A blowout preventer is a device used to avoid a potentially catastrophic event known as a blowout and to control extreme pressures emanating from oil and gas reservoirs. Blowout preventers are critical to the safety of well systems that include them. On April 22, 2010, an explosion ripped through the Deepwater Horizon drilling rig in the Gulf of Mexico and the absence of a functional blowout preventer resulted in the largest oil leak in History.
Recent developments in the East-Mediterranean are alarming and Israel energy monopoly is pretty clear now. Israel is creating conditions for monetizing its offshore gas reserves by realizing exclusive control of Egypt gas export infrastructure for many years to come which shall create extreme pressures and catastrophic political risks. In this article we will try to find answers to the question: Could Cyprus be the “Blowout Preventer” much needed for Energy stability in the Mediterranean?
Recent Developments affecting the East-Med Energy Landscape
In our recent article “The Puppet and the Puppeteer
” we focused on Israel ambitious energy control plan in the region and we tried to explain how the Arish - Ashkelon Pipeline "Liability Monster" is used to implement Israel energy monopoly. Three recent events in the East-Mediterranean describe clearly Israel Energy strategy:
1. Damietta LNG LOI: On May 6, the partners in Israel's Tamar gas field led by the Houston based Noble Energy said they had signed a letter of intent (LOI) with Union Fenosa to export up to 2.5 trillion cubic feet (tcf) of gas over 15 years to the Damietta LNG in Egypt.
2. Idku LNG Agreement: On 29 June, Delek Avner and Noble Energy announced that they had a preliminary agreement with BG Egypt for the supply of 7 billion cubic meters of natural gas annually from the Leviathan plot outside of Haifa to Idku LNG Egypt. The agreement value is 30 billion USD and will last 15 years.
3. East-Med Gas Diversion to China: According to Israeli business news site Globes, China National Offshore Oil Corp. (CNOOC) is interested to buy 30 to 40 per cent of the Aphrodite gas field in Cyprus’ offshore Block 12, as the estimated reserves there – around 4 trillion cubic feet – are ideally suited for a Floating Liquid Natural Gas (FLNG) solution. Noble Energy owns 70% of the rights of the Aphrodite field, and Delek Group energy exploration units Avner Oil and Delek Drilling Limited Partnership own 15% each. That would allow CNOOC to divert gas to China.
Potential risks for the Mediterranean region
On the one hand, China interest in East-Med gas could put lots of pressure on Europe that badly needs every bit of Gas from the Mediterranean region for its Energy security. On the other hand, the continuous escalation of Gaza conflict shall add catastrophic political risks and may cause the interruption of gas supply from Israel. This shall increase pressure on European countries who choose to depend on the Israeli gas via Egypt as the only available LNG source /route from the East-Mediterranean in the medium term.
The history of Egyptian-Israeli tensions is not that great and the Arish - Ashkelon Pipeline "Liability Monster" is a big barrier for resuming healthy business relations. By choosing to depend solely on Israeli gas to feed its LNG idle facilities in Damietta and Idku, Egypt will put all its Eggs in one basket. For Egypt, this will represent a national security risk and a potential financial trap.
By controlling gas feeds to both LNG processing facilities in Egypt, Israel will totally cut Cyprus out of the equation. Cyprus will be left with fewer options to monetize its offshore gas discoveries in the short and medium terms. Furthermore, this scenario can create a situation of diverting gas to Asian consumers instead of keeping it to EU countries.
Israel energy monopoly is too risky for everybody. Cyprus presence is crucial for balancing the gas supply in the Mediterranean. The development of a pipeline from Cyprus offshore blocks to Egyptian LNG facilities shall help in diversifying sources and routes. This is very important to minimize risks and maximize healthy cooperation between countries in the Mediterranean. The inclusion of Cyprus in strategic gas deals in Egypt shall improve the energy security situation for the EU. For Egyptians, such deal shall alleviate national security concerns, decrease financial risks, and improve energy security, specially with the uncertainty related to the future of the dual Oil and Gas pipeline from Basra to Aqaba and ultimately to Egypt.
Dr. Maged Amin
Articles in the Egypt Gas Puzzle series: