The Energy Dimension of the Israel-Lebanon Maritime Border Deal
The Maritime Border Deal, which aims to resolve the 860-square-kilometer maritime dispute in the Eastern Mediterranean between Israel and Lebanon, which do not have diplomatic relations, was finalized on October 11, 2022, under the US mediation. The significant “background motive” of the Deal is undoubtedly the energy factor. According to the published text of the Maritime Border Deal, entire Karish gas field (40-100 billion cubic meters of proven and probable reserves: “2P”) located in the disputed region remained on the Israeli side. The Lebanese side, on the other hand, will have full rights over the Qana (Sidon) gas field (no information about the proven gas reserves) located in the same region. Although there is no clear information, according to the “most positive scenario” of the Lebanese Oil and Gas Initiative simulations, there may be 450 billion cubic meters of reserves in the exploration field, including the Qana gas field, which is called Block 9 by the Lebanese side.
The Israeli side granted the operating right of the Karish gas field to the Greek-origin Energean company, which was established in 2007 and has oil and gas exploration projects in Israel, Egypt, Italy, Greece, and England. The company previously ended up in court in Israel due to issues regarding the Karish gas field. The floating production storage and offloading (FPSO) vessel of the Energean company, which went to the region via the Singapore-Suez Canal-Eastern Mediterranean route in June 2022 and escalated the Israeli-Lebanese tension, connected the Karish gas field to the Israeli gas network immediately after the Deal.
In 2018, the Lebanese government granted the exploration and production licenses of Block 9 in the Eastern Mediterranean and Block 4 in the further north to an international consortium which consists of French company Total (40%), Italian company Eni (40%), and Russian company Novatek (20%). Even though the Lebanese rights over the Qana gas field have been recognized by the Maritime Border Deal, a smaller section in the south of the field is included in the Block 72 area within the Israeli maritime borders. According to the Deal, Israel and the Block 9 operator Total will sign a separate financial agreement before the final investment decision, and it will determine the income that the Israeli side will receive from the operation of this area and the production there.
Since the exploration activities in the Byblos-1 well in Lebanon's Block 4 field did not yield the desired results and the Russian energy companies face a restrictive financial situation due to the sanctions, Novatek informed the Lebanese side that it plans to quit its 20% stake in the project. Although the future of Novatek's partnership in the Block 9 field remains uncertain, it is highly likely that the Qatar energy company will replace the Russian energy company in the field with the suggestion of the USA. While the scale of natural gas reserves in Block 9 is unknown, it remains uncertain how the negotiations between Israel and the Total company will progress, and which company will be the other partner of the project. These constitute the risk points of the Maritime Border Deal for Lebanon. On the Israeli side, political debates in the context of the Deal before the Knesset elections to be held in November 2022 may adversely affect the implementation of certain energy-related articles. The delay that may occur in the operation of the Karish gas field may indirectly be reflected in Israel's gas exports to Egypt.
When we look at it from a regional perspective, the Maritime Border Deal does not seem to be an isolated development. Instead, it may be seen as a part of the developments which occurred in the Eastern Mediterranean to solve the energy crisis of the EU, which was accelerated by the Russia-Ukraine War, and to meet the increasing energy demands of the regional countries. The energy dimension of the Israel-Lebanon Maritime Border Deal will be better understood when we list ten critical energy-oriented developments in the Eastern Mediterranean region in sync with the Russia-Ukraine War in just the last eight months (March-October 2022):
- Negotiations for the settlement of the ongoing maritime jurisdiction dispute between the Greek Administration of Southern Cyprus (GASC) and Israel over the Aphrodite (GASC) - Yishai (Israel) gas field (125 billion cubic meters of probable reserve) have gained momentum.
- It was announced that investment for Israeli company NewMed Energy (30%), British-Dutch company Shell (35%), and US energy giant Chevron (35%) to start drilling activities in the Aphrodite (GASC) gas field was approved.
- A memorandum of understanding was signed in the scope of the Eastern Mediterranean Gas Forum (EMGF), including Israel, Egypt, and the EU, for gas exports to EU countries using Egypt's liquified natural gas (LNG) infrastructure.
- The Capricorn Energy Company (UK) and the NewMed Energy Company have announced a merger to strengthen the Israel-Egypt gas link. The Capricorn Energy Company (UK) is the 50% partner in the operation of the Obaiyed field, Egypt's largest onshore gas field, and the NewMed Energy Company is a partner in Leviathan (Israel) and Aphrodite (GASC) offshore gas fields.
- Negotiations started between the Egyptian state gas company EGAS and the Palestine Investment Fund (PIF) on the development of Gaza's offshore gas field.
