Asset Publisher

Event Reports

Natural Gas Developments in the Eastern Mediterranean: Geopolitical & Economic Challenges

The European Centre for Energy and Resource Security (EUCERS) at King’s College London organized together with the Atlantic Council U.S. (ACUS), ECO Energy Israel and the Konrad-Adenauer-Stiftung Israel (KAS Israel) a two-day workshop in Jerusalem on May 19-20, 2015. The workshop was hosted in partnership with the Haifa Research Center for Maritime Strategy at the University of Haifa, Truman Institute at The Hebrew University and MITVIM - The Israeli Institute for Regional Foreign Policies.

Asset Publisher

The workshop was organized to explore the opportunities and challenges for the gas findings in the Eastern Mediterranean Levant Basin, which holds an estimated 3.45 trillion cubic meters of natural gas and 1.7 billion barrels of oil. The potential benefits of this find are manifold: A new income stream for the debt-plagued economies of the region; an additional and relatively clean source of energy for one of the world’s largest consumers – Europe; and energy independence for a number of smaller states that would otherwise continue to be almost wholly reliant on foreign imports. Unfortunately, the large discovery has also heightened political tensions in the region. Natural gas finds off the coast of Cyprus have exacerbated relations between Greek and Turkish Cypriots while Israel and Lebanon are in a maritime border dispute in which both countries have declared overlapping boundaries in the Mediterranean Sea. Moreover, the relationship between Turkey and Israel has come under additional strain, as a result of the latter’s cooperation with Cyprus.

In the evening of May 19, 2015, the partners welcomed Hildegard Müller for the keynote speech. Müller is the Chairwoman of the General Executive Management Board of the German Association of Energy and Water Industries (BDEW) and President of the German-Israeli Trade Association. Dr. Michael Borchard, Resident Representative of KAS in Israel opened the session by welcoming 30 participants from Israel, Britain, Germany, Cyprus, Turkey and Budapest. Dr. Borchard discussed the possibility of energy being put right in the middle of the conflict and has the potential to become a game changer for the region. Dr. Amit Mor, CEO of Eco Energy Financial & Strategic consulting and Visiting Professor at IDC in Israel, took up this point and referred to the energy in the Eastern Mediterranean but also the energy Jerusalem has in terms of culture and buzz. Dr. Mor then passed the word to Professor Pflüger who welcomed participants and partners and expressed how delighted he was to be back in Israel and meet such a great round to discuss Eastern Mediterranean gas and the prospects for regional cooperation over the next two days. He raised the question if the gas findings will be a benefit or curse for the region. Professor Pflüger referred to the example of Russia and Germany and the gas pipeline deal in the 1970s. The building of pipelines and establishing a long-term project contributed to security in the – back then – unstable relationship between the two countries. With this food for thought Professor Pflüger introduced Hildegard Müller.

Keynote by Hildegard Müller, Chairwoman, General Executive Management Board, German Association of Energy and Water Industries (BDEW)

The overall topic of Ms. Müller’s keynote was the importance of Eastern Mediterranean Gas for Israel and Europe. She began her keynote by describing the relationship between Israel and Europe and their linkage – not only from the past but also for the future. The discovery of Eastern Mediterranean gas is not only important economically and geopolitically for the region but it could also mean a deeper link for Israel and Europe in the future. With a growing dependence on energy imports and in the face of increasingly tense political relations with Russia, the EU is developing plans to diversify its energy supply and the Eastern Mediterranean was identified by the Energy Union as a strategic partner, said Müller. As the cleanest fossil fuel, Gas is relevant for Europe also in order to contribute in achieving its climate targets. Therefore, Eastern Mediterranean countries and especially Israel is an attractive strategic partner, however, considering political uncertainty and the small volume of gas at the moment (with current levels of 100bcm per annum in the Eastern Mediterranean), the relationship is yet to be defined. In order to consider natural gas transport to Europe, large investments for infrastructure must be financed, which might prove difficult with the current political tensions and the vulnerability of pipelines as terrorist targets. Another option discussed by Ms. Müller was LNG development. The higher prices achieved for LNG in Asia however, could make it a more attractive market for Eastern Mediterranean gas than Europe.

