The term “Eastern Mediterranean Gas Diplomacy: Rethinking in Turmoil” refers to the intricate geopolitical dynamics surrounding natural gas resources in the Eastern Mediterranean, which has been a significant focus for energy-related diplomacy, disputes, and negotiations in recent years.
The Eastern Mediterranean, a region with significant natural gas reserves, has been a focal point of geopolitical tensions between neighboring countries, including Israel, Cyprus, Greece, Turkey, and Egypt. These disputes involve issues related to maritime boundaries, sovereignty, and resource sharing. Cyprus, a part of the region, has been a focal point of tensions due to its division into the Republic of Cyprus and the Turkish Republic of Northern Cyprus.
Turkey has been assertive in the region, sending exploration vessels and warships to disputed waters and clashing with Greece and Cyprus over maritime boundaries. Diplomatic initiatives, including talks between Greece and Turkey and negotiations between Cyprus and its neighbours, have aimed to ease tensions and find a peaceful resolution. Energy alliances and partnerships have formed between countries in the region to jointly develop and export gas resources.
Diplomatic activity between Cyprus, Egypt, Israel, Lebanon, and Turkey has largely been driven by the discovery of economically viable natural gas deposits in their exclusive economic zones. Israel now produces 75% of its electricity with domestic natural gas, Egypt produces gas for domestic and export needs, and Cyprus is poised to join the gas bonanza with promising finds. However, strategic conflict with Turkey limits potential reserves.
Since 2020, Israel, Egypt, and Jordan have significantly enhanced their economic infrastructure, with 70% of Jordan’s and a significant part of Egypt’s electricity coming from Israeli gas. The European Union’s efforts to diversify their gas and oil sources, following the Russian invasion of Ukraine, offer an opportunity for Europe to access the Mediterranean as a readily accessible gas source. Gas has become a major force for interstate cooperation and competition in the sub-region, with numerous significant diplomatic and economic developments affecting the littoral states. Gas geoeconomics has strengthened the emerging geopolitical alignment between Greece, Cyprus, Israel, Egypt, and the Gulf States, as well as enabled negotiations and agreements between warring parties in Lebanon and Gaza.
The gas export possibilities of Eastern Mediterranean producers are limited by geography, with no existing land-based or undersea pipeline to potential customers in Europe. The EastMed pipeline, connecting Israel’s gas fields to Cyprus, Greece, and Italy, seems dead in the water, with significant security and technical challenges. Policymakers will seek to avoid being locked into major projects like pipelines that need long-term supply contracts to be viable.
Liquified natural gas (LNG) is a flexible and cost-effective alternative to pipelines, but it requires liquefaction plants on the exporter side and regasification plants on the importer side. The only liquefaction plants operating in the Eastern Mediterranean are those in Idku and Damietta, on the Egyptian coast, with a maximum production of approximately 17 billion cubic meters a year. For the foreseeable future, all gas pumped in Israeli waters and not earmarked for domestic use must be exported by pipeline either to end-users in Jordan or to Egypt for local use or liquefaction. This forms a bottleneck for Israeli and future Cypriot exports and makes Egypt the current hub of Eastern Mediterranean gas infrastructure.
Egyptian domestic demand for gas has surpassed production in 2023, leading to power cuts and extended periods without gas exports. Egypt has been saved from an even more serious gas shortage by record imports from Israel, with much of the piped Israeli gas being used domestically and relatively small amounts being liquefied and shipped on. Egypt’s petroleum minister predicted this year’s income from LNG exports will be half of 2022’s record $8 billion due to lower volumes and lower gas prices.
Israeli and Cypriot companies seek an LNG export channel independent of Egypt for reasons such as redundancy, concerns about domestic gas divergence, and the option to export directly to European and other consumers. There are also significant problems regarding the timely payment of debts and receivables by Egypt. In recent years, major international fossil fuel companies have entered the region, comprising the operators of the fields and in many cases, the major shareholders. While national governments have interests and desires, their fulfilment is predominantly dependent on the business considerations of these foreign companies.
As a sign of the greater regional significance of Eastern Mediterranean gas, major players in the Gulf are penetrating the market. Abu Dhabi’s national oil company, ADNOC, and BP are in negotiations to buy 50% of Israel’s NewMed gas company, which holds 45% of the Leviathan gas field and 30% of Aphrodite. Abu Dhabi’s Mubadala owns 11% of Israel’s Tamar, and QatarEnergy holds 30% of the Qana concession being explored in the Lebanese EEZ.
Israel has over 940 bcm of proven gas resources, including 600 bcm in Leviathan, 300 bcm in Tamar, and 10 percent in Karish and other northern fields owned by Energean. Over half of this is earmarked for domestic use. In 2022, Israel produced 22 bcm/year, with 12.7 going to the domestic market and 9.2 bcm to export. Israel’s Energy Minister Yisrael Katz praised Israel’s ability to export gas as an “emphasis” on its status in the region and the world. Israel is required to export 3 bcm a year to Jordan through 2035 and 6-7 bcm/year to Egypt, with 400 bcm total for export until the reserve is exhausted.
