The Eastern Mediterranean is an emerging region for natural gas development, and the resources underneath the seabed hold out the promise of an economic bounty to several small countries in the area.
Some of the natural gas fields just recently began to flow, but the buzz began back in 2010 when a U.S. Geological Survey report estimated that the Eastern Mediterranean held 1.7 billion barrels of oil and 122 trillion cubic feet of natural gas.
Known as the Levant Basin Province, the natural gas deposits stretch from the waters just off the coast of Israel, north to Lebanese and Syrian waters, and westwards to Cyprus.
Development quickly proceeded in Israeli territory shortly after the report’s publication.
ISRAEL
The development of the Tamar field has been a major achievement for the Israeli government. Israel, not naturally blessed with domestic sources of oil and gas, has long depended on imports to meet its energy needs. But the 2009 discovery of the large Tamar field in the Mediterranean changed the country’s fortunes. Holding an estimated 8 trillion cubic feet of natural gas, it was Israel’s largest discovery in history at that time.
And the Tamar was not the only field in the broader Levant basin to hold prodigious volumes of natural gas. A year later, the Leviathan was discovered. It was thought to hold 16 trillion cubic feet (tcf) of natural gas (450 billion cubic meters), double the volume of the Tamar field.…
The Eastern Mediterranean is an emerging region for natural gas development, and the resources underneath the seabed hold out the promise of an economic bounty to several small countries in the area.
Some of the natural gas fields just recently began to flow, but the buzz began back in 2010 when a U.S. Geological Survey report estimated that the Eastern Mediterranean held 1.7 billion barrels of oil and 122 trillion cubic feet of natural gas.
Known as the Levant Basin Province, the natural gas deposits stretch from the waters just off the coast of Israel, north to Lebanese and Syrian waters, and westwards to Cyprus.
Development quickly proceeded in Israeli territory shortly after the report’s publication.
ISRAEL
The development of the Tamar field has been a major achievement for the Israeli government. Israel, not naturally blessed with domestic sources of oil and gas, has long depended on imports to meet its energy needs. But the 2009 discovery of the large Tamar field in the Mediterranean changed the country’s fortunes. Holding an estimated 8 trillion cubic feet of natural gas, it was Israel’s largest discovery in history at that time.
And the Tamar was not the only field in the broader Levant basin to hold prodigious volumes of natural gas. A year later, the Leviathan was discovered. It was thought to hold 16 trillion cubic feet (tcf) of natural gas (450 billion cubic meters), double the volume of the Tamar field. Even better, the Leviathan has since been upgraded multiple times. The most recent estimate pegs the Leviathan at about 22 tcf (620 bcm) of natural gas, making it the world’s largest offshore gas find over the past decade. It is also the biggest success for Houston-based Noble Energy (NYSE: NBL), the lead operator on the Leviathan.
Noble has some ambitious plans for the Leviathan project, which is targeted to begin initial production in 2017. It is aiming to develop 2.4 bcf per day of natural gas, with most of the production earmarked for the Israeli domestic market. Noble then plans on using floating liquefied natural gas (FLNG) ships to process and export another 500 to 800 million cubic feet per day (3.2 to 4.8 million tonnes of LNG per year).
Noble Energy is working on several other fields near the Leviathan and the Tamar fields, with smaller but still significant reserves of natural gas.
On October 19 Noble Energy and its partners announced that they plan on selling natural gas to Egypt from its Tamar field. Noble Energy has a 36% stake in the project, and its partners include several Israeli companies – Isramco Neveg 2 Ltd. Partnership (TLV: ISRA.L), Avner Oil Exploration Ltd. Partnership (TLV: AVNR.L), and Delek Drilling Ltd. Parternship (TLV: DEDR.L).
The deal calls for the sale of five billion cubic meters of natural gas to an Egyptian gas company called Dolphinus Holdings Ltd, and the deal will last for seven years.
Separately, Noble has inked a non-binding agreement to send 45 bcm of natural gas to Jordan over the course of 15 years. That gas will come from the Leviathan field.
Taken together, the development of the Tamar and the Leviathan has the potential to turn Israel into a serious exporter of natural gas in the region.

Cyprus
The Levant basin also stretches north and west into Cypriot waters, and Cyprus is also home to a significant reserve of natural gas.
Cyprus is divided along Greek and Turkish lines, a division that has attracted international mediation efforts since the original break in 1974. However, although progress towards reunification has proceeded in fits and starts, the two sides have been at an impasse for years. But eyebrows were raised in both Brussels and Washington when a major natural gas discovery was made in 2011. In part because of the success in Israeli waters, Greek-controlled southern Cyprus has tried to attract attention for its own offshore reserves.
The Greek Cypriot government awarded contracts to international companies for development. Italian oil giant ENI (BIT: ENI) has an 80% working interest in blocks 2, 3, and 9 in Cypriot territory, with Korea Gas Corporation (KRX: 036460) as a partner. ENI-KOGAS is currently surveying Cypriot waters. Noble Energy has the rights to block 12, where it says there is an estimated 4.1 tcf of natural gas in place.
But there is a bit of political risk for companies operating in Cypriot waters that is not present in neighboring Israel.

The problem is that the Turkish Cypriot government and the Republic of Cyprus (as the southern Greek section is known) are at odds over who controls the rights to resource development. The northern Cypriot government is demanding its share of any revenues eventually realized from natural gas, and it is backed up by the Turkish government in Ankara.
The conflict escalated in October when the Turkish government sent navy ships and a research vessel into Cypriot waters south of the island. The Greek Cypriot leader pulled out of peace negotiations with his Turkish Cypriot counterpart in response. Finger pointing has ensued, with each side blaming the other for deteriorating relations.
A resolution to the dispute is not likely in the near-term, but the United States has paid an increasing amount of attention to Cyprus this year. That is largely due to the crisis between Russia and Ukraine. Europe’s dependence on Russia for natural gas suddenly became an acute vulnerability in the eyes of American diplomats after the annexation of Crimea.
This has led them to Cyprus, where they are leaning on north and south to resolve their differences in order to pave the way for the production of offshore natural gas. The importance of Cypriot gas to the U.S. was highlighted by a visit to the island from Vice President Joe Biden, the first visit from an American Vice President in over 50 years. Biden said that Cyprus could become a symbol of “peace and stability in the Eastern Mediterranean.” The idea is that Cyprus could export its natural gas to Western Europe, easing the region’s reliance on Russia.
But that would require an agreement over how to split the spoils of its offshore gas fields. For now, the Greek Cypriot government is downplaying the incursion by Turkish ships. The Greek Cypriot Energy Minister Giorgos Lakkotrypis said on October 21 that Eni’s drilling operations would proceed without any interruption. Going about “business as usual” would be the best retort to Ankara, he said.
If Cyprus provides enough political security to companies involved, and drillers can successfully extract commercial volumes of natural gas, the tiny Mediterranean island would stand to benefit. The estimated resources in Noble Energy’s block 12 alone would amount to 100 percent of Cyprus’ $23 billion GDP.
To export, Cyprus is considering the construction of an LNG export terminal. However, the production expected from Noble Energy’s block alone is not enough to feed a liquefaction facility. Therefore, all parties are eagerly awaiting the results of the ENI-KOGAS exploration campaign, which are expected before the end of the year.
French oil company Total (NYSE: TOT) is set to explore blocks 10 and 11 in 2015.
The President of the Republic of Cyprus Nicos Anastasiades has argued that natural gas can be the unifying force between Greek and Turkish Cypriots. Whether or not that is realistic, the Republic of Cyprus is urging Noble Energy, ENI-KOGAS, and Total to push forward.