One thing the eastern Mediterranean basin doesn’t lack is gas. If anything, there is a surplus of gas for in-region needs, but this isn’t enough to spur development. A cohesive plan is needed to develop and monetize these resources as liquefied natural gas and transport it to the European Union and, most likely, Asian markets outside of China that are facing or will face increased gas squeezes in the coming years.

The East Mediterranean Gas Forum’s Limitations

With the countries of the eastern Mediterranean often competing for their share of the limelight and pivoting to be awarded the label of “gas hub,” exploiting the region’s sizable reserves comes with challenges. Each country in the eastern Mediterranean with ambitions of playing a significant role, either in supplying other regional demand centers or exporting gas to Europe or Asia, faces its own litany of issues. A more collaborative approach could help unlock the region’s vast and largely untapped potential.

There have been numerous initiatives to date, but one approach that has yet to be explored is an overarching, end-to-end, collaborative approach that includes governments, supermajor operators, off-takers (firms that provide a market for the gas), and investors that would help develop the region’s resources.

The East Mediterranean Gas Forum, formed in 2019, is one venue through which the countries in the region are at least collaborating to a certain degree. The East Mediterranean Gas Forum’s members are Egypt, Cyprus, France, Greece, Israel, Italy, Jordan, and the Palestinian Authority, while the United States, European Union, and World Bank are observers. But the supermajors –the large energy firms operating in the region – have characterized the forum as a “talking shop” and merely a place for governments to meet for photo opportunities and publicly champion collaboration without actually taking on the challenges of financing and developing gas projects, as that task lies firmly with international energy companies and investment firms.

Omitted from the East Mediterranean Gas Forum are Turkey, Lebanon, and Syria – countries that are looking to forge their own paths as gas players in the region. The founding members –Egypt, Israel, and Cyprus – have said the forum is open to any country that would adhere to its charter, but there is neither a resolution to the long-standing “Cyprus problem” nor a comprehensive Israeli-Lebanese peace deal in sight to pave the way for Turkey and Lebanon to join.

This has led the supermajors to posit that, while the forum is a valuable vehicle and should be strengthened, it can only go so far in driving the significant investments and risk-taking needed to make gas development in the region work. Indeed, while the East Mediterranean Gas Forum is a constructive instrument, it has done very little to bridge gaps, provide concrete steps toward developing resources, or avoid a splintered approach to capitalizing on the region’s rising energy prominence. Even within the forum itself, there is an underbelly of dissent, which isn’t unusual in groupings in which strategic and timing issues must be aligned. The forum’s members haven’t established a common vision and action plan for developing and exporting the gas reserves they are sitting on or hope to find in the future.

For now, the East Mediterranean Gas Forum is unable to drive change within the region – something that must be led by foreign energy companies and investment firms – although it provides a valuable starting point.

Cairo Calling

Egypt seemingly appears well placed to carry the mantle of regional energy hub. It has two operating LNG export plants, at Idku and Damietta on the Mediterranean coast, a vast domestic gas network that also connects to the Arab Gas Pipeline, the presence of major foreign operators and international oil companies, and the Suez Canal, which connects the eastern Mediterranean to the Gulf and Asia.

However, despite its leading role in the East Mediterranean Gas Forum, years of experience, and the discovery of major reserves at the Zohr gas field in 2015, Egypt’s gas output is beginning to flag again. Egypt is facing an impending gas crunch, with declining output and rising consumption, requiring record imports of gas, which are touching 1 billion cubic feet per day from Israel.

However, things can change very quickly in the region. For Egypt, 2022 was a standout year in terms of LNG exports, and despite the onset of water infiltration issues at the country’s key producing Zohr gas field, combined LNG exports from Idku and Damietta reached a 12-year high of 7.14 million tons, according to data provider Kpler. But despite Egypt’s gas rationalization efforts, which were announced in August 2022, its LNG exports dropped to zero in June 2023, a worrying sign ahead of the peak summer gas demand period in July and August.

In these matters, however, one country’s loss is another’s gain. With Egyptian domestic output waning, but Cairo desperate to maintain money-spinning LNG exports, Israel has been able to step into the void and increase supplies to its Arab neighbor. With Egypt’s unquenchable thirst for gas growing and its output declining, Israel has talked up the possibility of doubling exports to its Arab neighbor by 2027 to 20 billion cubic meters per year through the construction and expansion of pipelines.

Beyond that, the partners in Israel’s key Leviathan project – Chevron 39.66%, Israel’s NewMed Energy 45.34%, and Israel’s Ratio Energies 15% – are looking for ways to expand the field’s capacity from 1.2 billion cubic feet per day to 2.1 bcf/d, with operator Chevron saying in a recent earnings call that it plans to select its preferred option for how to expand capacity by the end of the year.

