PUMPING GAS

King Charles has spent decades campaigning, cajoling, and convening meetings to drive action on environmental issues.

But that was when he was Prince of Wales, now he is subject to different rules - the monarch is obliged to remain politically neutral.

But his friends and advisers say he will not cool on the issue of global warming.

I had no intention of writing about the “Land of Hope and Glory” and its new King, but I got sidetracked by a news item I read on climate change.

Just the same, it serves as a preamble to the topic of Lebanon’s natural gas dilemma

At this juncture, I’ll add a brief comment regarding natural gas. It is a relatively clean burning fossil fuel Burning natural gas for energy results in fewer emissions of nearly all types of air pollutants and carbon dioxide (CO₂) than burning coal or petroleum products to produce an equal amount of energy.

Now back to our neighbours in the land of the cedars

The arrival of an Israeli floating gas production unit in the maritime zone adjacent to the coasts of Israel and Lebanon recently has radically changed the “rules of the game.”.

In abeyance for more than a decade, the dispute between Israel and Lebanon over the two countries’ maritime borders resurfaced on June 5.

Israel and Lebanon have never drawn their borders. The Karish gas field where Israel is exploring is located in a disputed area of 860 km2 in the middle of the Eastern Mediterranean where huge gas reserves have been found in recent years.

The Lebanese government invited the US envoy Amos Hochstein – appointed by President Joe Biden to mediate between the two countries – asking him to help restart talks with Israel over the issue.

Any exploration, drilling, or extraction work Israel carries out in the disputed areas would constitute a “provocation and act of aggression”, said a joint statement by Lebanese President Michel Aoun and outgoing Prime Minister Najib Mikati.

However, the Israeli government sees the Karish gas field as part of its exclusive economic zone and therefore believes that it’s not relevant to its maritime dispute.

Originally in dispute was the maritime area between the southern boundary of the Lebanese claim (known as “line 23”), which it formally asserted under the UN Convention on the Law of the Sea (UNCLOS), and the boundary Israel sought to draw to the north (known as “line 1”). In 2012, U.S. mediator Frederic Hof proposed a compromise that would have split up the area at a ratio of 55 percent for Lebanon and 45 percent for Israel. But – without offering clear reasons – the Lebanese government failed to approve the proposal and the negotiations lapsed. When indirect talks resumed in late 2020, the Lebanese delegation presented new legal and hydrographical studies to support an expanded claim (bounded by what is known as “line 29”) encompassing an additional 1,430 sq km south of line 23; it did not, however, formalise the expanded claim by amending its prior UNCLOS filing, which remains pegged to line 23.

Lebanon’s subsequent insistence on staking its claim based on line 29 has brought previously undisputed gas reserves into play, stoking further tension between the two countries. Under Lebanon’s original line 23 claim, the Karish field – the one from which Israel is preparing to extract gas, lies far to the south in Israeli waters. By contrast, the new Lebanese claim would put the northern half of Karish in Lebanese maritime territory. Predictably, Israel has rejected the new Lebanese position, and the parties have struggled unsuccessfully to resolve their differences.

 

The Karish field’s development is expected to add around 1.41 trillion cubic feet of gas to Israel’s proven reserves. The expected quantity of gas available at Karish falls well below the estimated size of the Leviathan and Tamar fields, which Israel is already exploiting, suggesting that Karish is not integral to Israeli energy security at present. Nevertheless, Israel’s firm stance regarding this matter has put an end to Lebanon’s foot-dragging.

An analysis conducted by INSS (The Institute for National Security Studies), quoted a particularly belligerent speech made by Hezbollah leader Hassan Nasrallah on June 9 attacking Israel and claiming that he had the ability to prevent gas production from the Karish field. “He described such gas production as Israeli aggression and theft of Lebanon’s economic resources. Nasrallah is therefore exploiting the current crisis in order to reinforce the organisation’s familiar narrative, that it uses its weapons on behalf of Lebanon’s national interests.

At this stage, efforts are focused on the formation of a new government. However, based on past experience, it is unlikely that Lebanese citizens will see the mission completed in the near future. More than a month after the elections there is still no sign of agreement over the composition of the government or the identity of the Sunni prime minister (as required by the Lebanese constitution). It is possible that the task will not even be finished by October when the parliament is due to elect a new president.

However, even if a government is formed in the coming months, the two main relevant scenarios do not promise a functioning government that could rescue Lebanon from its dire economic straits. A government of broad consensus as promoted by Hezbollah and its allies would be as paralysed as its predecessors and would be unable to promote the reforms necessary for any improvement in the situation. In the other scenario, any government formed without Hezbollah, a very unlikely scenario, would find its actions thwarted by Hezbollah through political moves, and perhaps even through the use of military force within Lebanon, or by heating up the border with Israel.

