Tuesday, March 07, 2017

EastMed gas in a nutshell: dizziness and headache

Natural gas is not a toxic substance when inhaled. However, exposure to high levels depletes the body’s oxygen levels, leading to cognitive problems. During the early stages, you may experience dizziness, headaches and blurred vision. Continued exposure may result in disorientation and poor judgment, and in severe cases, hallucinations. This list of symptoms also serves as an apt description of reactions to the natural gas developments in the Eastern Mediterranean.
East Mediterranean holds, without question, large hydrocarbon resources even though the countries in the region, excluding Egypt, have been quite slow in finding them. Large-scale offshore discoveries in the region since 2009 (Tamar and Leviathan in Israel, and Aphrodite in Cyprus) have paved the way for the so-called gas bonanza. When other discoveries, albeit smaller in size, are added to the above mentioned fields, total discovered natural gas resources in the Levant Basin at present amount to over 1100 bcm. Then came in 2015 a geological game changer into the picture; the giant Zohr discovery offshore Egypt.
And yet, the region remains one of the world’s most under-explored – indeed, unexplored – areas. For instance, Turkey has until today drilled 13 wells in the Mediterranean waters but no commercial quantity of hydrocarbons was discovered. In Lebanon and Syria no wells have been drilled offshore.
Two assessments by the United States Geological Survey (USGS) in 2010 – one on the Nile Delta and Mediterranean Sea sectors of Egypt, the other on the Levant Basin Province – indicated almost 10 trillion cubic meters of technically recoverable undiscovered gas potential in the region. To put this into context, Algeria’s current proven gas reserves is about half of it.
The above mentioned discoveries, the USGS assessment as well as the eye-opening resource potential estimates by Cypriot and Lebanese officials, have not only significantly augmented hopes for large natural gas potential in the East Mediterranean but also made it a fast rising favorite for international oil and gas companies. More importantly they have made everyone dizzy and maintained the hype, especially when converted into potential revenues, reaching 12-13 digit figures. Thus, the symptoms of natural gas poisoning have started, experienced to varying degrees across the countries in the region.
Cyprus has so far conducted three offshore oil and gas exploration bidding rounds, the results of the last one will soon be announced. Last year Israel launched its first offshore bid round. After years of delays, Lebanon also finally launched last month its first licensing round for offshore gas exploration.
However, discoveries make sense if reserves in discovered fields are converted into production capacity. Companies will carry on costly exploration and field development endeavors if they see the ability to commercialize their discoveries with a favorable rate of return. Much will depend on the gas price the companies will be getting by selling the gas to domestic market, availability of export options and transport means (even then, some may not be viable, either politically or commercially, for a number of reasons), stability in the countries’ regulatory, fiscal and gas policy, conflicts over the unresolved demarcation of maritime borders, as well as political atmosphere. These technical, administrative, security, legal and political challenges with geo‐political implications have created headaches, the other major symptom of natural gas poisoning.
Due to a combination of these headaches most of the discoveries could not have been converted into production capacity until today. For instance, development of the giant Leviathan field, discovered in 2010, was jeopardized by numerous obstacles and uncertainties created by changing government policies, a series of regulatory hurdles and lack of export infrastructure. The final investment decision to develop the field was finally taken in February.
Like it or not, hydrocarbons will be a dominant factor in the future of the countries of the East Mediterranean. If managed correctly, existing discoveries and the prospect of substantial hydrocarbons resources beneath the Mediterranean seabed may be a force that promotes prosperity and energy security in the region. If not, they may fuel disputes and add to the various frictions and anxieties in this already volatile region. In some cases they might even escalate into a full-scale confrontation.
As mentioned in the beginning of this article, natural gas is not a toxic substance when inhaled. However, in a political environment it can become toxic. What needed to cure this is a kind of geopolitical game changer in on word: cooperation. There is an old African proverb that says, “If you want to go fast, go alone. If you want to go far, go together.” It is up to the politicians in the region which path they will choose. For the benefit of their people, they must go far and quickly.
(This short brief of mine appeared on https://knect365.com/flame/article/6c3c2021-7896-4022-88c3-2cf8f3f6b8a5/east-mediterranean-gas-developments-in-a-nutshell-dizziness-and-headache)