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Egypt's
gas cut may spur energy conflicts
Other stories on energy shortages and energy industry
Egypt's
decision to cut off natural gas supplies to Israel threatens the two
countries' historic 1979 peace treaty.
UPI,
26
April, 2012
Egypt's
decision to cut off natural gas supplies to Israel threatens the
countries' historic 1979 peace treaty and could crank up simmering
tensions over disputed offshore gas fields in the eastern
Mediterranean.
On
Sunday, Cairo terminated a crucial agreement, signed in June 2005 by
the regime of President Hosni Mubarak, to provide Israel with 142
billion cubic feet of gas a year for two decades.
That
agreement has become a symbol of growing tension between Egypt and
Israel since Mubarak was driven from office Feb.11, 2011, in a
pro-democracy uprising.
With
Islamist parties, spearheaded by the Muslim Brotherhood, in control
of Egypt's Parliament and contesting upcoming presidential elections,
the interim military government of former Mubarak associates is under
mounting pressure to set aside the policies of the former regime.
The
Islamists have taken a sharp turn against Israel and the 1979 treaty,
reflecting the deep opposition to the U.S.-brokered peace agreement
by most of Egypt's 82 million people. They feel it's too favorable to
the Jewish state and U.S. policy in the Middle East.
The
"predictable but still surprising announcement" by Egypt's
state-run Natural Gas Holding Co. "is of immediate concern to
Washington, not only because it may affect the peace treaty … but
also because it could increase the likelihood of vexatious disputes
in the development of Eastern Mediterranean gas reserves,"
observed Middle East analyst Simon Henderson.
The
discovery of subsea fields, primarily off Israel where reserves of up
to 30 trillion cubic feet of gas have been found, had "raised
Washington's expectation that regional tensions might be more
amenable to resolution," Henderson noted in an analysis for
Washington Institute for Near East Affairs.
But
these discoveries, expected to be repeated off Cyprus and Lebanon in
the coming years, have only exacerbated regional disputes.
Lebanon
claims Israel's biggest field, Leviathan containing some 25 tcf of
gas, encroaches on its maritime economic exclusion zone.
Turkey,
a former strategic ally of Israel until they quarreled in 2010,
opposes exploration off Cyprus, which has been divided between Greek
and Turkish zones since Turkey invaded in 1974.
Indeed,
Ankara has threatened to send in its military to prevent such
exploration and it hotly opposes a deepening partnership between
Israel and Cyprus to jointly export their gas to Europe via Greece,
Turkey's historical enemy.
These
disputes have heightened friction between longtime adversaries Israel
and Lebanon, technically still at war, and between the
internationally recognized Greek Cypriot government in Nicosia and
Turkey, which occupies the northern one-third of the island.
It's
also sharpened the rivalry between Athens and Ankara. In 2011, the
Turks deployed F-16 fighter jets to what they call the Turkish
Republic of Northern Cyprus, which only Ankara recognizes.
The
Greek Cypriots responded by signing a military cooperation pact with
Israel that's believed to allow Israel to base fighters on the
island.
The
stakes are getting higher. The U.S. Geological Survey reported in
2010 that 122 tcf of gas lies within the Levantine Basin encompassing
Syria, Israel, Cyprus and the Gaza Strip.
By
way of comparison, Algeria, a key gas supplier to Europe, has proven
reserves of 159 tcf.
"So
great are the suspected riches that tensions are rising across the
region, echoing the scrabble for energy resources in the South China
Sea," observed the Financial Times.
Egypt,
and to some extent Israel as well, is portraying the gas cutoff as a
purely business decision over a payments dispute, with no political
purpose. Cairo claimed Israel's East Mediterranean Gas Co. hadn't
paid its bills for four months.
The
Israeli government sought to downplay the issue as a threat to the
treaty but it's clear pressure is growing in Cairo for, at the very
least, major revisions in Egypt's favor.
Mubarak's
enemies have long claimed he sold the gas to Israel at concessionary
prices, with his family and associates raking in millions of dollars
in kickbacks.
The
gas deal's unpopularity has been demonstrated by 14 bomb attacks on
the pipeline running from the Nile Delta to Israel -- and Jordan --
across the increasingly lawless Sinai Peninsula over the last year.