Israel’s NewMed has made clear which option it prefers: a floating LNG facility moored in Israeli waters. The partners launched a pre-Front End Engineering Design study in February for what would be a record 4.6 million ton per year facility. While this is a significant move, it is only the preliminary stage of the project where the initial concept is developed. However, the Israeli government is very concerned about the potential security risks of mooring a vessel of that size in its waters. NewMed’s push for a floating LNG facility could be viewed as an attempt by the Leviathan partners to leverage their position to obtain improved terms for other options, which include pipeline links to Egypt, Cyprus, or Turkey.

A pipeline from Leviathan to Idku had long been discussed with Cairo, but the Leviathan partners’ inability to secure guarantees that the gas would be exported as LNG and not rerouted to the Egyptian domestic market led talks to collapse in 2021. This option could be resurrected if Egypt becomes more amenable to the Leviathan partners’ terms.

Talking Turkey

As Israel and Turkey’s relations have thawed in recent months, talk has resurfaced of a pipeline between the two countries. However, a pipeline could give Israel a geopolitical headache, as it would be largely dependent on the whims of Turkish President Recep Tayyip Erdogan, whose testy relationship with Israeli Prime Minister Benjamin Netanyahu could be a stumbling block.

Turkey’s tensions with Cyprus could also cause difficulties, as any pipeline from Israel to Turkey would need to traverse Cypriot waters (with a pipeline through Lebanese and Syrian waters far less likely), and although Nicosia might not be able to outright block the pipeline’s construction, it could object on environmental grounds. With the aforementioned options posing serious headaches, Cyprus itself could look to take advantage of a potential need to find an outlet for Leviathan gas. Here, Nicosia might also be eying the extra Israeli gas volumes for a land-based LNG terminal in Cyprus.

With Europe’s energy landscape changing in recent years, especially following Russia’s February 2022 invasion of Ukraine, Cyprus’ role in the region as the only EU state sitting on untapped gas reserves has swung into focus. While Nicosia is hardly flush with cash, it could seek to obtain EU funding to provide a win-win scenario for the region and the EU.

There is also a window of opportunity for Cyprus to benefit from increased interest from Gulf and Israeli investors. BP and Abu Dhabi National Oil Company’s proposed joint purchase of 50% of NewMed could be key to Arab Israeli influence and potential regional collaboration among the EU, Gulf states, and Israel, with the Israeli firm also holding 30% stakes at Cyprus’ Aphrodite field.

An LNG terminal in Cyprus could also provide an outlet for its recent gas discoveries, which for now remain stranded. Italian firm Eni, which discovered the Zohr field, is eying a pipeline connection to Egypt for its two gas discoveries in Block 6 off Cyprus, the Cronos-1 and Zeus-1 wells, an option that Chevron and its partners in the Aphrodite reservoir project, Shell and NewMed, have filed a plan for with the Cypriot authorities. Egypt also appears to be the most convenient option for ExxonMobil, which operates the Glaucus discovery in Block 10, directly south of Eni’s new discoveries.

Considering the gas discoveries it has already, Cyprus should be technically capable of launching its own in-region initiative, but it would require significant strategic, financial, and political will to reach a viable solution. While not an impossible task for Nicosia, its relative inexperience in the industry compared to the other players could prove a major stumbling block. Also posing further hurdles are the less-than-friendly stakeholders who might prefer Cyprus not develop its resources for risk of upsetting the wider region’s power dynamics.

Let’s Stay Together

While a multitude of issues hinder the region’s gas potential, solutions exist. Key to unlocking these resources will be the strategic alliances that already exist as well as those likely to develop with new players that have recently made moves to enter the region. The proposed takeover bid by BP and ADNOC of 50% of NewMed could offer a fresh perspective and resources. The pair carry significant weight from a technical and financial standpoint but also politically and could help sway potential solutions. Thus, their proposed involvement in the key Leviathan and Aphrodite projects could impact the region’s future.

However, oil majors are typically hostage to shareholders and can be slow to act. There is very little room for delay, and depending on these firms to lead an interregional development could result in more disappointment. If anything, the region requires a different perspective, a nontraditional, entrepreneurial approach that could help navigate the unique challenges of the region.

The interest of major energy firms like BP and ADNOC in entering the eastern Mediterranean highlights the growing awareness of the potential of the region. They are not alone; other significant players from across the Gulf and globally are also eyeing this opportunity. The presence of these industry giants brings not only the necessary financial investments but also the technical expertise and global market connections needed to advance the gas development project.

Yet, it isn’t just about financial power and industry knowledge. It’s about bold, visionary leadership that dares to navigate the complexities and lead a region-wide collaboration. The coming year will undoubtedly bring more clarity on who can take up this mantle and lead the region into its promising energy future.

The eastern Mediterranean gas reserves present a unique, high-stakes challenge. But with the right blend of commercial acumen, political will, and strategic partnerships, this challenge can turn into a vital opportunity for the region and its people.