Russia’s invasion of Ukraine boosts East Med region role in EU energy security
In light of Russia’s invasion of Ukraine and EU’s renewed effort to cut reliance on Russia, the East Mediterranean could play an increased role in Europe’s energy security as several resources in the region could be unlocked, including fields in Cyprus and Israel.
“One of the key areas they want to bring forward, should bring forward is around Cyprus but also off Israel as well. They look very significant finds. And, of course, all western nations at the moment are scrambling around for alternative sources and all of them are chasing the same sources so the cost of that will be going up,” Justin Urquhart Stewart, co-founder of Regionally in London, told New Europe by phone on March 16. “But it’s fascinating to see how quickly the attitude towards different types of power production have changed. So, moving away from A: another supplier not Russia for oil or gas and B: actually carrying your own exploration and see what you can find,” he added.
But given that the timelines set by Europe to become independent from Russian gas are short, by 2027, only projects that can ramp up quickly can benefit, Charles Ellinas, senior fellow at the Atlantic Council’s Global Energy Center, told New Europe on March 17. “For example, Israel’s already developed gas fields, Leviathan and Tamar. Cyprus gas fields, Aphrodite and Glafkos, would take a few years to develop, by which time it could be too late. Unless of course Europe changes policy and promotes natural gas use in the longer term. However, right now that looks unlikely. Europe has re-emphasized its determination to accelerate energy transition. And within that, it is aiming to reduce gas use by 30% by 2030 and to zero by 2050. Not a message to encourage investment in new long-term fossil fuel projects,” Ellinas said.
Given the short-term timelines, Egypt’s existing facilities are the best option, he said. Egypt is already exporting liquified natural gas (LNG) to Europe and plans to increase exports this year. But quantities are relatively small – 2 billion cubic meters last year and probably a little bit more this year, Ellinas said, noting that, in support of this, Israel has already increased its export capacity to Egypt to about 11 billion cubic meters through the offshore East Mediterranean Gas (EMG) Pipeline and through Jordan freeing more Egyptian gas for LNG exports.
According to Ellinas, an option would be to expand its two LNG plants at Idku and Damietta by adding more liquefaction trains, but this would require at least 3 years. “Given that Asian LNG markets are still growing, this is a possibility. If it happens, it would provide an opportunity to unlock Cyprus’ gas fields and the second phase development of Leviathan.
The EastMed gas pipeline or a pipeline from Israel through Turkey to Europe, that has made the headlines recently, are both difficult because they would need 5 years to construct and 20 years of operation and exports to justify expensive investments,” he said, adding that Europe’s stated policies to move away from gas sooner than later and commitment to renewables make this difficult. “Investors need certainty and that is lacking,” he said.
Kurt Volker, former US Ambassador to NATO and senior international advisor at BGR Group, told New Europe by phone on March 18 Russia’s invasion in Ukraine has prompted Europe to drastically reduce its reliance on Russian energy supplies. “I think it’s a game changer. The Germans have not officially called off Nord Stream 2. At least not yet. But I think there is a movement now to dramatically reduce supplies from Russia to Europe. The British said they are going to stop importing Russian oil and gas by the end of the year. The EU has not given a date, but I think there is pressure to significantly reduce at least,” Volker said.
Everyone will need alternative energy supplies, Johannes Benigni, chairman of analysis firm JBC Group, told New Europe by phone on March 17. “I would definitely consider natural gas in whatever shape or form to be the energy of the future. Why do I say that? It has even less to do with Europe. The matter is a pure mathematical function. Two thirds if not more of Asia of energy requirement is coming from coal. You want to decarbonize the world and you manage to reduce that coal content and switch it against gas, you are reducing CO2 emissions by half,” Benigni said.
“It’s a massive problem. We need content of energy and is easiest if we do it with a lower carbon fossil fuel. That’s why I would say that gas has a future. The problem is pipeline. Pipeline requires trust. The future of European supply means we will have pipelines with Russia, but everyone is going to build now LNG Re-gas stations. Why? Because nobody wants to say, ‘Well, we’re dependent on Russia’. So, what will happen is they will build Re-gas stations, nobody will use it, everyone is going to still use the pipelines,” Benigni argued.
“But when it comes to the Eastern Med market, we know that political stability there is not a given and so you have the same or equal situation like in the Middle East. Meaning in the Arab Persian Gulf,” he said. The chairman of analysis firm JBC Group explained that in the Persian Gulf the cheapest possibility to provide gas would be a pipeline around the Gulf. But he pointed that all the countries prefer to build LNG facilities because they don’t want to be dependent on each other. “So, I therefore believe the more flexibility you can offer the better it is. If I had gas, I would build an LNG facility because it’s going work because at the end of the day demand for gas in the next 30 years is going to be so strong because the overarching objective will be to decarbonize the world and gas is the only solution,” Benigni argued.
Turning to renewables in the East Mediterranean, Ellinas said that’s where the future of East Med energy is. “Maximize use of renewables, supported by storage and electrical interconnections, and use of regional gas resources during energy transition as back-up to renewable intermittency. The potential is huge and given Europe’s lead, the East Med should follow,” Ellinas said, noting that with the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) as willing partners, investment opportunities would be forthcoming.