In August 2023, Katz approved increased export levels to Egypt, which needs more for domestic use and liquefaction and export. The Tamar field will be allowed to export 68.7 bcm over the next eleven years, while Leviathan partners have requested a doubled export ceiling. Increasing exports to and through Egypt requires additional pipelines in and from Israel. The Israeli Finance Ministry opposed Katz’s decision, citing concerns about oligopolistic Israeli and foreign entities enriching themselves with “sovereign national assets,” foreign control of “sovereign gas,” governments handing over sovereign national territory to foreign governments, and government “feebleness” facing tycoons and multinationals.
Supporters of export expansion in Israel argue that the country’s current gas reserves will suffice until 2048, despite rising domestic demand and a possible doubling of allowable yearly exports. They believe restricting these reserves could deter international firms from further developing Israel’s resources, harm the local market, and leave Israel with stranded gas assets in future decades. Netanyahu chaired a meeting on gas export policy on August 27 and ordered the formation of an interagency team to formulate a plan that would “give horizons to the companies, and assurances for the local economy.”
Recent Israeli moves stem from two internal political drivers: the current Israeli government’s pursuit of high-profile foreign policy successes and the rotation of jobs by Katz and Foreign Minister Eli Cohen in January 2024. Israel and Egypt closed bidding rounds for new offshore exploration blocs on July 16, 2023, with four consortia submitting six bids for licenses from Israel. The Israeli Energy Ministry aims to bring new companies into the sector to prevent overconcentration of market control in the hands of existing producers.
Cyprus’ position as the only EU state with untapped gas reserves has swung into focus in the past year, as it understands the need to translate its gas potential into reality. Talks between Israeli officials and their peers in the newly minted Christodoulides government have focused on a 300 km pipeline connecting Israel’s marine platforms to gas liquefaction facilities to be built in Cyprus. This would help reduce electricity costs in Cyprus, which are much higher than the EU average.
The Cypriot government has rejected Chevron’s Aphrodite Development Plan, which was modified from a 2019 agreement with Noble Energy. The plan reduces well numbers from five to three and abandons floating production units over the field, instead piping gas to existing Shell infrastructures off Egypt. The Cypriot government claims these changes benefit the companies but reduce long-term gas extraction volumes and potential revenue.
Cyprus must be careful not to leave its gas on the bottom of the sea, as Aphrodite, its most mature field, was discovered in 2011 and has not been utilized until now. Chevron and its partners have other options in the sub-region, but first gas is not expected before 2027-2028. Turkey has been excluded from the gas “gold rush” due to its intractable conflict with Cyprus, its tense relationship with Israel between 2010 and 2022, and its not discovering any gas deposits in its Mediterranean waters.
Since the renewal of full Israel-Turkish diplomatic relations in 2022, Turkey has been talking up gas cooperation with Israel, raising the idea of a pipeline from Israel’s gas fields to Turkey. This would enable Turkey to import Israeli gas for its needs and promote Turkey’s desired role as a major transit hub of oil and gas from the Eastern Mediterranean, the Caucasus, and Central Asia to Europe.
A pipeline from Israeli production facilities to Turkey would be problematic due to the need to transit the Exclusive Economic Zone (EEZ) of Cyprus, which has longstanding tensions with Turkey. The pipeline would also intersect the EEZ of Lebanon and Syria, which is formally in a state of war with Israel.
Israeli officials have been discussing competing concepts with Cypriot and Greek officials, as well as Turkish ones, in recent months. Netanyahu met with his Cypriot and Greek counterparts on September 3-4 and announced a decision will be made in the next three to six months regarding future Israeli gas exports. However, he has instructed the inter-ministerial team on gas exports to consider the construction of an underwater pipeline from Leviathan to Turkey.
Exploration activity began in late August 2023 in Lebanon’s Block 9 (“Qana Prospect”), straddling the maritime border between Israel and Lebanon. The lease, held by Total, ENI, and QatarEnergy, was made possible by a maritime border deal signed in November 2022 under American auspices. Gas production would occur on the Lebanese side, with Israel compensated for gas extracted from its side by Total under a side deal.
Israel announced in June 2023 that it had begun cooperation with Egypt and the Palestinian Authority to develop the Gaza Marine field, discovered 30 km off Gaza in 2000. The Palestinian Authority will shAare in the profits, but it is unclear how these will be shared with Hamas, which has controlled the Gaza Strip since 2007. Israel and Egypt would oppose Hamas directly securing a slice of any gas revenues. The Eastern Mediterranean has been a late adopter of the fossil fuel rentier economy, with public and elite opinion urging advanced economies to invest in renewable energy sources and talk of phasing out fossil fuels by mid-century.
High fossil fuel prices, supply shocks from the Russo-Ukrainian War, and OPEC+ production cuts have impacted international investors’ willingness to enter new major projects in fossil fuels, such as pipelines. Pipelines lock countries into long-term dependence on specific suppliers, putting them at risk of having stranded assets. As a result, Eastern Mediterranean countries are keen to get their gas to market as quickly as possible, which has been strengthened by the jump in gas prices over the past two years.