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Vanand Meliksetian

Vanand Meliksetian

Vanand Meliksetian is an energy and utilities consultant who has worked with several major international energy companies. He has an LL.M. from VU Amsterdam University…

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The Next Flashpoint In This Emerging Energy Hub

The Eastern Mediterranean is quickly turning into an energy hub due to the discovery of significant gas resources in recent years.

Egypt, for example, has already started production at its giant Zohr gas field, which transformed North-African state from an importer into an exporter of energy. Israel, for the first time in its history, will become a net exporter instead of importer concerning gas. Also, Cypriot waters have seen their fair share of significant discoveries in recent years. Lebanon, on the other hand, is one of the few countries in the Eastern Mediterranean which hasn’t yet been able to deliver any good news. However, according to some estimates, the area could generate $200 billion in revenues based on 96 trillion cubic feet of gas reserves and 865 million barrels of oil reserves.

Russia has been making significant inroads into the Lebanese energy sector with practically all major Russian companies participating in exploration and construction projects in the energy sector. The military intervention on behalf of Syrian President Assad in the neighbouring country's civil war provided the Kremlin with a springboard regarding the expansion of Russian activities in the region. It hasn't gone unnoticed as Washington is trying to counter the Russian advances by using its diplomatic and economic clout which hasn’t been particularly successful.

Secretary of State Mike Pompeo travelled to Lebanon on the 22nd of March where he dedicated some time to transfer Washington’s concerns regarding the growing influence of Russian energy companies. According to some media, he intended to set red lines concerning the participation of ‘unwanted elements’ in the Lebanese energy sector. Despite the U.S. efforts, Lebanese leaders have voiced their continued support for cooperation with Russian energy giants to facilitate the development of their country’s energy sector.

Beirut has already awarded the first contract for offshore drilling to a consortium comprised of Novatek, Eni, and Total. Rosneft is also increasing its activities in the country by agreeing to rehabilitate part of the oil storage terminal in Tripoli, and the company is also competing in the bidding process for an offshore gas terminal. Gazprom, on the other hand, has been active in revitalizing neighbouring Syria’s gas industry. Despite the distinct economic advantage, Moscow is primarily focussed on the bigger picture when it comes to gaining influence in the strategically well-positioned country. The relative retreat of the U.S. from the Middle East allowed Moscow to increase its presence.

Although Washington has significant influence over Lebanese affairs, that clout seems to be waning quickly due to counterproductive American policies. The strong presence of Hezbollah in the Lebanese society and economy creates another hurdle for Western companies willing to invest due to U.S. sanctions. Furthermore, Washington’s support for Israel and President Trump’s decision to move the U.S. embassy to Jerusalem, as a favour of the Jewish lobby, hasn’t had a positive effect on America’s image in the region. The longer U.S. companies aren’t involved in the Lebanese energy sector, the less influence Washington has over future developments. Related: Rosneft Sees No Oil Deficit Looming As Iran Sanction Waivers End

Lebanon’s difficult relations with neighbouring Israel aren’t limited to religious and ideological areas only. Also, in the energy domain, the countries are at odds with each other due to a dispute in maritime border demarcation. The states have an overlapping claim concerning a hydrocarbon-rich area in the Eastern Mediterranean. Although Washington has tried to mediate between the Middle Eastern countries, the Lebanese leadership is critical towards the Americans as they perceive them biased towards Israel.

Moscow, on the other hand, has chosen an approach into making strategic inroads which combines security, diplomacy, and energy. President Michel Aoun’s visit to Moscow is a testimony of good relations and high stakes. A sign that Moscow’s Middle East strategy is working is the rehabilitation of a long-disused oil pipeline connecting the Lebanese port city of Tripoli with oilfields in Iraqi Kurdistan through Syria. This wouldn’t have been possible if the Kremlin hadn’t cultivated its military, diplomatic and economic presence in the concerning countries where Moscow has invested significantly over the years.

By Vanand Meliksetian for Oilprice.com

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  • Mamdouh Salameh on April 30 2019 said:
    Three countries, namely Egypt, Turkey and Israel have emerged as the clear winners in the growing importance of the huge East Mediterranean natural gas discoveries.

    Egypt is already emerging as the the energy hub of the Eastern Mediterranean. It has the third largest proven reserves of natural gas in Africa, gas pipelines, proximity to Cypriot, Israeli and eventually Lebanese gasfields, the only LNG export plants in the East Mediterranean and the re-emergence of interest in its gas potential by the oil supermajors like Shell, ExxonMobil BP an ENI.

    Turkey is also consolidating its position as the energy hub of the European Union (EU) bolstered by the Turk Stream gas pipeline which will bring Russian gas supplies once it becomes operational by the end of 2019 to Turkey and the EU under the Black Sea and also with the Southern Gas Corridor (SGC) bringing Caspian gas from Azerbaijan to Turkey and then to the EU via the Trans Adriatic Pipeline (TAP).

    Israel, for the first time in its history, will become a net exporter instead of importer of gas.

    And while Cyprus has had a relatively fair share of significant discoveries in recent years, the success of its production and export of gas has so far been bedevilled by geopolitical and economic conflict with Turkey defending the rights of the Turkish Cypriots to benefit fairly from these riches.

    Lebanon, on the other hand, is one of the few countries in the Eastern Mediterranean which hasn’t yet been able to deliver any good news. A major reason is a maritime border dispute with Israel.

    Lebanon and Israel are squabbling over the right to claim an 860 kilometre (332 square miles) triangular area as part of their respective exclusive economic zones.

    The dispute dates back to the discovery of the huge Israeli gasfield known as the Leviathan in 2010 with proven reserves of 25 tcf. However, the development of the Leviathan triggered a boundary dispute between Lebanon and Israel with Lebanon accusing Israel of violating its maritime rights.

    Lebanon and Israel have not defined their maritime border since the withdrawal of Israeli troops in 2000, leaving a slice of contested territory.

    When Israeli troops withdrew from Lebanon in 2000, the U.N.-sanctioned Blue Line became the de facto land border between the two countries. Israel unilaterally extended a line of buoys out into the sea to approximate a maritime border. But Lebanese officials say the angle Israel took from the shore gives it more territorial water than it deserves.

    The Lebanese-Israeli dispute is a long-standing one, but tensions rose after Lebanon called an oil and gas exploration tender in disputed territory. Lebanon and Israel have an unresolved maritime border dispute over a triangular area that extends along the southern edge of three of Lebanon’s 10 blocks.

    US mediation between Lebanon and Israel failed according to Lebanese media because it meant dividing the disputed maritime area between Israel and Lebanon, something Lebanon adamantly refuses to agree to.

    Russia has been making significant inroads into the Lebanese energy sector. Lebanon has already awarded the first contract for offshore drilling to a consortium comprised of Russian gas company Novatek, Italian oil & gas giant, Eni, and French Total. Rosneft has already agreed to rehabilitate part of the oil storage terminal in Tripoli, and the company is also competing in the bidding process for an offshore gas terminal.

    The United States, on the other hand, is hell-bent on undermining Russia’s efforts in Lebanon.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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