyprus will have surpluses that can be exported after allowing for domestic consumption. Decisions over export markets will depend on demand, investment in the necessary infrastructure — pipelines or liquefied natural gas (LNG) plants — and price as well as commercial and political risk. Israel appears set to begin by exporting gas to Jordan and the Palestinian Administration, with the further possibility of exports by pipeline to Egypt. To attract investors and persuade companies to engage in long-term supply contracts, Egypt needs to improve its investment climate. This means ensuring that contracts can be enforced through a judicial system which is independent and effective. When the large Israeli offshore Leviathan field comes on stream, exports to more distant customers in Asia, Europe, or Turkey may become feasible. Cyprus will need considerable additional discoveries to attract investors to build export infrastructure. Joint monetization by Israel and Cyprus of their adjoining gas fields appears unlikely. If Lebanon eventually discovers significant quantities of gas, and if the political situation there stabilizes, joint monetization by Cyprus and Lebanon might become possible in the long term. Potential oil discoveries, as well as liquid by-products of gas production, could add to the value of hydrocarbon resources in the region. Energy discoveries, and the construction of pipelines or LNG plants, will not overcome the region’s long-standing political conflicts. Constant diplomatic engagement will be required to prevent disputes over sea areas containing valuable resources from exacerbating existing political conflicts. However, if renewed efforts to reach a comprehensive settlement of the problem of the division of Cyprus and to overcome tensions between Israel and its neighbors are successful, energy cooperation can reinforce diplomatic breakthroughs. Overall, eastern Mediterranean hydrocarbon resources discovered thus far can make a crucial contribution to the energy security of the countries directly concerned, but are not sufficient to significantly affect the energy security of Europe or other regions. It remains essential for the European Union to pursue others means to strengthen its energy security including better interconnectors and diversification of the sources and types of energy it uses. Sir Michael Leigh is senior adviser to the German Marshall Fund of the United States.
The views expressed in GMF publications and commentary are the views of the author alone.