Man and Culture (By Gina Cohen and Alexander Kislov) – LNG industry: Between war and volatile energy markets
The combination of the eruption of the global Covid-19 pandemic of 2020, coupled with the unfolding wars between Russia and Ukraine, and between Israel and Hamas, have rattled international energy markets, including within the Eastern Mediterranean region.
The Eastern Mediterranean region comprises Israel, Egypt, Cyprus, Turkey, Jordan, and Lebanon.
The region’s geopolitical volatility is a factor for whether the Eastern Mediterranean can fully integrate into a regional actor enabling countries with surplus gas to feel secure about supplying most of their excess to the region and further cooperate for the mutual use of existing and/or construct additional infrastructure to reach international markets. Failing this, there are risks that some countries will remain short of gas and that reserves that could truly benefit Europe could remain stranded.
Let us first have a look at the supply and demand equation of each country, and then delve into potential export projects: Cohen is a preeminent expert on
Israel: Reserves of ~1,000 bcm, it currently produces ~25 bcm/a and consumes ~13 bcm. It exports ~3 bcm/a to Jordan and ~8.5 bcm/a to Egypt. Expansion plans include decisions made to increase the capacity at the Tamar field from 11 to 12 bcm/y, of the Leviathan field from 12 to 14 bcm/a and Karish to 7.5 bcm/a. In October 2023, the Ministry of Energy awarded 12 new exploration licenses to six companies, including a group led by Italy’s Eni and a group involving Azerbaijan’s Socar along with British Petroleum.
Egypt: Reserves of 2,200 bcm, in 2023 it produced ~60 bcm, consumed ~65 bcm, imported ~8.5 bcm/a of pipeline gas from Israel and exported ~4.7 bcm of LNG. Egypt has and continues to carry out exploration bidding rounds, but has only had small discoveries over the last few years. In 2023, Egypt imported more gas from Israel and exported half the LNG it did in 2022, because of a gas shortage at home.
Cyprus: Reserves of ~430 bcm, but has no gas production, development, or consumption. In 2024, the country is expected to start consuming imported liquefied gas and it hopes to move ahead on making a decision to develop at least one discovery.
Turkey: Reserves of over 700 bcm, aims to reach ~3.5 bcm output from the first phase of its offshore Sakarya field, consumes 45-60 bcm and thus strongly dependent on imports from Russian, Iran, Azerbaijan, and LNG. Ankara has conducted on-and-off talks centering on the potential import of Israeli gas; but this is now on hold because of the Gaza war.
Lebanon: Despite exploration carried out by TotalEnergies, Eni and QatarEnergy, Beirut has not made any discovery and is not consuming any gas. Plans to import gas from Egypt, albeit from Israeli molecules via Jordan and Syria, are not moving ahead for now.
Map of key East Mediterranean natural gas infrastructure and Israeli fields. Courtesy of the authors
In 2023, as aforementioned, regional exporters include small to mid-size volumes from Israel (about 11.5 bcm a year to Jordan and Egypt) and from Egypt (about 4.7 bcm a year of LNG to the global market).
In order for the region to be able to export another 10-20 bcm of gas a year, the following projects are under consideration:
Cyprus: Hopes to develop one of its fields and export 6 bcm/a to Egypt.
Egypt: Has long-standing ambitions of becoming a gas hub, but failing further discoveries, and a recovery in its economic situation, Cairo may find itself instead becoming a net importer of gas.
Israel: Hopes to export more gas from its Tamar field to Egypt and to make a decision to increase the capacity of its Leviathan field, and for doing so is examining a number of potential export projects:
Additional sales to Egypt: Tamar hopes to export an additional 43 bcm to Egypt from 2025 to 2034. For additional volumes to Egypt also from Leviathan, partners in Israel want to see that Egypt’s financial situation stabilizes, and that certain guarantees can be provided.
A pipeline to export gas to Turkey: Although relations between Israel and Turkey improved over the first 9 months of 2023, the Israel-Hamas war once again changed the trajectory of the relationship after President Recep Tayyip Erdogan publicly supported Hamas and paused plans for energy cooperation. No breakthrough on energy cooperation is expected in the near future.
Floating facility offshore Israel (FLNG): The Leviathan partners are considering a 6.4 bcm/a FLNG project. The cost of such a project are immense and the security implications for now are complex; this option may require further analysis to determine its feasibility, potentially attempt a smaller scale project or await new technological developments
Poseidon project to lay an offshore pipeline from Israel, gathering supplies from Cyprus and onwards via Greece and Italy. Engineering studies (FEED) for this project was completed in 2022 and the project is part of the European Union’s project of Common Interest. Although this is a complex $6.4 billion project, its feasibility has potentially become more prominent considering some of the complexities involved in other regional export projects.
Each project is feasible but requires further investigation and decisions to be taken.
Despite a complex regional environment, energy security remains of paramount importance to local, regional and global gas consumers, and to quote Amos Hochstein, US Assistant Secretary of State for Energy Resources, optimism remains and even “the potential normalization of relations between Saudi Arabia and Israel remains an objective for the Biden administration and would be a positive development.”
About the authors
Gina Cohen is a natural gas analyst, consultant, lecturer, and author of two books on natural gas. Over the years, she has worked as a consultant for numerous major gas exploration companies operating in the Eastern Mediterranean. Cohen has collaborated with government institutions in Israel and abroad. Her articles and commentary are regularly published by Israeli newspapers and international news agencies; Cohen is a frequent speaker at international oil and gas conferences.
Alexander Kislov is an analyst and consultant in the natural gas and LNG business with focus on the Eastern Mediterranean, Russia, Europe, China and global LNG market. He previously worked for Gazprom and served as a Russian diplomat in China.
In 2024, Cyprus is expected to start consuming imported liquefied gas and it hopes to move ahead with taking a decision on developing at least one discovery
Israel hopes to export more gas to Egypt: Cohen and Kislov