Home' Trinidad and Tobago Guardian : January 30th 2014 Contents BG20 | THE ECONOMIST
BUSINESS GUARDIAN www.guardian.co.tt JANUARY 2014 • WEEK FIVE
Are governments in the Levant fooling their people with
false promises of an offshore gas bonanza?
From the proceeds Lebanon hopes to fund a bullet train
that will end Beirut s traffic snarl-ups. Across the water the
Cypriot government has equally grandiose plans: By 2020 a
vast new complex in Vasilikos, on Cyprus southern coast, is
supposed to start shipping liquefied natural gas to Europe and
even to Asia, salvaging the country s finances. Gas reserves,
Cypriot optimists say, amount to 96 trillion cubic feet.
Most oil analysts say that this is all wildly over the top,
however. Even Israel, whose development of offshore gas is
most advanced, is unlikely, they reckon, to start exporting
large amounts by 2020, as it hopes.
The skeptics say that the main brake is a lack of regional
cooperation, rather than a shortage of oil and gas. The Amer-
icans official Geological Survey estimates that from Gaza s
coast to southern Turkey the eastern Mediterranean holds 122
trillion cubic feet of gas, comparable to the reserves of Iraq.
Lebanon s caretaker government lacks the authority to pass
the legislation needed to persuade foreign oil companies to
start drilling, however, and a heralded auction is again likely
to be delayed. America s effort to mediate over a disputed
maritime boundary between Lebanon and Israel is stalling
progress. The civil war in Syria is scaring away big oil companies,
and drilling off the Lebanese coast has yet to begin.
Drilling has begun off Cyprus, but estimates of the amount
of gas and oil to be found there have been inflated too. Delek
Drilling and Avner Oil, two Israeli firms involved in exploration,
say that Aphrodite, Cyprus only proven gas field, has reserves
of only 4.1 trillion cubic feet, barely enough to meet long-
term local demand.
Oil companies, including Italy s Eni and France s Total, may
find more gas there. If not, Cyprus natural-gas venture will
depend on getting it from elsewhere, perhaps from Israel s
Leviathan field. In any case, Cyprus and Turkey both claim
some of the same stretches of water. The Israelis, for their
part, have prevented the Palestinians from developing Gaza
Marine, a field off the coast of Gaza where BG, formerly British
Gas, found gas a decade ago.
Israel alone is romping along. It has verified finds of 35
trillion cubic feet. Noble, an American company that so far
has dominated Israel s production, says that gas from its Tamar
field, which began flowing this year, already supplies 45 per
cent of the country s electricity. Development of the much-
larger Leviathan field, farther west, is slow, however. Fearing
an outcry over the sale of public assets, Israeli ministers have
delayed the timetable.
There are other obstacles. Asian buyers, who tend to pay
the highest prices, are reluctant for security reasons to ship
Israeli gas through the Suez Canal. Turkey, whose energy needs
are soaring, might have been an attractive export market for
Israel. Construction of a pipeline on the seabed between Turkey
and Israel could prove more profitable than a natural-gas plant,
says Robin Mills, head of consulting at Manaar Energy, an
advisory firm in Dubai, because upfront costs are lower and
Turkish gas prices quite high.
However, such a pipeline might have to pass through waters
officially recognised as belonging to Greek Cyprus and the
Turkish-ruled north of the island, so an agreement with both
would be needed. That would be tricky. An alternative route,
under Syrian and Lebanese waters, would be trickier still.
In any case, Israel is loth to strike an export deal with Turkey
at a time when that country s foreign policy has become unpre-
dictable and the prickly Prime Minister Recep Tayyip Erdogan
could turn off the tap whenever he feels piqued. An Israel-
Cyprus deal could make matters worse.
Egypt s decision to discard a Mubarak-era agreement to
supply 40 per cent of Israel s gas serves as a warning against
doing business amid unresolved conflicts.
"Without peace with the Palestinians," former Israeli Energy
Minister Josef Paritzky says, "we can t sell our gas to Egypt,
Jordan, Turkey and, who knows, maybe even to the Euro-
Tangled in red tape and regional disputes, even oil companies
in Israel may flag. Woodside Petroleum, an Australian firm
with natural-gas expertise, still is pondering an ambitious
plan to build a floating LNG platform. Noble lacks the capacity
to go it alone. Few developers will invest without secure long-
term contracts, and buyers in Asia, the best market, are banking
on getting an alternative deluge of gas from new finds in the
Without exports, regional prospects are less sunny. Plowing
billions of dollars into platforms, rigs, offshore pipelines or
costly LNG plants is feasible only if drillers are confident of
shipping gas to foreign markets.
@2014 The Economist Newspaper Ltd. Distributed by
the New York Times Syndicate
How much Mediterranean
oil is waiting to be found?
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