Egypt moves to define eastern Med borders to boost gas reserves

Egypt's Petroleum Ministry is reported to be considering claiming a stake in the big natural gas fields discovered in the eastern Mediterranean while Greece, a potential customer, has begun exploratory talks on moving the gas to the European market.

The Egyptian newspaper Al-Masri al-Youm Tuesday 25th January quoted Minister of Petroleum and Mineral Resources Sameh Fahmi as saying the Cairo government is "studying the precise coordinates of the maritime borders in order to determine our share of the reserves."

That implied that Egypt, already the main natural gas producer and exporter in the eastern Mediterranean, may find itself at odds with Israel.

It signed a historic peace agreement with the Jewish state in 1979 but it's largely been a cold peace even though Cairo exports gas to Israel.

The gas finds off Israel's northern coast, made in 2009-10, have already drawn accusations by Beirut of Israeli encroachment into Lebanese waters and threats of violence from both sides.

But the potential for conflict is even wider. The US Geological Survey reported in 2010 that the Levant Basin, stretching from the Jordan River into the eastern Mediterranean, the West Bank, the Gaza Strip, Lebanon and Syria, could contain up to 122 trillion cubic feet of natural gas.

"These discoveries have added a new, hitherto unseen dimension to the Arab-Israeli conflict," observed analyst Walid Khadduri, former editor of the Middle East Economic Survey, a prominent energy industry newsletter.

"This geopolitical dimension is not limited to the Israeli-Palestinian or Israel-Lebanese disputes … but will also encompass several other Arab countries, particularly those that export natural gas, and especially in the event Israel intends to export to European markets."

Khadduri, writing in the pan-Arab daily Al Hayat, noted that "preliminary contacts in this regard have already started with another source of gas being made to available to gas-thirsty Europe … a source that overlooks the Mediterranean directly, obviating the need for pipelines crossing several countries, as it can be exported as liquefied gas."

"The current disputes …are somewhat old. What is new, however, is the competition over gas markets."

Israel 's gas bonanza offers geopolitical opportunities as well as perils.

The Jewish state is negotiating with Cyprus, most of which is ruled by Greek Cypriots, and with Greece about transporting gas to them and on to the vast European market.

Greek Minister of Investments Haris Pamboukis said Saturday 22nd January that Athens is conducting exploratory talks with Israel about moving gas from the main Israeli gas field, Leviathan, to Europe. "We're a natural road to the Balkans and Europe," he said.

But Egypt may be a more natural partner. It already has a liquefied natural gas terminal on the Mediterranean coast where tankers carry the LNG to Europe, Asia and North and South America.

It is conceivable - although far from certain given the prevailing relations between Israel and Egypt - that the Israelis might find it convenient to export their gas in liquid form through Egypt rather than engage in costly undersea pipelines and other infrastructure.

Egypt has proven gas reserves of 77 trillion cubic feet, three times Israel's estimated reserves, and is established as the main gas producer in the eastern Mediterranean. It serves Jordan, Lebanon and Syria as well as Israel.

According to the US Geological Survey, Egypt's Nile Delta Basin could contain as much as 223 trillion cubic feet of gas.

"Israel has several potential export options of its own but all would pose technical and, often, political challenges," observed Simon Henderson, director of the Gulf and Energy Program at the Washington Institute for Near East Policy.

"Greece has been mooted as a possible market, perhaps by undersea pipeline; India is another potential market; and the Russian giant Gazprom is currently proposing a joint venture," Henderson wrote in a 4th January analysis.

"Israel's most commercially viable option might be to export surplus gas as LNG, converted via existing facilities in Egypt."

He concluded that the energy developments in the eastern Mediterranean, long a US preserve, mean that Washington "needs to pay careful attention, since these … offer opportunities for US companies as well as the potential for friction between US allies."

"Although the amounts of gas discovered so far seem unlikely to change the world, they could certainly change the eastern Mediterranean."

Source: UPI

For more news and expert analysis about Egypt, please see Egypt Politics & Security.

BP finds gas in West Nile Delta

BP announced a sizeable gas discovery in the West Nile Delta. For BP and the world oil industry, the focus has been on the drilling in deepwater after the disaster of the Macondo well in the Gulf of Mexico. The Hodoa [“horseshoe”] discovery is about 80km northwest of Alexandria, in 1077m of water, and drilled to a depth of 6350m. It is the first discovery in the older deeper Oligocene geological structure in the West Nile Delta area. BP insists further appraisal is underway.

For Egypt, the well is vindication of its changed terms, finalised in July, that were to give BP greater incentive to develop fields. BP and other IOCs had argued that previous concession terms no longer justified the far higher production and development costs from very deep water which has been the focus of most recent exploration. Failure to reach satisfactory terms had led to a slowdown in production. This did not deter Minister of Petroleum Sameh Fahmi from declaring at every opportunity that Egypt had plentiful supplies of gas; a claim disputed not only by Egyptians suffering power cuts in the summer but foreign customers for piped gas or LNG unable to receive their contracted amounts.

For more news and expert analysis about Egypt, please see Egypt Politics & Security.

© 2010 Menas Associates

Oil minister may limit offshore Suez rigs after spill

Egypt 's Oil Minister Sameh Fahmi has told the press that the government is considering reducing drilling in the Gulf of Suez after crude oil washed ashore for several days.

Oil began to appear on the shores of the popular Red Sea diving resort Hurghada, with a spillage from an oil rig as a "probable cause" of the leak, although an investigation is ongoing to determine the exact source of the pollution.

Egypt produces about 700,000 b/d, and the oil ministry says there are 188 rigs operating in the Red Sea and the Gulf of Suez where Egypt's largest oil field, Belayim, is located.

The oil ministry estimates that no more than 30 barrels were leaked; a figure which is disputed by environmental activists.

The government has focused its cleaning operation on Hurghada, given its importance to the Egyptian tourist industry. Environmentalists argue that two islands of lesser tourist importance continue to be neglected, and have called for wider cleaning operations in the region.

For more news and expert analysis about Egypt, please see Egypt Politics & Security.
© 2010 Menas Associates