Event Reports

Energy Security and Regional Cooperation in the Eastern Mediterranean Rim

by Susi Doring Preston
The Konrad Adenauer Regional Program Political Dialogue South Mediterranean and the Konrad-Adenauer-Stiftung Israel organized a two day conference in Malta June 8 and 9, 2017. The conference on Energy Security and Regional Cooperation in the Eastern Mediterranean Rim hosted 16 participants from Germany, Turkey, Lebanon, Cyprus, Israel, Egypt, and Greece.
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The first day of discussions focused on the state of play: the development of new technologies and recent discoveries of gas fields in the Levant basin as well as the country presentations. In the welcoming remarks, Dr. Canan Atilgan, Director of the Regional Program Political Dialogue South Mediterranean of the Konrad-Adenauer-Stiftung, and Dr. Michael Borchard, Resident Representative of the KAS Israel, introduced the topic on a geopolitical level and highlighted the importance of functional cooperation in the region. Finding a realistic and sober approach to the opportunities and challenges of gas in the Eastern Mediterranean was the driving goal of the conference.

Panel 1: New Discoveries and Regional Cooperation: The State of Play

The moderator of panel 1, Eco Energy Financial & Strategic Consulting CEO Dr. Amit Mor defined the vital question: can those new discoveries be a catalyzer for economic cooperation or will they lead to more conflict?

Binyamin Zomer, Manager of the Israeli company Noble Energy Mediterranean Ltd. gave a brief overview of the growing Israeli energy market and the Tamar, Mari B and Leviathan gas fields. As stated in the explanations, the trust-building through first smaller deals and then increasing projects is essential to international cooperation. In addition to the already existing cooperation between Israel and Jordan, export potential can be seen in Egypt, Cyprus and Turkey. Mr. Zomer highlighted that energy should be understood as a tool that can cause damage through mismanagement but in competent hands, can offer opportunities for the creation of new jobs and cooperation. Mr. Zomer explained that in the work that Noble does, it is hard not to be optimistic when signing deals with Palestinians and Jordanians, not matter what size. That you see these relationships being built and it creates a sense of optimism for the region the room but the big question he has, is how one takes that optimism out of the room and help nurture it for regional stability. Answering participant’s questions, Zomer underlined the company’s willingness to cooperate with Europe and Syria after an end of the civil war. He explained that as a principle, no markets are dismissed; however some markets are more feasible than others. He also explained that the market is very dynamic and within a couple years, strategies can change for the region.

Dr. Harry Tzimitras, Director of the Peace Research Institute OSLO in Cyprus, emphasized the underlying political interests in the region and the amount of mistrust in politics: Dr. Tzimatras discussed how political agreements are tantamount to pipeline construction and in Cyprus these two issues are often mixed which is problematic because pipeline construction takes long term commitment political commitments often only last from one term to another. Dr. Tzimitras also pointed out that he does not feel that bodies such as the European Union speak in one voice regarding energy policy. He explained that for energy issues to move forward in the Easter Med, there needs to be unified voice for energy policy.

As Dr. Gareth Winrow, Head to the Department on Continuing Education at the University of Oxford stressed, the role of each player in the region in very ambivalent and thereby endangers the development of an Eastern Mediterranean pipeline: While it is far not clear whether Turkish constituency can keep up with the fast shift of policy, and despite massive gas discoveries, Egyptian stability is highly questionable. It is also worthy to consider that Russia might act as more than just a normal commercial player. Other political issues are the Israel-Lebanon, the Israel-Jordan and the Israel-Palestine relations, completed by the Gaza electricity crisis.

Regarding the EastMed pipeline that is meant to connect the main energy actors in the Eastern Mediterranean, Dr. Trimitras sees the need of first solving the Turkish-Cypriot issue.

Still, it remains questionable what company would take the risk in investing in a highly uncertain situation, as concluded by Dr. Karbuz.

Panel 2: Evolving Energy Supplies and Economic and Political Outlooks- Country Presentations

Panel 2 concentrated on the prospects and opportunities of the Eastern Mediterranean cooperation, particularly concerning Egypt, Cyprus and Israel.

The Director of the Hydrocarbons Division of the Mediterranean Observatory for Energy, expressed the major role Egypt may play in the next 15 years due to its rich gas fields. He also warned of the hardly foreseeable developments in the Israeli-Palestine conflict and pointed out the inevitable involvement of Russia.

In his input, Dr. Amit Mor, CEO of the Eco Energy Financial & Strategic Consulting, emphasized the high dependency and following the importance of the Tamar fields to Israel by reminding the table of the Lebanon war. He furthermore asked if the infrastructure should rather be onshore or offshore, depending on whether the main part of the production goes to export or domestic use, thereby the forecast of electricity demand is more important than ever. Indeed, Israel struggles with a lack of competence and the high uncertainty regarding the EastMed pipeline and is exploring all possibilities regarding export, but, according to Dr. Mor, it would be recommendable to focus on the internal market.

Dr. Charles Ellinas, CEO of the E-C Cyprus Natural Hydrocarbons Company Ltd. on the other side called for a focus on facts instead of opinions, as conditions change rapidly. An example given is the development to low carbon energy due to low oil and gas prices. He stressed that, in point of fact, prices are the key factor in the energy market. Moreover, the Russian low energy price can barely be undercut; as a result, Russia remains the most attractive energy partner for the EU. After all, energy projects must be well-integrated in order to meet the market’s demands. Dr. Ellinas sees LNG as the future of the regional energy cooperation.

