Seminar No. 63

”Major Gas Finds in Eastern

Mediterranean – a source of new supply and

conflicts in South East Europe”

Wednesday, 26th of September 2012

Web-site: www.nog.se Email: info@nog.se

Phone: (+ 46) 10 505 00 00

Speakers: Ambassador Mikael Eriksson International Energy Affairs Introduction Marie Jacobsson Principles of international law Chief Adviser on International Law Professor Bassam Fattouh Resources and markets Director of the Oil and Middle East Programme at Oxford Institute for Energy Studies George Christian Pelaghias Executive Director and Program Coordinator at the European Rim Policy and Investment Council (ERPIC)

Marie Jacobsson Chief Adviser on International Law

Main Messages • Sea borders are determined by the United Nations Convention on the

Law of the Sea from 1982.

• Country borders may vary a lot and current national borders may not be in line with the legal definition.

• Sea borders are difficult to define due to different interpretations of International Law.

• The baseline is key for appreciating the sea border.

• Seabed resources are not subjects to the same rules.

Explanation of maritime zones (added by the NOG-secretariat)

Professor Bassam Fattouh Director of the Oil and Middle East

Programme at Oxford Institute for Energy Studies

East Mediterranean sub-sea natural gas deposits “potentially so vast that the economic map of the region is already being redrawn, even as tensions flare”

(Financial Times)

Main Messages

• Recent discoveries offer considerable potential for region’s economic prosperity and domestic energy security but there are risks

• Pace of development will depend mainly on local factors; geopolitical and regional factors will play less important role (perhaps with exception of Cyprus)

• Recent discoveries will play a limited role in integration of regional gas markets despite strong regional gas demand

• Syria and Lebanon will continue to be net importers of gas by 2020 while Cyprus and Israel will most likely become net exporters of gas

• By 2020, only limited export volumes will be brought to market (5-7 mtpa) mainly from Cyprus

• LNG remains most attractive option for both Israel and Cyprus because of flexibility it provides and its competitiveness with most (politically) feasible pipeline options

• Volumes and location of liquefaction plants still uncertain

• Expected export volumes unlikely to turn around Europe’s gas balance but can contribute to greater diversification of import sources

Recent discoveries and existing infrastructure

Source: ATP

0 5 10 15 20 25 30 35 40 45 50

Russian FederationIran

QatarTurkmenistan

USSaudi Arabia

United Arab EmiratesVenezuela

NigeriaAlgeria

AustraliaChina

IndonesiaEgypt

NorwayLibya

AzerbaijanIndia

East-MediterraneanNetherlands

Oman

Sou

rce:

BP

; N

ob

le (

East

Med

)

Region’s combined discoveries are significant

East Mediterranean estimated reserves among international proved reserves (Bcm)

Block1

Block 2

Block 3

1211

10

4

5 6 78 9

13

23

1 Lebanon-Syria EEZ

Cyprus EEZ

Isra

el-Cyp

rus

EEZ

Turkish EEZ

Turkish EEZ

GreekEEZ

Palestinian

Territorial Waters

Le banon-Cyp

rus E

EZ

Off

sh

ore

are

as a

scla

ime

d b

y T

urk

ey

Syria-Turkey EEZTu rkish Cyprus,September 2011De limitation line between Turkey and

TURKEY

SYRIA

JORDAN

CYPRUS

ISRAEL

LEBAN

ON

EGYPT

Cyprus Territorial Waters

WESTBANK

Gaz

a

M e d i t e r r a n e a n S e a

Lebanon’s proposed maritimeboundaryIsrael’s proposed

maritim

e boundary

Political Complications

• Israeli-Libanese border dispute

• Palestinian-Israeli relations

• The Cyprus question

Conclusions

East-Med more of a local game-changer… but for whom?

• For this energy-poor region, recent discoveries offer considerable potential for region’s prosperity and domestic energy security….. if it does not stir existing conflicts.

• LNG remains the most attractive option for both Israel and Cyprus because of the flexibility it provides and its competitiveness with the most (politically) feasible pipeline options. Volumes and location of liquefaction plants still uncertain.

• By 2020, only limited export volumes will be brought to market (5-7 mtpa).

• Expected export volumes are unlikely to turn around main export markets’ (Europe’s) gas balance but can contribute to greater diversification of import sources.

George Christian Pelaghias Executive Director and Program Coordinator at

the European Rim Policy and Investment Council (ERPIC)

Source: Petroleum Geo-Services (Amended for the purpose of this presentation)

Egypt: ≈ 77.3 tcf (2188.8 bcm)

Gaza: ≈ 1 tcf (28.3 bcm)

Israel: ≈ 52.26 tcf (1480 bcm)

Cyprus: ≈ 7 tcf (198 bcm)

Consumption 2011

EU: ≈ 447.9 bcm

UK: ≈ 80.2bcm

Germany: ≈ 72.5 bcm

Italy: ≈ 71.3 bcm

Spain: ≈ 32.1 bcm

Sweden: ≈ 1.3 bcm

East-Med Offshore Deposits

The Southern Corridor to Europe

Source: Ministry of Commerce, Industry and Tourism, Cyprus

Cyprus Ratified UNCLOS in 1988

Cyprus becomes a EU Member in 2004.

Proclamation of its Continuous Zone and Exclusive Economic Zone in 2004. Delimitation Agreements with Egypt (2003), Lebanon (2007), and Israel (2010).

The 1st Licensing Round conducted from February 2007 to August 2007. Blocks 03 and 13 were excluded, due to MC3D seismic survey conducted at the time.

Applications were submitted covering Blocks 06, 11 and 12.

Houston based Noble Energy Inc. was awarded a Exploration License for Block 12 on 24 October, 2008.

Noble began drilling in Block 12 (“Aphrodite field”) on 20 September 2011. The first results were confirmed on 28 December 2011.

Hydrocarbon Developments in Cyprus

Source: International Crisis Group

Greece: Signatory to the UNCLOS.

Maintains that Islands should

have a continental shelf of 12

nautical miles.

The Island of Kastelorizo is

part of Greece’s EEZ.

Recognizes Cyprus’ EEZ

under UNCLOS.

Turkey: Not a Signatory to the

UNCLOS but have applied it in

principle in the Black Sea.

Maintains that Islands does

not have a continental shelf of

12 nautical miles.

The Island of Kastelorizo does

not form part of Greece’s EEZ.

Does not recognize Cyprus’

EEZ.

Maintains that Turkey’s EEZ

should connect with Egypt

Regional Hydrocarbon Related Tensions Greece – Turkey

Source: Turkish Marine Research Foundation

Source: International Crisis Group

Regional Hydrocarbon Related Tensions Turkey-Cyprus

Turkey’s Reaction to Cyprus’ Exploration

Export Market

By Pipeline

Pipeline to Greece

Pipeline to Turkey

By Ship

Compressed Natural Gas (CNG)

Floating LNG Facility (FLNG)

LNG Export Terminal

Energy Infrastructure Projects in Cyprus

The East Mediterranean Corridor Pipeline Options

The East Mediterranean Corridor LNG Options