Big Oil Looks To The Eastern Mediterranean As Replacement For Russian Gas

(MENAFN- Baystreet) Ever since Russia invaded Ukraine on 24 February 2022, the U.S. and its key North Atlantic Treaty Organisation (NATO) allies have looked to new sources of gas supply to allow the security group to phase out all such supplies flowing into Europe from Russia. The key reasons for this are still intact, but with Donald trump beginning his second term as U.S. President on 20 January, this part of the multi-pronged strategy to further diminish Russian influence in Europe is set to pick up pace. It is also a key part of the new Trump Presidential Administration's push to destroy the financing at the heart of the 'Axis of Resistance' in the Middle East spearheaded by Iran and, in turn, to scupper the broader China-led strategy to replace the dominant influence of the U.S. and its key allies in the world with an alternative version in which China plays the dominant role.
The first reason why phasing out all Russia's gas exports into Europe remains so critical is that the continent's heavy dependence on these (and its oil exports too) led to a catastrophic failure to halt President Vladimir Putin's vision to resuscitate the European Empire of the U.S.S.R. back in 2008 and then even more significantly in 2014, as analysed in full in my latest book on the new global oil market order.
There was little doubt of his intentions when he called the collapse of the Soviet Union in 1992:“The biggest geopolitical catastrophe of the century”. Once Putin had secured his presidency, he saw Russia's oil and gas resources as a key mechanism through which Russia could firstly, keep the energy-needy Former Soviet Union states firmly in line and; secondly, ensure that the principal European Union (E.U.) states (especially Germany) did not seek to interfere too much in any of Russia's dealings with the remaining non-E.U. countries; thirdly, leverage whenever and wherever possible existing disagreements between the E.U. and the U.S. to critically undermine the core NATO doctrine of 'collective defence' against attack; and fourthly, use the prospect of given or withheld energy supplies to project its power into 'chaotic states', most notably those in the Middle East and North Africa.
So successful was he in leveraging Russia's gas and oil supply power over Europe into broader economic and political influence that nothing meaningful was done after Russia invaded Georgia in 2008 or Ukraine's Crimea region in 2014.
However, the failure of the Putin-ordered full invasion of Ukraine in 2022 to secure the country within a week as he envisaged allowed the U.S. more leeway in moving to draw a line in Europe across which Russia should not venture. This was focused on cutting off as much as possible of the financing for its war in Ukraine that Russia still received from gas and oil exports into Europe. As also fully detailed in my latest book, this involved a combination of very forcefully persuading Germany that it was not in its best interests to lead Europe into another capitulation to Russia as it had done in 2008 and 2014, while at the same time putting into place for it (and other wavering countries) alternative energy supplies.
This was done primarily in the first instance through liquefied natural gas supplies (LNG), mainly from Qatar but with deals tied into the U.S. for the Emirate. And later, as it became apparent that LNG would be the key emergency energy supply in the new global oil market order, more supplies of it from other sources over which the U.S. and its NATO allies could gradually exert a significant broader economic and political influence came into play as well. A key focus of this was the Eastern Mediterranean region, especially Egypt and Israel. The major players at the forefront of this concerted strategy were oil and gas majors from the U.S. (including ExxonMobil, Chevron, and ConocoPhillips), from the U.K. (especially Shell, and BP), France (most notably TotalEnergies), and Italy (with Eni taking the lead).
The pace of gas supply development in Egypt had been seamlessly spectacular up until recently. Not only does the country hold a very special political, economic, religious and cultural place in the Middle East and Islamic world, as detailed in my latest book on the new global oil market order, but it also has potentially huge gas reserves. These are very conservatively estimated at around 1.8 trillion cubic metres (Tcm), but could be considerably more than this, according to E.U. energy security sources spoken to by OilPrice in recent months. It is also the only country in the Eastern Mediterranean gas hotspot region with operational LNG export capacity and is consequently ideally placed to become the top regional export hub for the gas.
Crucially as well is that its geographic positioning means that it controls the major global shipping chokepoint of the Suez Canal, through which around 10 percent of the world's oil and LNG is moved. It also controls the vital Suez-Mediterranean Pipeline, which runs from the Ain Sokhna terminal in the Gulf of Suez, near the Red Sea, to Sidi Kerir port, west of Alexandria in the Mediterranean Sea. This is a crucial alternative to the Suez Canal for transporting oil from the Persian Gulf to the Mediterranean. The Suez Canal importance to the global energy sector is further boosted by the fact that it is one of the very few major transit points that is not controlled by China. That said, the influx of so many Western developments has caused its own currency problems for Egypt recently, although remedies are coming into place for this.
Given all of this, the attention of the same Western firms active in Egypt is refocusing on the parallel Eastern Mediterranean gas hotspot of Cyprus, which is now considering a new licensing round for offshore natural gas exploration, according to recent comments from its Energy Minister George Papanastasiou. It estimates current untapped gas reserves of around 0.45 Tcm, although again this is considered a huge underestimate by E.U. energy security sources spoke to by OilPrice. The island has 13 offshore blocks, with 10 of these already under licence to the same Western energy majors active in Egypt -- including ExxonMobil, Chevron, TotalEnergies, and Eni. According to Papanastasiou, Cyprus may offer blocks for which existing operators may want to give up their licence, in addition to those currently not under licence.
At the end of last month, ExxonMobil's vice-president for global exploration, John Ardill, said that“There is huge potential for gas exploration” around the island and that the firm will be spudding its first well in mid-January. Having won its initial licences in Cyprus in 2017, ExxonMobil made its first big find in 2019 at the Glaucus well and has since found two new potential major discoveries in Pegasus and Electra. Electra (in Block 5) has the benefit as well of being close to its Glaucus operation (Block 10) and to the huge Cronos discovery (Block 6) being developed by Eni and TotalEnergies.
By Simon Watkins for Oilprice

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