Another Game Changer?

  • Date: 05/01/13
  • Nick Grealy, No Hot Air

The discovery of sizable gas resources in the Levant Basin, a geological structure that straddles the territorial waters of Cyprus, Israel, the Palestinian Territories, Lebanon, and Syria, has the potential to be game-changing for the East Mediterranean region.

The Little Britain opponents of UK shale appear desperate to save their part of the planet while ignoring any implications of global energy industry trends on the rest of it. A constant objection by FOE and WWF is that shale must stop because it will upset UK climate targets (not actual emissions as we’ll see in an upcoming post). So to those who think this post only concerns far away countries of which they know nothing and care less, stick to the end.  

Proving shale gas isn’t everything and conventional natural gas still has a lot of life left in it, i.e. bang goes the peak conventional gas theory, a recent study by Oxford Institute of Energy Studies asks the question East Mediterranean Gas: What kind of Game Changer? The title infers it at least could be a game changer. A refreshing change from an OIES study of over two years ago which asked a similar question about European shale and gave any number of reasons why not.

I admit to more interest in the decade’s other big discovery, offshore East Africa, than gas in the literally explosive area of the Eastern Med. For those who’ve missed the African story:

Eni SpA and Anadarko Petroleum Corp. agreed to build the world’s second-largest liquefied natural gas plant in Mozambique to start exporting fuel in 2018.

Italy’s largest oil company and Anadarko will coordinate development of gas fields and cooperate in the construction of the plant in the Cabo Delgado province of northern Mozambique, which could have an eventual capacity of about 50 million tons a year, The Woodlands, Texas-based company said today in a statement. That would make it the largest LNG plant outside Qatar, the world’s biggest exporter of the fuel.

50 million tons of LNG is something the world LNG industry needs like a hole in the head. The story of only ten years ago was natural gas in short supply everywhere, even in the US which would be supplied by Qatar, escorted out of the Gulf by the Sixth Fleet. Whimper went that theory, as the US didn’t need any LNG after shale, which meant Qatar had to sell it to either Japan or Europe. Then Australian LNG emerged, aimed at Japan and setting up a price war with Qatar. In the meantime, the US and Canada start planning exports. Fortunately Qatar is a tiny place, anyone else would have declared war by now. To add insult to injury East Africa LNG emerges aimed at the strongest Qatari markets left, India and SE Asia. Thailand’s PTT has already bought up a chunk of the discovery. I haven’t even mentioned emerging African and Australian shale industries. What could be worse for both Qatar in particular and expensive gas fans in general? How about this?:

The discovery of sizable gas resources in the Levant Basin, a geological structure that straddles the territorial waters of Cyprus, Israel, the Palestinian Territories, Lebanon, and Syria, has the potential to be game-changing for the East Mediterranean region. Hitherto net energy importers, these countries are now faced with the prospect of long-term energy self-sufficiency and the development of a new revenue stream for the economy. With the resource potential of the Levant Basin believed to be much higher than the 35 Tcf of gas discovered recently, the East Mediterranean is now the focus of much interest on the part of major upstream investors.

It’s intriguing how energy can bring together enemies. Build something really, really big, and suddenly people with even a small share have an incentive to preserve it. It’s worth recalling how upset the US was over German imports of Soviet Gas, yet the only interruptions to supply started after the fall of the CCCP. During the entire madness of the Cultural Revolution, the only part of China that functioned with no interference was the oil industry.Today, the other unlikely prospect is Russia to South Korea via North Koreagas. So if that can work (I think it’s inevitable  but don’t ask me for a date), surely this project could? In fact we’ve already seen the only thing Israel and Gaza successfully negotiate has been off shore exploration. The conventional wisdom of left/greens is oil and gas causes conflict, but the reality is it more often gets implacable enemies talking.  Ever since spooky friends told me even the Taliban were on board about theTAPI pipeline, I’ve been thinking perhaps the Levant Basin might work, despite initial misgivings that building flammable infrastructure in the area was asking for trouble. In this area, Israel, Palestine, Lebanon, Syria and Gaza are the least of worries.

levantbasin

Northern Cyprus claims large sections of the East Mediterranean offshore on the northern side of the island as international interest in Cyprus’ hydrocarbon resources has grown. Both the governments of Northern Cyprus, and of Turkey, have called for a halt to current hydrocarbon exploration and development efforts offshore Cyprus until a comprehensive political settlement has been found for the island. Turkey has repeatedly issued statements that the Turkish-Cypriots ‘have equal and inherent rights over the natural resources located on the whole continental shelf of the island’

Throw in further confusion as Egypt is the supplier via the same pipeline of some of its own offshore gas to Israel, Jordan Lebanon and Syria, underlining my point of energy creating strange bedfellows.That gas has been interrupted by various bomb blasts in the Sinai and pricing issues. That leaves Lebanon and Cyprus almost 100% dependent on oil for electricity, so for the greens, going gas saves 30% CO2, and for everyone else it’s a huge amount of money, Lebanon alone uses 15% of GDP on oil for generation imports. At the same time, gas shortages have led to power cuts of up to ten hours there and even in Israel. Before anyone asks, Lebanon’s energy plan fo 2030 sees gas at 66% and renewables at 12%.That makes an interesting aside: if Lebanon and Cyprus currently use oil, the most expensive way of producing power bar none, shouldn’t that give a far greater incentive than the UK or Germany have for example, to implement renewables? Why aren’t they? Could it just be that renewables, even in a low latitude, sunny and mild climate, simply aren’t ready for prime time even with the greatest incentives? Israel is also one of the most scientifically advanced societies going, but their plans are similar. Just noticing.