The discovery of a giant gas field, Tamar, off the coast of Israel in 2009 opened up a new era for the Eastern Mediterranean as an energy hot spot, but regional politics stood in the way for some years. This could be about to change. Now, with Israel and the Gulf states finding common cause against Iran, several Arab leaders are breaking longstanding diplomatic taboos on Israel. Meanwhile, Washington supports an opening of Israeli gas exploration that could help Europe diversify away from Russian imports.

Israel’s proven gas reserves are estimated at some 455 billion cubic meters (bcm), where the Eastern Mediterranean in total has about 2100 bcm of gas. The EU’s consumption of gas in 2017 was 410 bcm, meaning that Israel’s reserves are enough to supply the EU for a short-term period.

UK-listed exploration and production company Energean Oil & Gas recently made a “significant” gas discovery in the Karish North of Israel. This area has an estimated 28-42 bcm of recoverable gas. Exxon and Qatar Gas have, since 2009, discovered another giant gas field off the coast of Cyprus. Italy’s Eni has found deposits off the coast of Egypt.

Exxon is also in discussions to build a platform to expand exports of Israel’s biggest natural gas field. The liquefied natural gas (LNG) ship would allow partners to export to countries not reachable with pipelines, and avoid the need to build expensive infrastructure to connect to LNG facilities in Egypt.

Meanwhile, Cynergy Group, an investment fund based in Cyprus, is looking to spend between $5 billion and $10 billion buying natural gas assets in the region. IGI Poseidon, a 50-50 joint venture between DEPA and Edison Energia, is about to start a detailed FEED (Front End Engineering Design) study at a cost of €70 million, to look at the technical and commercial feasibility of exporting Israeli and Cypriot gas to the one global market where imports are increasing steadily – the EU.

Several alternatives are being considered by Egypt, Cyprus and Israel to transport the energy to markets in Europe. One of two competing options will likely happen: the expensive and technologically complex EastMed pipeline or Egypt’s LNG facilities, including a subsea pipeline.

Israel is pushing for the EastMed pipeline to reap political and economic dividends by having a physical connection with mainland Europe. For this purpose, Israel, Cyprus, and Greece agreed in December to conduct a feasibility test concerning the pipeline, with financial support from the EU. The project would cost over $7 billion.

Israeli and Lebanese negotiators are due to meet, with Hezbollah’s blessing, at a United Nations base to agree a delineation of their sea border. The prize is access to newly discovered Mediterranean gas fields, which can only be safely exploited once the threat of war is removed.

Egypt’s energy and mineral resources minister Tarek el-Molla has been quick to respond and promote an alternative plan. Egyptian companies have already struck a $15 billion deal for the import of Israeli natural gas. Cairo intends to attract additional resources such as Cypriot gas to become the energy and LNG hub of the region.

Israel, primarily, has been focused on Cyprus’ participation in the EastMed pipeline, because of the increased economic viability of the infrastructure due to combined Israeli and Cypriot gas resources. Tel Aviv is aware of the competing, and more favourable, Egyptian offer, compared to its relatively expensive and technically challenging proposal.

Despite ongoing negotiations with Cairo, Nicosia is also continuing its cooperation with Tel Aviv and Athens on what could become the EastMed pipeline.

The US is in favour of the EastMed pipeline, as it would provide an alternative source of energy to the EU, where currently, Russia’s gas giant Gazprom dominates the market. China also investing in the EastMed LNG sector.

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