The fact that Hezbollah in recent years has been largely engaged in internal matters has helped restrain its military activity against Israel. However, in view of Nasrallah’s harsh rhetoric around the issue of pumping gas from the Karish field and his threats that his organisation can prevent Israel from acting unilaterally in a gas field that he considers disputed, Israel must prepare for the possibility of escalation following attempts to implement the threats. This will be especially likely if there is greater internal pressure on Hezbollah.”   

In an earlier publication issued by INSS in 2019, the authors included the whole Eastern Mediterranean in their analysis,” A number of seemingly unconnected developments over the past year have created the possibility of a new dynamic concerning the economic potential in natural gas resources in the Eastern Mediterranean basin. Accelerated activity in the matter may also contribute to a positive change in the geopolitical situation in the region.” Since then, the situation in Europe following Russia’s incursion in Ukraine has changed. In retrospect, the INSS survey of 2019 appears even more relevant today. “The third development has to do with the issue of transporting the gas to the European market. When Lebanon reaches the commercial production stage, the question of transportation of quantities of natural gas produced in the Eastern Mediterranean to the most significant nearby customer - Europe - will come into sharper focus. The alternative of laying a pipeline toward Cyprus and from there to Greece may prove to be difficult to implement for political reasons (Turkish opposition), technical reasons (difficulties in laying the pipeline on a problematic seabed), and thus also for financial reasons (costs higher than the current estimate of $6 billion). The less expensive alternative of laying a pipeline to Turkey and connecting it to the existing transportation systems to Europe is more problematic politically, not only from Israel's standpoint. It requires passage through Lebanese and Syrian EEZs, and reliance on the current regime in Turkey that in recent years has been wont to make strategic reversals and certainly does not encourage long term investment that requires trust between potential investors.

Against this background, other alternatives emerge. One is transporting the gas from the Israeli fields to facilities on the northern Egyptian coast. These facilities liquefy the gas and load it into tankers, carrying the gas to ports where the reverse process is performed — offloading, gasification, and pumping the gas into a pipeline. The companies that operate the Leviathan field planned to begin transporting gas to Egypt in late 2019.  It was anticipated that Egypt would be both a consumer of Israeli gas and a transit point for liquefied natural gas. Since then, a change in the route has occurred. The Israeli energy ministry has approved the start of gas flows to Egypt via Jordan.

At present, Israeli gas from its offshore Leviathan and Tamar fields is delivered to Egypt via Israel's own transmission system before flowing to Egypt via the now-reversed offshore East Mediterranean Gas, or EMG, pipeline.

However, with Egyptian demand for Israeli gas set to grow, the ministry approved the use of the Jordan route which will take gas to Aqaba and then onto Egypt.

This alternative is very important, both because it is the only one that provides an immediate gas export response that ensures the ability of producing companies to continue developing the other fields where they have concessions, and because it enables the state to increase its tax and royalty revenue from the sale of the gas. Beyond the economic aspect, cooperation between Israel and Egypt is a strategic asset for both countries. Despite the advantages, this alternative is not without technical and political problems. The technical problem is the limited capacity of both the pipeline to Egypt and the Egyptian liquefaction facilities. The Israeli-American consortium will have to compete with the natural gas produced in Egypt, some of which is intended for export. From a political standpoint as well, economic dependence on a single transport mechanism may under various circumstances prove to be problematic.

For that reason, the willingness of the consortium (and in effect that of the Israeli government as well) to examine the alternative of liquefying the natural gas and shipping it to Europe from floating installations – Floating LNG – that will be positioned in Israel's EEZ is understandable. In July 2019, the Israeli-American consortium signed agreements with two companies that deal with the establishment of such floating installations. One is GOLAR, which is registered in the US, and the second is EXMAR of Belgium. The cost of an installation depends on its distance from the coast, the quantity to be liquefied, and the ability to store the liquefied gas until it is loaded onto tankers. In all cases, the cost of the floating LNG installation exceeds $1 billion. A combination of land-based installations in Egypt and a floating installation in Israel’s economic waters will provide flexibility in transport and early and more rapid exploitation of quantities of natural gas, which the companies are permitted to export according to the framework adopted by the Israeli government, and which may increase if new reserves are discovered.

Settling the issue of the land and maritime boundary between Israel and Lebanon and an agreement for the joint exploitation of cross-border gas fields may enable the future utilisation of a floating LNG facility by producing companies in Lebanon and Cyprus, thereby saving them huge investments in separate infrastructure. This will also increase the interest of the involved countries in maintaining regional stability.

Almost all of this convoluted narrative is derived from open-source information. My experience with pumping gas (petrol) is at our local filling station.

Have a good weekend.

 

Beni,                                                               15^th of September, 2022.