Mediterranean Gas Galore, Challenges Aplenty

March 27, 2019

(Photo: Elaine Maslin)
(Photo: Elaine Maslin)

Gas resources abound in the Mediterranean but the challenges facing their monetization were highlighted at the opening plenary session of Offshore Mediterranean Conference (OMC) in Ravenna, Italy, this morning.

On the one hand, gas exploration in the region has come under an international spotlight since Eni made the Zohr discovery offshore Egypt, spurring new entrants, and further significant discoveries, mostly recently ExxonMobil’s Glafcos find offshore Cyprus. Numerous countries have issued recent calls for tenders for granting gas exploration licenses, among others Lebanon, Greece and Israel. Egypt has recently awarded exploration rights to 12 blocks which marked the entry of ExxonMobil to the country, highlighted OMC President Innocenzo Titone.

On the other hand, the countries subject to these new hydrocarbon bonanzas have a race to get their resource to market, Simon Flowers, chairman and chief analyst at Wood Mackenzie, told the audience, as Europe, the primary export market Mediterranean countries see for their gas, is driving a transition away from fossil fuels that could curb that demand.

“Energy policy is changing, the biggest change is in Europe in the power sector,” Flowers told the conference, at which Offshore Engineer is a media partner and reporting daily. “The EU plans, and it is just a plan, to have zero carbon by 2050, which has significant ramifications. It needs a dramatic increase in renewables to eliminate fossil fuels by 2050. Industries like cement and housing will be more difficult to decarbonize. If the EU succeeds, there is a threat that demand for gas could disappear. (Countries with gas resource) need to think about getting on and monetizing resources. Exporters need to recognize the degree of urgency. The markets wont be there forever.”

Even without a reduction in demand, the countries with gas export hopes face challenges. There are others looking to supply gas, including the US liquefied natural gas (LNG) market. “The Eastern Mediterranean has world class discoveries but the biggest challenges to commercialize, to secure a market,” says Flowers. “There is the cost of delivery to market and the geopolitics.”

Titone welcomed the formation of a new East Med Gas Forum, formed, in January, to create a regional gas market, promoting common infrastructure projects of gas transmission. However, its seven members omit Turkey and Lebanon, due to their disagreements with members of the group, which includes Italy, Egypt, Israel, Greece, Cyprus, Jordan, and the Palestinian Authority.

Italy, the home of the conference, also faces its own issues. Michele de Pascale, Mayor of Ravenna, told the conference: “Italy has shifted from not having an energy strategy to having the wrong strategy.” This included the introduction of a moratorium on offshore oil and gas exploration permits, as well as a sharp increase in fees payable on upstream concessions.

“Our country has abandoned scientific criteria relying on demagogy and fake news and this gives rise to a risk of serious harm to the segment, rejecting Italian and foreign investments and above all undermining energy development,” said Pascale. “We call on the Italian government to review the entire legislation regarding extraction activities.”

Still, the need to transition to a more sustainable and less carbon intensive energy sector was discussed. “We are in a period of transition in to a low carbon economy and the energy industry can positively contribute to this target with our technology and passion for innovation and financial resources,” said Titone. “But no easy transition will be achieved without an integration of renewables with fossils.”



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