Eastern Mediterranean offshore gas production not imminent, expert says

Development of potential offshore natural gas sources in the eastern Mediterranean Sea’s Levant basin could potentially increase global supplies significantly, but it probably won’t occur for some time, an Istanbul-based consultant suggested.

Countries in the region will need to resolve their conflicts first, and Israel will definitely need to be involved because of the supplies’ location, Zeynep Derdi, managing director of APCO Worldwide’s Istanbul office, said on Oct. 24.

“It’s not enough to simply have gas,” she told an audience at Johns Hopkins University’s School for Advanced International Studies. “It has to be economical to get out of the ground. A $10/MMbtu price would make it feasible to produce gas in Israel and Cyprus.”

Israel, Cyprus, and Greece have started calling themselves “the energy triangle,” but transportation issues need to be resolved, Derdi said. “Turkey has a huge say about what happens in the eastern Mediterranean because there are so many Turks in Cyprus,” she noted, adding, “I don’t think it will do anything unless more countries become involved.”

That probably won’t happen until Turkish-Israeli relations improve and international water boundary disputes are resolved, she added. “I’m a bit skeptical we’re going to have development very soon,” she said. “We should get together and discuss these issues first.”

Possible delay

Derdi said Noble Energy Inc. reduced its potential resource estimate on Oct. 3 after completing a production test of its A2 appraisal well on Block 12 offshore Cyprus (OGJ Online, Oct. 4, 2013). The island nation may have to delay its gas export plans, she said.

Proposed pipelines through the area will face increasing competition from LNG, particularly since tankers will be capable of turning their cargos back into gas onboard and not require large regasification facilities onshore, Derdi said.

“Europe clearly would be the best customer for eastern Mediterranean gas, but it could be sold to Asia as well with shipments through the Suez Canal,” she said. “Perhaps Europe could help finance an undersea pipeline. That could help Turkey move matters along.”

Derdi noted that while Turkey still needs to resolve conflicts with its own Kurdish population, “what’s happened between Turkey and Northern Iraq has been great. It shows how business can help solve political problems.”

She said, “But Northern Iraq is land-locked and needs Turkey as a trading partner. Closer ties between Ankara and Baghdad are possible. But eastern Mediterranean countries have easier potential access to markets.”

Contact Nick Snow at [email protected].