Ms. Müller concluded with an overview of opportunities and challenges. Opportunities are to deepen the relationship between Europe and Israel and to bring stability and prosperity to the region as well as diversifying the European natural gas supply. Challenges are the political tensions in the region and that quantities currently produced are too low to serve the domestic demand and export to Europe. Another issue is the future of gas in the energy mix around the world in general. These issues also formed part of the discussion with dinner guests afterwards.

20. May 2015, Konrad-Adenauer-Stiftung, Rabbi Akiva 8, Jerusalem 9107901, Israel

The dinner speech the previous night left participants with enough food for thought and the organizers and participants were looking forward to an exciting roundtable discussion spread over three sessions. Dr. Borchard welcomed participants to the KAS office in Jerusalem where the workshop was held. Professor Dr. Harry Tzimitras, Senior Fellow at ACUS and Director of the PRIO Cyprus Centre set the scene for the discussion. Dr. Tzimitras urged participants to remain realistic regarding production levels and time scales and to think in a pragmatic way. This was followed by Dr. Nimrod Goren, founder and chairman of Mitvim - The Israeli Institute for Regional Foreign Policies, who raised the question on how geopolitical and economical issues can go together and the role of natural gas as engine for regional cooperation. Dr. Goren also pointed out the question of ownership of natural gas in the Eastern Mediterranean. Dr. Aviad Rubin, Co-Director at Haifa Research Center for Maritime Strategy at the University of Haifa, elaborated further on ownership of natural gas in the Eastern Mediterranean and maritime domain issues.

Panel I - Geopolitical challenges: How can natural gas promote regional cooperation?

Dr. Amit Mor, CEO of Eco Energy Financial & Strategic consulting and Visiting Professor at IDC, opened the panel by pointing out that currently, the discovery of natural gas in the Eastern Mediterranean are moderate in global terms.. and therefore, can only serve the domestic market, but potential exploration could mean for Israel to also export natural gas. This would be especially interesting in light of recent developments in the last few years and the Arab Spring, whichchanged the balance in the region. Israel changed roles from being an importer of natural gas from Egypt to a potential exporter of natural gas to Egypt.

Dr. Mor then introduced Dr. Adnan Vatansever, Senior Lecturer at King’s College London and Associate Director of EUCERS. Dr. Vatansever raised two major questions: Can natural gas generally contribute to cooperation or conflict and what are the implications of the Eastern Mediterranean gas discoveries? Regarding the first question, Dr. Vatansever pointed out that the emergence of conflicts in the aftermath of a major discovery of hydrocarbons might have to do more with crude oil rather than gas. Natural gas is less prone to be plundered as a resource, and requires much closer coordination among various stakeholders. Examples of cooperation in relation to natural gas are Europe and the USSR (subsequently Russia) as well as Russia and Turkey. The second question deals with the impact of Eastern Mediterranean gas discoveries. He noted, the timing of a discovery is crucial. From an economic standpoint, the timing appears good, as Egypt, formerly a major gas supplier of the region, has become unable to continue its role--at least for now. However, from a political standpoint, there is rising polarisation in the region, which could result into obstacles of project development in the Eastern Mediterranean.

Dr. Ehud Eiran of the Center for Marine Strategy & Division of International Relation at the University of Haifa gave the next introductory statement. Dr. Eiran focused on the maritime domain disputes and gave an overview on the history of Israeli-Lebanese maritime disputes. Israeli-Lebanese boundaries are not clear and influence exploration rights in the Eastern Mediterranean. This point was also taken up by Dr. Alon Liel, former general director at the Israel Ministry of Foreign Affairs and Charge D’Affairs at the Israeli Embassy in Turkey. Dr. Liel points out that a new peace agreement is not in plan and the instability in Egypt is a threat for regional stability. The example used of the vulnerability of energy projects is the pipeline connecting Egypt and Israel which has been attacked 15 times. Dr. Liel views the notion of an energy resource to be used as a political instrument as an illusion.

