Flush with fresh subsea natural gas finds, Cyprus and Israel are flirting more and more with export cooperation as political deadlock continues to put Lebanon’s hydrocarbon exploration plans on hold. While being behind its neighbors is not in itself a bad thing, the country is keeping tens of willing international companies waiting for a peek at what lies below Lebanese waters.
Bankrupt Cyprus seems most keen on getting moving with exports quickly. The Greek side of the island nation is currently in talks with the US oil-and-gas giant Noble Energy and Israeli partners on building a liquefied natural gas (LNG) terminal. The massively expensive project would allow Cyprus – and potentially others – to convert some of its natural gas to a liquid, making it easier to export via ship to markets around the world.
Last week, the Cypriot press reported that a final agreement on building and – more importantly – financing the multi-billion-dollar terminal should be ready by December. A few days later, Cyprus, Israel and Greece inked a memorandum of understanding on cooperation in the energy and water sectors.
Commenting on the document, Greek energy Minister Yannis Maniatis said, in part, “without a doubt developments in the field of energy, and especially the exploitation of hydrocarbon resources as well as the construction of a pipeline for the transport of natural gas […] constitute an important factor for stability in the Eastern Mediterranean and for the prosperity of the people living in the three countries.”
The idea of a Cyprus-Greece undersea pipeline for natural gas exports is certainly on the table, but Cyprus seems more interested in the LNG plant, and in bringing its neighbors on board with it. The terminal would be larger than Cyprus would need to only export its own natural gas, and press reports suggest it is eyeing both Israel and Lebanon as potential partners.
For its part, Israel has not even reached a final decision on how much of its natural gas to export, and officials are hesitant to send gas to Cyprus for liquefaction out of security concerns. That said, Noble Energy – which has large stakes in both Israeli and Cypriot gas fields – and its Israeli partners are in pipeline talks with companies in Turkey, and studying pipeline possibilities for reaching Egypt, Jordan and the Palestinian Territories, Reuters reported earlier this month.
Lebanon, meanwhile, has barely gotten off the starting block concerning its own exploration of the sea below. The country has done significant seismic surveying, but as Laura El-Katiri, a research fellow at the Oxford Institute for Energy Studies, noted in an interview with NOW: “We’re still not sure how much gas is there.”
Pointing to estimates of a gas bonanza repeated by Lebanese politicians, El-Katiri said that until drilling begins, “one has to be very, very skeptical” about Lebanon’s potential hydrocarbon resources.
Lebanon was supposed to begin its first licensing round (whereby the country auctions off rights to explore for and potentially develop gas and/or oil in its territorial waters) in May. The round has since been delayed by the lack of a government, which still needs to approve decrees delineating offshore blocks and a model exploration and production sharing agreement. The decrees have been ready for months – prepared by the Petroleum Administration – and Caretaker Energy Minister Gebran Bassil repeatedly pressed the collapsed government to meet in a special session to pass them.
Caretaker Prime Minister Najib Miqati recently said that if no government is in place by September, he would have the caretaker cabinet convene to approve the decrees.
“Miqati’s suggestion is important. Progress [on oil and gas] shouldn’t stop because there’s no government,” Sami Atallah, director of the Lebanese Center for Policy Studies, told NOW.
“Without [the decrees], we’re in limbo,” he said.
An official with the Ministry of Energy – who spoke on the condition of anonymity in line with ministry rules concerning media coverage of the oil and gas sector – told NOW that the Petroleum Administration is studying options for what to do with any natural gas companies may find in the future.
The official added that, despite the uncertainty and delays, the Petroleum Administration is in talks with neighboring countries to explore potential exporting options.
“We’re in constant communication with Cyprus” in terms of teaming up on the LNG terminal, the official said, noting the PA is also talking with Turkey. He pointed out that should Israel also ultimately use the LNG terminal in Cyprus, “this would raise a lot of legal issues,” and might have to be scrapped because of the Lebanon’s boycott of Israel laws.
That said, the official stressed that “we need the decrees to move on.”
Asked if delays might leave Lebanon too far behind to benefit from big finds if they are out there, the Oxford Institute’s El-Katiri said, “economically, it could have benefitted Lebanon to have started earlier” with exploration and potential development.
However, “it’s not hurting anyone by leaving it there,” she added.
El-Katiri said that rushing to explore can lead to problems down the road, so delays are often helpful if the time is used to put a “sensible framework in place.”
For Lebanon, waiting has not been “time well spent,” rather “political back and forth,” she said.