Gas discoveries in the eastern Mediterranean represent extremely important economic opportunities for the countries concerned. Nevertheless, they create geopolitical problems for these countries as a result of military occupation; failure to demarcate exclusive economic zones (EEZ) or to agree on them prior to initiating hydrocarbon exploration; regional conflicts; and adverse political and economic developments in some of the countries in question. In 1999, the Palestinian National Authority (PNA) granted a license to a consortium led by British Gas (BG), the Palestinian Investment Fund, and the Consolidated Contractors Company (CCC) in Athens, for exploration and development in the waters off the coast of Gaza. Israel initially agreed on the condition that any ‘surplus' gas would be diverted to its local market. In 2002, the Gaza Marine field was discovered, with estimated reserves of up to one trillion cubic feet of gas, sufficient to meet demand from Gaza for 15 years. However, to this day, the field has yet to be developed, as Israel insisted on building the main pipeline to go into Ashkelon, where Israel would take the gas it needs at low prices, before sending the rest into Gaza. The PNA and the British-led consortium refused the Israeli demands, and negotiations stopped in 2007. Israel's concerns that Hamas may obtain the gas revenues, and use them in ‘terrorist' attacks, were the main reason for Israel's crippling conditions. Negotiations resumed in September 2012, brokered by the United States. These negotiations are still ongoing, but they are progressing very slowly and are yet to achieve any results. The estimated time period for the development of the field, in case of agreement, is three to four years. Gaza Marine is located about 35 km from the coast of Gaza, and is in relatively shallow water at a depth of 600 meters below sea level. After Gaza Marine was discovered, Israel made its own discoveries with the help of the US firm Noble Energy, in partnership with Israeli oil companies in the southern waters adjacent to the Palestinian waters. But the reserves these southern fields held were relatively small. Then nearly a decade later, important fields were discovered near Lebanese waters, including Tamar and Leviathan. Gas reserves in Israel are currently estimated at more than 30 trillion cubic feet, mostly in Leviathan. Israel is seeking to attract international companies, while the only foreign company to invest so far is Noble Energy. Recently, international companies have applied, albeit in a very limited manner, to invest in Israeli waters in light of the discoveries made by Noble Energy. But compared to the broader participation of international companies in Cyprus and the greater attention afforded to Lebanon, Israelis are asking two questions: One, is it possible to attract mega international companies, and increase the odds of discovering new fields? And two, will it be possible to break the Arab boycott of Israel which the international oil companies have observed so far, fearing the reactions of Arab oil countries where they have bigger stakes? Israel recently dispatched a delegation to New York to test the waters and get feedback from the companies in question. In late 2012 in Cyprus, Noble Energy discovered a field dubbed Aphrodite in the EEZ located in the southeastern waters of the island, about 34 km from Leviathan. The field holds about nine trillion cubic feet of gas, and is about 7,000 meters below sea level. These reserves can meet the energy needs of the island for the next 25 years, while making it possible to export some of the gas too. But Cyprus faces a problem as a result of Turkish pressures. Turkey has demands, including sharing natural resources in Cypriot waters on behalf of Turkish Cypriots in the northern part of the island, which has been under Turkish occupation since 1974. Turkey is also putting pressure on neighboring countries to not demarcate the boundaries of EEZs with Cyprus except after taking into account the interests of the occupied part of the island, and granting Turkish oil companies the right to invest in the waters adjacent to that part. It is believed that Turkey aims to obtain Cypriot gas supplies at discounted prices, and pressure Nicosia to negotiate over the reunification of the island. Turkey has used many ways to pressure Cyprus. It scrambled fighter jets over Nobel Energy's offshore rig to deter the company from continuing exploration (the Israeli air force intercepted the fighters). But Cyprus insisted on its policy, and Nobel Energy pressed ahead with its exploration efforts. Turkey pursued a new policy in putting pressure, and decided to boycott any oil company signing agreements over investments in Cyprus. Ankara thus banned Italy's Eni from operating in the booming Turkish market, while Ankara's decision over French group Total is still pending, after the latter was awarded a contract for drilling in Cypriot waters. The present financial crisis in Cyprus will also no doubt impact the government's efforts to invest in petroleum projects. In Lebanon, the petroleum sector suffered over the past years as a result of weak political institutions and delays in decision-making. Nevertheless, Lebanon made a crucial decision a few years ago, related to proceeding with 2-D and 3-D seismic surveys of its offshore areas. The results of these surveys gave positive indications about the possible presence of petroleum in Lebanese waters. However, these surveys cannot give specific figures about the size of the reserves in the manner being touted in Lebanon, without drilling exploratory wells first. Lebanon faces another, more important issue, namely, the need to agree now before any discoveries are made over amending the constitution to stipulate that the hydrocarbon wealth belongs to the entire Lebanese people—and not any particular segment in whose regions oil may be found. This amendment is necessary in light of the bitter experience seen in oil-producing countries like Iraq, where sectarianism is rife. Lebanon, like many Arab countries, also has to grapple with the problem of corruption. This is the first issue raised by Lebanese people when commenting on the possibility of Lebanon becoming an oil-rich country. Yet Lebanon was able to deal prudently with a dispute with Israel over its EEZ in the south. The information available indicates that the US State Department sent a delegation to mediate on this issue. The delegation proposed that Lebanon take control of two-thirds of the disputed EEZ, while the remaining third remains “disputed," i.e. neither Lebanon nor Israel can invest in it, until the dispute is resolved. It seems that the Lebanese political factions are in agreement over the issue, but Israel has not expressed its position yet. What matters is that concerns over the border dispute have faded, and will not be an obstacle to investment by international companies which are showing extensive interest in Lebanon. So far, 46 companies have applied to obtain licenses related to exploration. * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
