An opportunity for natural gas in the eastern Mediterranean

After a decade of false starts, producers should grab the chance to co-operate as exporters.

By: Date: March 12, 2019 Topic: Energy & Climate

This opinion piece was also published in the Financial Times


The past few months have been busy for the eastern Mediterranean gas sector. After nearly a decade of speculation about the potential of the region’s resources, recent developments seem finally to have set it in the right direction.

In January, energy ministers from Cyprus, Egypt, Greece, Jordan and Israel, with representatives from Italy and the Palestinian Authority, met in Cairo to discuss regional co-operation in offshore gas.

The result was the Eastern Mediterranean Gas Forum (EMGF), a platform aimed at developing a regional natural gas market and taking advantage of existing liquefied natural gas (LNG) infrastructure in Egypt.
It followed an agreement in December between Egypt and Cyprus, who committed to creating and maintaining conditions for the construction of a pipeline connecting the Aphrodite gasfield in offshore Cyprus to Egypt’s LNG facilities.

There was another development on February 28, when ExxonMobil announced a new gas discovery in offshore Cyprus, more than doubling the country’s estimated offshore resources.

Those involved should now put aside any differences among them and grasp the opportunity at hand. The region’s gas saga started in 2009-2011, with the discovery of the Tamar and Leviathan fields off the shore of Israel, and the Aphrodite field off the shore of Cyprus. Various export options were progressively put on the table, from pipelines (to Turkey or Greece) to LNG plants (in Cyprus, Israel and Egypt). Expectations were great and the discoveries were promoted as a means to foster a new era of economic and political stability in the region.

However, initial expectations have since been damped. In Israel, a long debate on the management of gas resources caused uncertainty and delays in investment decisions. In Cyprus — where gas was welcomed as a godsend to relieve the country’s financial troubles — enthusiasm was cooled by successive downward revisions in the size of the discoveries. These developments raised scepticism over the whole idea that the region might become an exporter of natural gas.

However, hopes were revived in 2015 when the Italian energy company Eni discovered the Zohr gasfield off the shore of Egypt, the largest gas discovery ever made in the Mediterranean. In an unprecedented fast-track development, production at Zohr began in December 2017, helping Egypt recover its self-sufficiency in gas after turbulent years in which the country turned from a net exporter to a net importer. Zohr also marked a new phase of exploration in Egypt’s offshore waters, leading to further discoveries.

The significance of Zohr goes well beyond Egypt. Its proximity with other fields off Israel and Cyprus could allow for co-ordinated development and, thus, provide the economies of scale required to create competitive regional gas-export infrastructure.

Egypt already has LNG export infrastructure in Idku and Damietta with a capacity of 19bn cubic metres a year — but it currently sits idle. This could enable prompt export of gas from Egyptian, Israeli and Cypriot fields. Both plants could be expanded if need be.

For Israel and Cyprus, co-operating with Egypt is crucial. Building export infrastructure and developing fields is a circular problem. If there are political or commercial risks that no export infrastructure will be in place when production starts, a lot of money will be lost. If the field underperforms compared with expectations, expensive infrastructure will sit idle. (For example, the proposed Cypriot LNG Vasilikos project has an estimated cost of €5bn; similarly, the EastMed pipeline project connecting Israel, Cyprus, Greece and Italy is estimated to cost more than €6bn). Bringing together underused and scalable export infrastructure with several promising fields could be the key to unlocking untapped regional potential.

The most logical course is to create an eastern Mediterranean gas market based on the existing LNG infrastructure in Egypt, with benefits for all the regional players involved. This would also present an opportunity for Europe, where gas-import requirements are likely to grow in the coming years as domestic production declines, and where a large capacity to receive LNG already exists.

Such an approach would also offer eastern Mediterranean suppliers flexibility in terms of destination markets in the future, allowing them to serve Asian markets, for example, through Egypt’s LNG terminals.
Finally, a joint regional export scheme, through the Egyptian LNG facilities, could also provide a first opportunity to test commercial gas co-operation between Egypt, Israel and Cyprus. If successful, this co-operation could eventually scale up in the 2020s, should new discoveries be made in the region and should gas demand in Europe justify the construction of pipeline infrastructure.

Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to communication@bruegel.org.

View comments
Read article More on this topic More by this author



Deep Focus: Energy transition in the next EU institutional cycle

Bruegel fellow Simone Tagliapietra speaks to Sean Gibson in this instalment of 'The Sound of Economics', on the matter of the European energy transition and how the EU should proceed in the new institutional cycle.

By: The Sound of Economics Topic: Energy & Climate Date: July 10, 2019
Read article More on this topic More by this author



Deep Focus: Reforming and rejuvenating Russia’s economy

Bruegel fellow Marek Dabrowski talks to Sean Gibson about the underlying causes of Russia's slow emergence from economic crisis, in an episode of the Deep Focus podcast series.