Panel 3: Evolving Energy Supplies and Economic and Political Outlooks- Country Presentations

Panel 2 concentrated on the prospects and opportunities of the Eastern Mediterranean cooperation, particularly concerning Turkey, Lebanon and Cyprus.

Founder and CEO of the Global Resources Partnership presented the Turkish perspective by explaining the comfortable position of Turkey not being driven by gas but more by geopolitical interests. Still, according to him, the dependency to Russia must be decreased. He also warned of relying too much on long-term projections as the market changes rapidly.

Chief Operating Officer of Petroleb, asked for a less market-orientated perspective. He pointed out the importance of domestic economies that should be supported first and demands a broader discussing, considering also the Chinese and the American involvement in energy market through the shale gas industry.

As the Eastern Mediterranean gas deals stagnate and gas has more and more being exploited at negotiation tables,. Dr. Hayriya Kahveci Ozgur, Assistant Professor at the Middle East Technical University Northern Cyprus Campus, asked to think outside of the box when considering natural gas outlets. He commented that it cannot be seen as favorable to only rely on one energy producer in order to avoid a too high dependency.

In the following discussion, the opportunities for an involvement in the European energy market were debated. Dr. Tzimitras uttered his regret that the chance of finding a solution to the Cyprus conflict has been missed in the last years. Yet, that the political solution should not only depend on the energy issue.

Panel 4: The Role of External Actors in the Energy Field in the Eastern Med

One of the main issues in current energy market developments is the striking decline of energy prices and the fierce competition, not only between companies but also between different energies such as nuclear power, gas, oil and renewable sources. The main challenge is to provide a competitive response to large scale funding for requited energy projects in the upcoming decades, according to moderator Shimon Serrousi, Co-Director of Eco Energy Financial & Strategic Consulting, brought up the factors in the changing face of the energy market and discussed how the regional cooperation of the Eastern Mediterranean will be funded and how much international capital, policy and governance will be required.

Charlotte Brandsma, Program Officer in Mediterranean Policy of the German Marshall Fund reported the aspirations of international powers in the Eastern Mediterranean. She threw a glance at the two principal external actors in the region, the United States and Russia. She discussed how the Trump administration is concentrating on more unilateral relations and is considered less humanitarian than previous administrations which affects American policy and makes it more security and market driven. This shift affects Russia and Russian engagement is barely foreseeable and considered a risk especially as it is not interested in a stable East Med and may not help create a favorable geopolitical environment. Concluding, Mrs. Brandsma highlighted the Russian interest in investing in the energy market, but its lack of contribution of peace and prosperity in the region.

Answering to a participant’s question, she clarified that the buzzword “resilience” EU has focused on promoting human rights but failed and now the EU follows much less ambitious goals: going back to more functional roles instead of this grand strategy of helping the region. However, the EU is positioning itself as a stable and reliable partner.

Regarding a question concerning the US withdrawal from the climate agreement, she does not see a significant influence on the energy market.

Dr. Frank Umbach, Research Director at the European Centre for Energy and Resource Security at the King’s College London, gave an input about the EU energy supply and strategic interests. The major challenges of EU energy policies are the security of (gas) supply, economic competitiveness and environmental, as well as climate, protection challenges. Europe has great unused gas storages and accordingly is obliged to import but struggles to find the right balance in the “Energy Trilemma”: decarbonization against diversification of energy sources against the aim to find the lowest price. Still, the Russian gas prices cannot be undercut; Russia has subsidized it’s gas for geopolitical reasons and furthermore, Gazprom effectively defends its market shares, so the US LNG export meets serious obstacles. The conditions, as he remarked, keep changing and lead to high uncertainty. Different investments were discussed; finally Dr. Umbach concluded determining that energy and energy prices will remain source of conflict in the region.

Commenting on the coordination of energy policies with EU states and with Brussels, Dr. Umbach saw a failure of the Germans to take the lead of energy policy issues for the EU.

Panel 5: Outlook: Towards Peace or Conflict?

Dr. Athanasios Dagoumas, Assistant Professor at the Energy and Resource Economics ath the University of Piraeus, highlighted the critical role of the EU and underlined energy diversification as the main argument for the EU to be interested in energy from the Eastern Mediterranean. He furthermore named the key factors affecting the decision making in the Eastern Mediterranean being techno-economic feasibility and less political. Asked for a forecast about the next 15 years, Dr. Dagoumas sees Egypt as a major player.

Nadav Perry, Head of External Relations at Delek Drilling, provided a slide the vision of the Israeli Gas Sector, a post gas framework, outlining the different Drilling fields on the Mediterranean. According to him, potential markets for Delek Drilling are Jordan, an ideal export off taker thanks to already existing agreements and infrastructure that can be enlarged; and Egypt, using infrastructure, which has not been used since 2011, still could easily be reactivated. He also noted Turkey’s potential, being highly developed and dependent to imports.

Referring to Delek’s vision, Mr. Perry does not rely on political decision makers but rather would create prosperous partnerships and sees the prospects for an Israeli-Turkish pipeline entirely in the hands of Turkish decision makers.

Dr. Ahmet K. Han, Assistant Professor at Kadir Has University, discussed the role of different players in the world: China, globally strengthening its economic involvement as well as Russia, insistently claiming its influence as a global player; and Turkey, already being influential and broadening its potential. Dr. Han discussed Turkey’s geopolitical temperament in the region: according to him, cooperation with Turkey is most promising when joint with economic benefit.

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