Are East Mediterranean gas resources the solution to Europe’s energy crisis?

By John Solomou

The Russian invasion of Ukraine more than 6 months ago has caused a dramatic spike in natural gas prices and caused repeated energy shocks in Europe. The EU has accused Moscow of using energy as a weapon, while Russia denies this and blames western sanctions for the drop in exports. After Russian state-owned company Gazprom announced a three-day shutdown of North Stream Pipeline 1, natural gas futures linked to TTF, Europe’s wholesale gas price, increased sharply to EUR340 per megawatt hour due to supply fears. Gazprom, claiming that it has problems with its turbines, has already reduced flows through the Nord Stream pipeline to about 20 per cent of its capacity.

As Europe has been desperately trying to find alternative sources to cover its energy needs, and as Gulf oil and gas producers have made it clear that they are unable to substantially increase their output and cover the energy shortfall facing the European continent, the European Union and individual countries have turned their attention to the Eastern Mediterranean gas finds.

Significant quantities of natural gas were discovered in the Eastern Mediterranean mainly in Israel, Egypt and Cyprus in recent years and European leaders, who in the past did not give much attention to this, have now come to realize that the region can potentially become an alternative source to Russian gas for European countries, contributing to the diversification of Europe’s energy supply route.

The sizeable quantities of offshore natural gas discovered in recent years within the Levantine Basin and further across the Eastern Mediterranean Sea can turn the region into an oil and gas production hub and supplier. Egypt, Israel, Cyprus, and more recently Greece, have at varying degrees developed their national energy research and exploitation programs with the aim to extract, use and export their seabed resources.

Most countries in the Eastern Mediterranean with the notable exception of Turkey, established back in 2019 an intergovernmental organization called the East Mediterranean Gas Forum (EMGF), or simply EastMed, to coordinate the activities and cooperation of participating states on natural gas issues.

The charter of the EMGF international organization was signed in September 2020 and entered into force on 9 March 2021. The participating countries in the EastMed are: Cyprus, Egypt, Israel, Italy, Greece Jordan, Palestine and France.

One country that is notably absent from the EastMed organization and from regional cooperation in the energy field is Turkey, although its geographical position lends itself to transporting natural gas to Europe.

This is basically due to the confrontational foreign policy followed by Turkey’s President Recep Tayyip Erdogan, who on several occasions sent Turkish Navy ships to disrupt gas exploration activities in the Cyprus exclusive economic zone and every day sends Turkish aircraft to fly over Greek islands, creating tensions with Greece.

Moreover, in the last four years, diplomatic relations between Turkey and Israel were frozen and Erdogan repeatedly called Israel “a terrorist state” and accused it of killing children. So as long as Turkey was at loggerheads with Greece, Cyprus, Israel and Egypt, Ankara’s participation in the EMGF was out of the question.

However, in the past few months, Erdogan made efforts to mend relations with Egypt and last week agreed with the Israeli government to restore diplomatic relations between the two countries. So, he may also want to end Turkey’s exclusion from energy cooperation in the Eastern Mediterranean and may even seek to join the EGMF.

On 15 June 2022, it was announced at the EGMF that the EU, Egypt and Israel had reached a deal for the supply of natural gas to the EU. Under the deal, gas from Israel will be brought via a pipeline to the LNG terminal on Egypt’s Mediterranean coast and then it will be transported on tankers to Europe. It is estimated that Israel can export about 500 billion cubic meters of gas to Europe in the next 20 years.

On August 22, the Cyprus Energy Ministry has announced that the world’s third-largest gas discovery in the last two years has been made in the Eastern Mediterranean, off the southwest coast of Cyprus by Eni of Italy and France’s Total consortium. The discovery is estimated to contain 2.5 trillion cubic feet of gas and is the second deposit discovered in the area.

At the moment Cyprus does not have an LNG facility but hopes to access existing infrastructure in Egypt following a recent agreement to build a pipeline linking these significant gas finds with Egypt’s LNG export facilities, so production from them could be delayed for several years.

These quantities, when they become available, together with those of Israel and Egypt could cover Europe’s energy needs and free the continent from its dependence on Russian gas.

However, there are constraints to achieving this. Egypt must first expand the capacity of its LNG facilities in Damietta and Idku by adding more liquefaction trains, while LNG terminals in European countries do not have enough capacity to receive greatly increased supplies of natural gas.

Moreover, there are political risks involved in the whole effort and surely Europe’s weaning off from Russian gas will not be an easy task or something that can be achieved in the space of a few months. It is also something that entails political risks.

As Karen Young, of the Centre on Global Energy Policy, Columbia University, points out: “For Europe, more political risk is associated with disruptions of LNG deliveries and attacks on drilling infrastructure in the Eastern Mediterranean. The advent of more political risk to budding gas infrastructure in the East Mediterranean would signal a prolonged energy security threat to European supply sources, even before they have become firmly established as alternatives to Russian pipeline gas.