By: The Sound of Economics Topic: Global Economics & Governance Date: May 9, 2019
Read article More on this topic More by this author


The geopolitical implications of the global energy transition

Energy has traditionally played an important role in global geopolitics, contributing to the rise of great powers, the formation of alliances and, in many cases, also to the emergence of wars and conflicts. Every international order in modern history has been based on an energy resource. This piece discusses how the ongoing low-carbon energy transformation could reshape global geopolitics in the future.

By: Simone Tagliapietra Topic: Energy & Climate Date: March 7, 2019
Read article More by this author

Blog Post

Economic policy challenges in Southern and Eastern Mediterranean

For a long time, southern and eastern Mediterranean countries struggled with serious socio-economic challenges and dysfunctional economic systems and policies. Marek Dabrowski reviews the challenges the region has to face to get out of a low growth trap.

By: Marek Dabrowski Topic: Global Economics & Governance Date: December 11, 2018
Read article Download PDF More by this author

External Publication

A new strategy for EU-Turkey energy cooperation

Cooperation over energy and climate issues could be one of the components of the EU-Turkey Positive Agenda. Simone Tagliapietra proposes a new strategy for EU-Turkey energy cooperation, which envisions a shift of focus from gas and electricity to fields such as renewables and nuclear energy.

By: Simone Tagliapietra Topic: Energy & Climate, Global Economics & Governance Date: December 5, 2018
Read article More on this topic More by this author



Backstage: Shared prosperity for the EU and north Africa

Bruegel's director Guntram Wolff looks at north Africa's economic growth in the light of the region's trade agreements with the EU, welcoming Karim El Aynaoui and Uri Dadush to the Backstage series on 'The Sound of Economics'.

By: The Sound of Economics Topic: Global Economics & Governance Date: November 27, 2018
Read article Download PDF More on this topic

Policy Contribution

Assessing the European Union’s North Africa trade agreements

In this Policy Contribution, the authors provide an economic assessment of the trade agreements between the EU and North Africa. They argue that the common view of the agreements is overly negative, and point to policy conclusions that could increase regional integration.

By: Uri Dadush and Yana Myachenkova Topic: Global Economics & Governance Date: November 26, 2018
Read article More on this topic More by this author



Deep Focus: Renewing the clean energy strategy in the Mediterranean

In this episode of Deep Focus, Bruegel research fellow Simone Tagliapeitra explains how the nature of cross-Mediterranean energy relations needs to change, not only in line with new climate-change targets but also to meet the burgeoning energy demand outside Europe.

By: The Sound of Economics Topic: Energy & Climate Date: October 16, 2018
Read article Download PDF More on this topic More by this author

Policy Brief

The Euro-Mediterranean energy relationship: a fresh perspective

The author analyses the current renewable energy development in Southern Mediterranean countries (SMCs) and proposes a climate financing strategy that retreats from the Eurocentric approach. Not only will it allow the region to meet its energy demand sustainably, it will also benefit the EU, both in economic and political terms.

By: Simone Tagliapietra Topic: Energy & Climate Date: October 16, 2018
Read about event

Past Event

Past Event

Policy responses for an EU-MENA shared future

In the third edition of the "Platform for Advanced & Emerging Economies Policy Dialogue" we will discuss trade flows and trade policy between Europe and MENA, integration of developing economies into global value chains, and regional energy relations.

Speakers: Karim El Aynaoui, Marek Dabrowski, Uri Dadush, Ignacio Garcia Bercero, Ettore Greco, Giuseppe Grimaldi, Badr Ikken, Joanna Konings, Said Moufti, Pier Carlo Padoan, Lia Quartapelle, Visar Sala, Nicolò Russo Perez, Nicolò Sartori, Simone Tagliapietra and Guntram B. Wolff Location: LUISS Business School Viale Pola, 12, 00198 Roma RM, Italy Date: October 11, 2018
Read article Download PDF More on this topic More by this author

External Publication

The impact of global decarbonisation policies and technological improvements on oil and gas producing countries in the Middle East and North Africa

Simone Tagliapietra contributed to the IEMED Mediterranean Yearbook 2018 with a chapter on the impact of decarbonisation policies on oil and gas producing countries in the MENA region.

By: Simone Tagliapietra Topic: Energy & Climate Date: October 3, 2018
Read article Download PDF More on this topic More by this author

External Publication

LNG and Nord Stream 2 in the context of uncertain gas import demand from the EU

Georg Zachmann sees the development of import demand for natural gas in the EU as uncertain. In case of strongly increasing import demand, both Nord Stream 2 and liquified natural gas imports could contribute to ensure European supply.

By: Georg Zachmann Topic: Energy & Climate Date: September 27, 2018
Load more posts