- Lebanon, which faces an energy crisis (daily power cuts can last up to 23 hours), sent an official delegation to Tehran asking for fuel support, Iran announced that it could supply 600,000 tons of fuel, and the fuel oil that Lebanon will buy from Iran is exempt from the sanctions.
- Lebanon signed a gas supply agreement with Syria and Egypt (650 million cubic meters of gas export per year from Egypt to Lebanon via Syria) to alleviate the energy crisis in the country.
- Türkiye and Libya signed a memorandum of understanding in the field of hydrocarbons, which envisages comprehensive oil and natural gas exploration, production, and transportation cooperation in the future.
- QatarEnergy Company has been interested in the joint operation of gas fields in the Eastern Mediterranean, located in both the territorial waters and maritime jurisdiction of Egypt (North Marakia offshore block) and Lebanon (Block 4, Block 9). The USA has supported the process.
- UAE's Mubadala Investment Company wealth fund completed its share purchase in Israel's Tamar gas field with substantial fund support from a consortium of international banks.
In the Eastern Mediterranean region, while some countries (Lebanon) have been carrying out active energy policies with the motivation of rising domestic demand, some others (Israel, Egypt) consolidate their energy cooperation through companies to export more gas to the EU. The foreign actors (Gulf countries, EU, USA, Russia), on the other hand, have the ability to affect regional energy balances through companies and policies. The current energy relations between Greece/GASC, Israel, and Egypt have been deepened thanks to the method that one country's energy company operates the oil and gas field of another mutually. The Israel-Lebanon Maritime Border Deal has been a trigger that started the new phase of the dashing energy policies of the countries in the region.
The Maritime Border Deal may be important for Israel just because it wants to acquire new resources to meet domestic gas demand, which rose 145% in 2011-2021, and to control gas fields in strategic regions to export gas to the EU via Egypt's LNG facilities or via Türkiye's pipelines in the future. Official statements suggest that according to the data of June 2022, Israel, which has approximately 900 billion cubic meters (600 billion cubic meters according to BP estimates) of gas reserves, has an annual gas production of approximately 10 billion cubic meters, and it exports approximately 5 billion cubic meters of gas to neighboring countries such as Egypt and Jordan. In its current energy crisis, the Deal is significant for Lebanon because, in the Qana gas field, which is assumed to have a certain amount of resources though there is no proven gas reserve, it can start producing through partners consisting of international companies, attract foreign investment to its economy and has bargaining power in regional energy developments. The Deal is important also for the USA because it can provide the safe production of new gas resources in the Eastern Mediterranean in order to ensure the energy security of the EU and reduce the dependence on Russian gas. Furthermore, it is also significant for the USA to open potential new fields for the Chevron energy company, which is the operator and partner of Israel's Leviathan (600 billion cubic meters reserves) and Tamar (300 billion cubic meters reserves) natural gas fields, and Greek Administration of Southern Cyprus’s Aphrodite (125 billion cubic meters reserves) gas field. In France's approach, the motivation of consolidating regional alliances, ensuring the energy supply security of the EU, and observing the interests of French energy giant Total comes to the fore in the scope of the Deal. After reaching an agreement on the Maritime Border Deal, French President Emmanuel Macron, during his meeting with Lebanese President Michel Aoun, assured Total's oil and gas exploration commitments in Lebanon.
In the scope of the significance of the issue for Türkiye, the expansion of the energy cooperation front (Israel, France, GASC, Egypt) towards Lebanon can be summarized as the desire of some regional and global circles to reinforce the idea of exporting Eastern Mediterranean gas to the EU without passing it through Türkiye. However, the strategic decision, which will be made by Israel, the EU, and the USA on which route to export natural gas to Europe in the future, can be in favor of Türkiye when the export volume will be 25 billion cubic meters rather than the current annual volume of 10 billion cubic meters.
The annual maximum export of Egypt and Israel after meeting their increasing domestic demands at this stage and running their LNG facilities at full capacity can meet only 2% of the total demand of Europe and 6% of the volume they import from Russia. Energy expert Gina Cohen underlined that increasing Israel's gas exports to Europe from 10 billion cubic meters to 25 billion cubic meters does not only require the development of new gas fields. It also depends on which options will be chosen for the export of gas. If the volume of gas to be exported increases, the capacity of Egypt's Idku and Damietta LNG liquefaction plants, whose total annual capacity does not exceed 17 billion cubic meters, may not be sufficient. Such objective conditions may bring up the option of export of Eastern Mediterranean gas to the EU via Türkiye through pipelines. The effectiveness of the relations that Türkiye will develop with regional countries such as Israel and Egypt, and the effectiveness of mutual trust-building measures will also be decisive in this process.