Cairo's
failure to contain growing turmoil in Sinai, in which Egypt is
allowed to deploy only a few hundred troops under the 1979 treaty to
ensure Israel's security, is becoming an increasingly tendentious
issue.
Security
there could become the real game-changer.
Foreign
firms vie for Libya oil industry revival
UPI,
26
April, 2012
Libya's
first post-war oil and gas exhibition attracted dozens of foreign
companies to Tripoli this week, avid to win new business and hopeful
that questions about contracts and security will ultimately be
resolved in their favour.
After
a virtual shutdown last year, Libyan oil output has climbed to near
pre-war levels of 1.6 million barrels per day since the conflict that
ousted Muammar Gaddafi ended, but concerns remain over security and
how the North African country's new rulers will treat foreign
companies.
Libya
needs foreign investment and expertise to increase oil and gas
production. But uncertainty about existing contracts and about the
terms of any new deals will persist until a clearer landscape emerges
after June elections for a national assembly.
"(We
need) a stable environment ... security. We also need answers to
questions about what will be the role of IOCs (international oil
companies) in the future," Jean-Daniel Blasco, vice president
North Africa for exploration and production at France's Total, told a
conference that ran alongside the exhibition.
"What
will be the relationship between the ministry and National Oil
Corporation? When will the next exploration rounds be issued? ...
will EPSA 4 remain the model for future exploration? These are the
main questions," he said, referring to Libya's last exploration
and production sharing agreement programme.
The
interim government has set up a committee to look into corruption
allegations in the Gaddafi regime. Its determinations could lead to
the reworking of lucrative deals in the OPEC member, which has
Africa's largest crude oil reserves.
Meanwhile,
a shake-up of the sector has given more power to the oil ministry and
carved up the responsibilities of the state's National Oil
Corporation (NOC).
"We
are cooperating with the committee, we gave them all the information
we have," Oil Minister Abdulrahman Ben Yazza told Reuters. "We
hope they will finish their work soon and give out all the
information needed."
When
asked about the next potential offering of blocks or contracts, he
said: "We are studying this matter and we will (talk) about this
soon."
INCREASING
FUTURE PRODUCTION
The
government has reiterated there will be no new deals until after the
polls and that it is too early to say what future contracts would
look like. In the meantime, businesses are ensuring they make
themselves well known on the ground.
Companies
from around the world exhibited their expertise in exploration,
production, refining and services at the four-day Oil & Gas Libya
2012, which runs until Thursday. Among them were Total, Repsol,
Wintershall and Statoil, already among the biggest firms already
operating in Libya.
Repsol
expects to reach its pre-war Libyan output of 340,000 bpd by summer.
It hopes for a rise to up to 380,000 bpd in coming years, Nemesio
Fernadez-Cuesta, upstream director, said.
"A
lot of Libyan people know they need the international oil companies
for financing, added technology, and we don't foresee any major
problems," he told Reuters. "This process (regime change)
can generate some difficulties, but we think we will be able to deal
with them."
Unlike
in Iraq, the scale of the damage in Libya was limited, although oil
officials have cited the need for maintenance and upgrades after
fields were hastily shut down. That means potential business for the
numerous European and Middle Eastern engineers, consultants and
others at the exhibition.
"We
hope to re-establish a lot of contacts with Libyan clients, existing
and new," Erik Huber, of Dutch engineering and environmental
consultancy Royal Haskoning, said. "We trust that there will be
a lot of investment in the Libyan oil industry."
But
behind the public statements of optimism, worries are evident.
Protesters in Benghazi closed off the office of NOC subsidiary the
Arabian Gulf Oil Co on Monday and Tuesday, and their demands included
the ouster of Gaddafi-era officials.
"The
problem is that some people want a clean cut from before (the
Gaddafi-era), but some are needed for their expertise. Getting
through change is key," a European oil executive said. "We
just have to be patient for now."
Security
also remains one of the biggest concerns of foreign companies
returning to Libya. The numbers of expatriate workers still have yet
to return to pre-war levels.
Officials
speak of plans to train thousands of former rebel fighters under an
umbrella oil installation guard. Groups of fighters have stood guard
in the absence of an effective army.
"One
of my biggest concerns is that fighting, such as tribal clashes, can
easily start," a Libyan worker at a European oil and gas company
said. "The situation is still unstable."
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