Anyone visiting the Mediterranean in the summer goes for the sea, food, and the unique palette of colors. Purples, pinks, greens, and whites compete for our attention, but blue is the predominant hue. Now, natural gas, the “blue” fuel, is dominating the economic hopes of smaller eastern Mediterranean countries such as Lebanon and Cyprus. Larger countries, including Egypt and Israel, have already begun producing significant quantities of gas. Turkey remains sidelined but is looking to paint with its own brush.
The best place to begin understanding the story of eastern Mediterranean gas is to look at Israel, which launched the era of Mediterranean gas development two decades ago with the discovery of the Yam Tethys fields in 1999. And now, Sujata Ashwarya’s Israel’s Mediterranean Gas: Domestic Governance, Economic Impact, Strategic Implications (Routledge, 2019) provides a comprehensive way of doing so. Ashwarya details every facet of Israel’s gas story, tracing the country’s energy insecurity in the twentieth century to discovering and producing gas and therefore transforming, gradually, from a coal and oil-dominated energy system to a gas-oriented, lower-carbon economy.
Israel is already a gas success story. Its first discoveries at Yam Tethys in 1999 led to the discovery of the 10-trillion cubic feet (tcf) Tamar field in 2009, which came online in 2013. When the 22-tcf Leviathan field, discovered in 2010, comes online later this year, Israel will become a regional gas powerhouse capable of exporting gas in massive volumes. Only Egypt, which began producing from its 30-tcf Zohr field in 2018, has a similar profile.
Will Israel try to export gas by burying political differences with neighbors or will it keep the gas in the ground for future generations of Israelis? Ashwarya argues for the latter, stating that Israel’s export challenges are too great and its prospects for using gas to transform its own economy too attractive (p. 251). I do not agree. State interests are selfish by nature, but sometimes they are best served by building bridges to neighbors. Hoarding fossil fuels is an outdated energy-security strategy that does not apply to gas or the current era of transitioning to cleaner energy. Moreover, the prospects for developing gas are still very much on the horizon. Either way, it is undeniable that the prospects for building such gas bridges in the eastern Mediterranean hinge on Israel.
From insecurity to abundance
Energy insecurity has hung over Israel since being founded in 1948, as Ashwarya describes in the first chapter. With no oil or gas resources of its own, the country has depended on imports from fickle suppliers. In the 1950s, the major U.S. and British international oil companies did not supply Israel because it might undermine their prized concessions in Arab states. Many might also be surprised to learn that Iran was Israel’s dominant supplier after the Suez Crisis in 1956-7 to the Iranian Revolution in 1979. Meanwhile, Egypt threatened, most famously in the lead-up to the 1967 war, to cut off Israel’s oil imports through the Strait of Aqaba. Finding its own gas supplies helps solve a longstanding security dilemma.
We often fixate on production as a measuring stick, but Ashwarya keenly notes that consumption is more critical to understanding the geopolitics of gas. Israel’s proven reserves only rank 44th in the world, after all. Meanwhile, the United States, Russia, China, Japan, Canada, and Iran account for half of global consumption. Gas needs viable markets to be valuable, and securing them is not easy. “Given the high cost of development of infrastructure involved in extraction, processing, storage, transportation, and distribution to customers, adoption of gas in the global energy mix has been slow” (p. 53).
The second chapter details Israel’s discoveries and the evolution of its institutions to regulate its domestic gas industry. Through the Sheshinkski and then Tzemach committees, Israel concluded that its fields would safely supply the country through 2040, and rejected the idea of exporting gas from Tamar. From 2013 to 2018, however, no new exploration was carried out, as companies balked at the investment, deeming exports commercially critical. Moreover, “anti-tycoon” domestic political groups backed regulatory hurdles that caused Nobel to pull back from further exploration (p. 111).
The third chapter explores how gas is already shaping the Israeli economy. Gas has replaced oil and coal imports and surged in the electricity sector. This has decreased prices for consumers.
The 2015 Natural Gas Framework led to American firm Noble Energy and its Israeli partner Delek selling off some of its assets and stimulated competition. Leviathan is now “the largest privately financed infrastructure project in Israel’s history” (p. 135). Independent power producers began emerging in 2013 and account for roughly 3.6 gigawatts of power (p. 148-151). Gas-generated electricity has a 4.38% compound annual growth rate to 2030 in the “business as usual” scenario – the “low” scenario being 4% and the “high” 6.92% (p. 143).
Ashwarya lays out the case for how it can contribute in the manufacturing, petrochemical, and even transportation sectors. Yet much of these hopes remain in the prospective phase. For now, 80% of gas goes towards electricity. In other words, Israel needs significantly more time to realize its ambitions.
The fourth and final chapter explores the topic on everyone’s minds: can eastern Mediterranean gas reach Europe. In a bid to do so, Israel is currently pushing the construction of the EastMed pipeline through Cyprus to Greece, but this project is quite expensive, to say the least, and nowhere near entering the construction phase. Gas pipelines are looking like white elephants on the post-2014 era, if South Stream-now-Turk Stream and North Stream are any indication. Sending Leviathan gas through Egypt makes logistical sense, but Cairo has its own export ambitions and regasification for re-export would make Israeli gas less commercially competitive.
A pipeline to Turkey makes far greater commercial sense, and such Israeli-Turkish cooperation would attract smaller, gas-hopeful states such as Cyprus and Lebanon to join these regional pillars. Turkey is the indisputable center of gravity for gas demand in the region and has evolved its capacities to move, store, and consume gas, as revealed by its ever-rising intake of U.S. LNG. Its desire, moreover, to secure and diversify its gas import sources is central to its grand strategy.
The United States remains key. Noble remains the operator of Tamar and Leviathan as well as the Aphrodite field in Cyprus. Washington has attempted to calm tensions, but would do well by bolstering ties between its allies, Israel and Turkey. Doing so would foster regional cooperation.
Blue fuel in a green world
As intractable as Middle Eastern politics and the Arab-Israeli Conflict have been, we live in an entirely new energy era. Moreover, Israel has proven its ability to trade gas before 2011 with Egypt. Ashwarya argues that “[gas’s] incremental internal use will assure energy security over several generations as Israel’s relations with its neighbors continue to be inconsistent, even after peace deals and gas contracts” (p. 231).
Leviathan could not be more perfectly named. Hobbes’ treatise on man’s selfish, animalistic, and individualistic nature mirrors the thinking that Israeli gas should be kept at home. This makes the “politics as intractable” argument a fait accompli. Eastern Mediterranean gas is most certainly not a game-changer in terms of productive volumes. But it can build peaceful bridges through the development of regional markets, especially in Cyprus.
Gas has surged since the early 2000s because it is cheap, abundant, and cleaner than coal. It took twenty years to get to Leviathan, but first gas will coincide with a global supply glut. Eastern Mediterranean countries want to develop their resources now. Who knows if this trend will continue in 2040. Israel could again be behind the curve by then, say if hydrogen were to replace gas globally. Major shifts in energy occur within 5-10 years time, not generations. Israel would be wise to monetize its gas now and building up its sovereign wealth funds in the process to pay for education and health costs in the future.
Israel’s Mediterranean Gas is, unfortunately, littered with grammatical errors and clunky sentences, which hampers reading it. Nevertheless, the book is bursting with information and is a must-consult source for understanding Israel’s gas. It can serve as a coda for countries aiming to develop nascent gas industries, both inside the region and beyond.
Picture Credit: pxhere.com.