How the discovery of offshore gasfields is changing Levantine economies

The discovery of massive gasfields in the Mediterranean basin has the potential to change the dynamics of the Levantine economies. But will those countries have the foresight to take advantage?

With European finance ministers meeting in mid-September, Spanish bank recapitalisation taking place, the Troika's report on Greece forthcoming in October and a possible onset of a global recession and economic slowdown because of the Eurozone's debt crisis — one would think there’s little to be positive about.

Even the future of Saudi Arabia, the world largest oil exporter is in question. In a report this month, Citigroup said the kingdom could become an oil importer by 2030 if the country's oil consumption grows in line with peak power demand.

For other countries the story is taking a different shape. If you’re Cyprus, Israel or Lebanon things look pretty good. As the rest of the world focused on the global credit crisis and its reverberations over the past four years, Israel and Cyprus, who import most of their energy needs, appear to have struck gold.

In 2009, Israel discovered what is known as the Tamar field in the Mediterranean Sea, which has 10 trillion cubic feet (tcf) of natural gas. Then, a year later, it discovered the Leviathan gas field, the largest discovery of its kind for a decade, but nowhere near the world’s biggest gas field, which is shared by Qatar and Iran. Then, last year, two new offshore natural gas fields, Sarah and Mira, were also discovered, by an Israeli company.

Houston-based Noble Energy Inc, which is helping Israel with its oil and gas exploration, also made a major gas discovery last year offshore Cyprus known as Block 12, estimated to have 7 tcf of gas.

In its first study in 2010 of the Levant Basin, the offshore Mediterranean region which stretches from the north of Egypt to the north of Lebanon and south of Cyprus, the US Geological Survey estimates the area has about 122 tcf of undiscovered, technically recoverable natural gas and holds 1.7bn barrels of undiscovered technically recoverable oil.

While Israel and Cyprus move forward, Lebanon lags behind. As has traditionally been the case with Lebanon, progress on any issue hinges on political consensus among its various political factions. Political bickering along sectarian and regional lines has been the norm since the end of a 15-year civil war in 1990.

Though the country’s parliament passed legislation that was supposed to pave the way for the exploration licences, Lebanon is still at the stage of carrying out seismic surveys of its territorial waters to collect data. If the government and politicians get their act together, tenders could start at the end of this year or early next year, although any extraction or production is unlikely to take place before five to eight years, according to analysts and industry experts.

“Lack of democracy and transparency, corruption, mediocre leadership, combine to structurally transform an apparent economic blessing into a tool of cronyism and authoritarianism,” says Chibli Mallat, a Lebanese lawyer and currently a visiting professor at Yale Law School.

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