Panel II - Economic opportunities for the eastern Mediterranean: Israel’s prospects of exporting gas to Egypt, Jordan Palestinian Authority & Turkey

After the coffee break, the second panel discussed economic opportunities of natural gas in the Eastern Mediterranean and was moderated by Professor Dr. Harry Tzimitras, Senior Fellow at ACUS and Director of the PRIO Cyprus Centre. Dr. Tzimitras introduced Professor Eytan Sheshinski, Sir Isaac Wolfson Emeritus Professor of Public Finance at The Hebrew University in Jerusalem, who gave an overview of global trends in terms of natural gas and energy prices. Professor Sheshinski focused on the structural, regulatory and monopoly issues in Israel and how the Israeli market has to be reformed to exploit Eastern Mediterranean gas most economically.

Ofer Oberlander, Economist and Project Director at Delek Drilling LP,gave us a practical insight and an overview of natural gas projects. Delek Drilling operates in the Eastern Mediterranean and the largest, private project is Tamar. Although it is entirely private, the project still needs political approval and has been delayed by regulatory issues. According to Mr. Oberlander, the main challenge for natural gas projects in the Eastern Mediterranean is the financing and building of infrastructure to connect the gas reservoirs.

Dr. Amit Mor, CEO of Eco Energy Israel Financial & Strategic consulting and Visiting Professor at IDC in Israel, came back to the point of investment in energy infrastructure. With the current political situation, attracting investment is not an easy task, said Dr. Mor.

Former CEO of British Gas, Kanat Emiroglu, today Chairman of the Board for Global Enerji and Senior Advisor to BCG's worldwide energy practice in Turkey, discussed the role of Turkey. Mr Emiroglu views the developments of natural gas in the Eastern Mediterranean as a benefit Turkish-Israeli relations and believes Turkey will play a significant role as a hub of Eastern Mediterranean gas was to be exported.

Panel III - Implications for US/Europe: Which countries set to benefit most from eastern Mediterranean gas exports?_

After lunch, the third panel on the implications for Europe and the US was moderated by Kanat Emiroglu, Chairman of the Board for Global Enerji and Senior Advisor to BCG's worldwide energy practice in Turkey. He introduced Dr. Frank Umbach, Research Director at EUCERS. Dr. Umbach’s presentation gave a global outlook of natural gas markets, with a focus on European diversification options. In his presentation, Dr. Umbachhighlighted the co-dependence of politics and energy projects. An example are theLNG developments in the U.S. If the democrats win the election, there will be likely more support LNG projects which would form a counterweight to Russia. On the other hand, Russia is also looking for other natural gas export markets considering that Gazprom has an annual over production of 100bcm. Dr. Umbach also pointed out in his presentation that demands for natural gas in Europe are stagnating and may be decreasing over the coming years. This is due to strategies to alternative supplies such as renewables and energy efficiency measurements. What that means for natural gas from the Eastern Mediterranean is that the successful development of natural gas projects is not only due to infrastructure but also timing: whichever project is developed first might kill other projects as demand is not unlimited.

The day was concluded with a round-up of Dr. Michael Borchard, Resident Representative, KonradAdenauer-Stiftung in Israel and Professor Dr. Friedbert Pflüger, Director, EUCERS King’s College London. Both agreed that all presentations during the workshop were substantial and important remarks were made during the discussions. The main points in relation to natural gas in the Eastern Mediterranean are the on-going political tensions in the region and the unclear boundaries iof the Eastern Mediterranean. These points make the area an unstable environment due to the: geographical location for investment in infrastructure projects; the current modest production levels of natural gas in the Eastern Mediterranean; the timing of projects and the question of demand centres. The role of Turkey as an energy hub has proved to be very important to the discussion and partners agreed to a follow-up workshop in Istanbul to discuss the role of Turkey more in depth.

Contribution made by Carola Gegenbauer of King's College and Edited by KAS Israel Project Manager Susi Doring-Preston.

Asset Publisher

Expert talk
May 19 - 20, 2015
KAS Israel- closed seminar
read now


Asset Publisher