The international energy market has witnessed serious upheavals since the Russian invasion of Ukraine in February 2022. Europe, which significantly depended on Russia for its energy security, has been struggling to find alternative sources. The sanctions on Russia’s oil industry by the United States (US) and the European Union (EU) has led to serious churn in the global energy supplies, already seething with shortages due to sanctions on Iran and Venezuela, the civil war in Libya, and the debilitating impact of Covid-19 on demands. This has led to rise in global energy prices, making the post-pandemic economic recovery even more daunting, including in the US and European countries.
By Md. Muddassir Quamar
The OPEC+ decision on production cuts taken on 5 October 2022, therefore, provoked sharp reaction from President Joe Biden who blamed Saudi Arabia, warning it of “consequences” for siding with Russia. The Kingdom, on the other hand, responded by underlining its longstanding commitments to stability of the global energy market and denied political manoeuvring.
While the geopolitical tensions over the global energy production and supplies are unlikely to reduce anytime soon, the existing situation has underlined the need for finding alternative sources of energy. The growing international concern over global warming and environmental degradation has also accelerated the quest for alternatives. The focus is on finding alternatives both in terms of clean and renewable sources and newer producers and suppliers.
Natural gas, which compared to oil has lesser CO2 emissions, is being touted as the “bridge fuel” for energy transition in the twenty-first century. Regional hubs with prospective large gas fields such as Caspian and Eastern Mediterranean have gained international attention. The case of Eastern Mediterranean region is more interesting because of the way the geopolitics is shaping in recent years leading to greater competition and cooperation among regional countries. The region has gained prominence as an alternative source for supply of cleaner fuel, especially in the context of the Russia–Ukraine conflict.
Gas Exploration in East Med
Over the past decade, the Eastern Mediterranean has witnessed the discovery of a number of gas fields in the Exclusive Economic Zones (EEZs) of regional countries while further exploration and drilling activities are going on. According to estimates included in two reports from the United States Geological Survey released in 2010, vast energy reserves are deposited in both the Nile Delta and the Levant basins in the Eastern Mediterranean. Further deposits are estimated in the Aegean and Ionian Seas. Among the regional countries, Egypt and Israel have made a head start with commercial drilling and supplies through pipeline.
Israel has invested in Mari-B, Noa, Tamar and Leviathan gas fields, while Egypt has invested in the Zohr and Noor gas fields. Moreover, after the Israel–Lebanon maritime delimitation deal, Israel is expected to start production at the Karish gas field, while Lebanon is likely to accelerate drilling at the Qana field. The success of Egypt and Israel in finding commercial quantities and starting production from onshore gas fields has encouraged others, including Greece, Cyprus and Northern Cyprus, Turkey, Lebanon, Libya and Syria, to seriously undertake exploration activities.
The findings and quest for exploration have also generated squabbling among regional countries to claim territorial waters, EEZs and sections of the continental shelf leading to serious tensions, for example, between Turkey and Greece as well as between Turkey and Egypt. The signing of a MoU between Libya’s Government of National Accord (GNA) and Turkey in November 2019 on delimitation of maritime jurisdiction areas in the Mediterranean further escalated the tensions. The two have followed it up with an agreement signed in October 2022 on joint hydrocarbon exploration in Libyan waters, further causing stir among those opposed to the maritime deal between the two countries.
Simultaneously, the possibility of the Eastern Mediterranean region emerging as a new gas production hub has led to efforts at reconciliation and joint exploration. For example, an informal bloc among Egypt, Israel, Greece and Cyprus took formal shape as the Eastern Mediterranean Gas Forum (EMGF) in 2019. The EMGF, based in Cairo, aims to develop a cooperative mechanism among member countries for exploration, infrastructure development and to supply gas to European and Asian markets. Likewise, the possible economic benefits of gas production and exports encouraged Israel and Lebanon, that otherwise do not share formal ties, to sign a US-mediated maritime demarcation agreement in October 2022.
Prospects for India
India’s energy needs are constantly growing, and are likely to increase exponentially in the coming decades owing to its size and performance of its economy. India is the fastest growing large economy in the world, and its energy needs are also growing faster than any of the G-20 economies. There is a huge disparity, however, in the consumption to production ratio in India, which means that India has to depend on imports to fulfil its energy security needs. Conventionally, the Gulf region has been the mainstay of India’s energy security requirements, supplying 55–60 per cent of its oil and gas needs over the past few years.
The Government of India has been trying to diversify India’s energy basket both in terms of increasing renewables and cleaner sources, such as natural gas, wind, solar and hydrogen, as well as finding alternative producers, including from Australia, US, Russia, Latin America and Central Asia. Thus far, however, New Delhi has made only limited efforts to explore the potentials for gas imports from the Eastern Mediterranean region.
There are a number of reasons why India can emerge as a favourable destination for supplies from the Eastern Mediterranean. Firstly, India shares friendly relations with major regional countries, especially Egypt and Israel, both of which are keen to find newer markets for gas supplies. At this point, the majority of India’s gas imports come from Qatar and Australia. Given the emphasis on clean energy, New Delhi can explore imports from both Egyptian and Israeli gas fields. Both spot procurement and long term supply deals can be considered.
Indian oil companies can also look for participating in the exploration activities that can ensure supplies for India in the long term. In addition to Egypt and Israel, India can also explore the possibilities of partnering with Greece and Cyprus in gas exploration which can be lucrative in the future. There are challenges pertaining to regional tensions and uncertainties about maritime jurisdiction but this can be overcome by avoiding investments in disputed areas. The problems related to logistics and transportation can also be overcome given that India has in the past secured supplies from Libya before it got engulfed in the civil war. Further investments in infrastructure developments through mini-lateral initiatives such as the I2U2 and jointly with friendly regional and international powers, including the UAE and France, which are interested in the Eastern Mediterranean, can be explored.
Conclusion
At a time when India’s energy security needs are constantly increasing, it is worth exploring possible newer sources for supply of cleaner sources of energy. The Eastern Mediterranean has in recent years emerged as a major hub for gas exploration with mega findings in the Nile Delta and Levant basins. Although this has caused regional tensions, given competing claims on maritime jurisdiction in the Mediterranean Sea, it has also resulted in cooperation among regional countries for joint exploration and infrastructure development. For India, despite the regional problems, the Eastern Mediterranean offers strong prospects as a source for import of natural gas given its constantly increasing demands, and strong bilateral relations with the regional countries including Egypt, Israel, Greece and Cyprus. At the same time, for the regional countries, India offers a lucrative option as an export destination, given the huge and growing Indian appetite for energy.
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