The ongoing conflict between Gaza-based militant group Hamas and Israel has directly affected gas flows within the east Mediterranean region. Escalating tensions between Israel and Lebanon-based group Hezbollah are further compounding fears regarding long-term investment in the region. East Mediterranean Gas Forum (EMGF) secretary general Osama Mobarez spoke with Argus at the IISS Manama Dialogue in Bahrain on 18 November about flows, investment commitments and Egypt's role as a gas hub. Edited highlights follow:
The ongoing conflict in Gaza has directly affected gas flows within the region, even though these may be normalising now, following the restart of Israel's offshore Tamar field and the East Mediterranean Gas pipeline. What is your assessment of potential implications for longer-term investment plans in the area?
We are talking about an energy industry that, in its DNA, [plans] long term. Definitely there might be some ups and downs, but usually the companies are planning for the long term. They might be impacted by the current circumstances for a short while, but they will resume. The Tamar field stopped for a short while due to security reasons, but when the situation got better, they resumed production. So I am positive about the long-term investment vision for the region in general.
Egyptian gas production is struggling to keep pace with rising domestic demand, and this has reduced the country's LNG export potential. Considering this, is there any shift in the EMGF's focus and strategy, which has so far been centered on Egypt's ambition as a regional hub?
Let me start by emphasising that the EMGF is not just for Egypt. The EMGF is based in Egypt and started as an Egyptian initiative, but it was later adopted and hailed by all the member countries and observers. Our main objective is to see how we can we create value. Definitely the resources in the region have value already, but how can we optimise value and how can we share those values? That is why our strategy is not solely centered around Egypt.
Egypt is an important country in the region and for the EMGF, for several reasons — it is the country with the most mature gas industry, it has the biggest gas production, and it has the infrastructure needed for local [demand] and exports.
I do not see [increasing domestic demand] having a big impact on the EMGF. It might impact the amount of surplus production from Egypt available for export, but Egypt still has a lot of infrastructure that can accommodate surplus production from other countries in the region. And this is the whole idea about the hub and the EMGF — how can we make use of the existing infrastructure and what other pieces of infrastructure can we add to compliment and complete the picture?
As for Egypt dealing with energy demand, the country has an energy strategy that was issued a few years ago and it is now under revision. Hopefully the update will be issued [early next year]. Egypt is working on three main tracks:
One is trying to optimise and increase its energy efficiency. Not just in electricity and petroleum but across the board. This requires what the government has been trying to do from subsidiary reforms — providing more incentives for households and industries to use more efficient systems and technologies.
Another track is to increase its renewable energy sources. I think Egypt has hit significant milestones in this regard, but the government is also trying to attract more investment for this.
And the third track is to optimise and increase exploration and production. In the past year, Egypt has managed to sign more than 15 new concession agreements, with most of them focusing on gas. Very recently there has been two significant gas discoveries by Chevron, [Italian energy firm] Eni and other European countries, and now the government is discussing how it can accelerate these.
If we are to conceptualise Egypt as a gas hub that is exporting other country's gas to Europe, what other country — aside from Israel — could contribute to that process in general?
Cyprus has some gas discoveries, with the most mature in terms of development being Aphrodite. Aphrodite's operator, Chevron, has submitted its development plan to the Cypriot government. The plan is based on bringing this gas to Egypt's liquefaction facilities to be re-exported. The development plan is under discussion between the Cypriot government and the company.
And there is already an agreement between the Egyptian government and the Cypriot one. It was signed and ratified between the two parliaments in 2018. Now it is for the companies to finalise the development plan and have the commercial agreement.
The government of Cyprus has recently rejected a development plan for the Aphrodite field because of the removal of a planned floating production unit, which would effectively hand over control of the field to Egypt, according to Cyprus' government. Do you see this as a potential test for the forum's goal of fostering co-operation?
A lot of the media reports in this regard are not very accurate. I've met with the new Cypriot minister and received first-hand information about this. I've also met with the 36 companies that are part of EMGF's industry advisory committee, which include all of the operators and companies in the east Mediterranean. The whole issue was that it is technical. I don't want to say rejection, but the Cypriot government has technical comments on the development plan. The conception, or the main elements of the development plan, have not been not rejected.
I think the Cypriot minister was maybe misquoted in his statements and comments at the beginning, but I believe that he tried to clarify things in several statements later on.
What are your thoughts on the recent announcement regarding the exploration drills offshore Lebanon?
I believe that the recent results are not the end of the road. There are many reports [...] that indicate big potential. I am personally optimistic and hopeful that the exploration campaigns work and better results come out.
Is your optimism more about Lebanon's offshore block 8 and 10?
I think it is beyond those two blocks, but the idea is that once you find the discovery, it will trigger more exploration activity, similar to what happened in Egypt or in other areas in the region or outside it.
