by Amy Styer
23 April 2013. Jerusalem, Israel. What does the banking crisis in Cyprus have to do with king crisis in Cyprusan Israeli oil field and a Texan drilling company? The banking crisis in Cyprus might have been the big news this past week, but there is a quieter event that could have much greater consequences for the region. The Tamar gas field discovered off the coast of Israel in 2009 began delivering natural gas on March 30th. The connection between Israel and Cyprus is via Noble Energy, Inc.
Noble Energy took a risk when it agreed to drill in Israeli territory in the Mediterranean. The company knew that signing up with Israel would mean being blacklisted by oil rich Arab nations, lucrative potential customers. Israel wanted Noble, and only Noble, to do the drilling because it has a reputation as the best deep drilling company in the world able to reach more than five miles into the bottom of the ocean. The risk paid off when 90 km off the northern coast of Israel the Tamar field was discovered holding 238 billion cubic meters (bcm) of natural gas.
Oil-poor Israel celebrated the news of Tamar, but then an even larger discovery was made. Just 45 km from the Tamar site, the Leviathan field dwarfs Tamar. Initial testing indicated there could be 453 bcm of gas. Production of the area could begin in 2016.
This is where Cyprus connection comes in. The Leviathan field crosses from Israel’s territorial waters into Cyprus’. Cyprus and Israel have already worked out the touchy situation of demarcating territorial waters (normally a nation has exclusive drilling rights up to 200 miles off its coast, but because the two countries are so close their territories overlap). The Cypriot part of the Leviathan field, called Aphrodite, looks to be larger than all of Israel’s fields combined.
Noble is also going to start drilling in Crete’s territorial waters in the near future. There is a plan to connect the fields of Israel, Cyprus, and Crete with a pipeline approximately 750 miles long. Cyprus and Crete cannot afford to build the pipeline, a necessity for distribution. A consortium of Israeli and American oil companies could possibly raise the capital and complete the job. The three countries would be able to supply Europe with all its natural gas needs for the next twenty years.
Cyprus, amid a banking disaster, and Crete, caught up in the Greek debt crisis, could benefit greatly from the gas discoveries. On a recent visit to Cyprus, I met many elders and not many younger people. In the pastoral village of Lefkara, the elementary school was nearly empty. I spoke to a woman sitting outside embroidering a pillow. She said that because there are no jobs, all their children left. When I asked her about the possibility of Cyprus becoming one of the wealthiest nations in the Mediterranean, she flipped her hand in a get out of here sort of gesture. “It could happen,” I insisted.
Apart from the much needed economic boom, the pipeline means that Europe will have an alternative to the Russian monopoly which currently supplies 50 percent of its natural gas. Not only does Russia control the price of natural gas in Europe, in the winter of 2008, gas was cut to Central European nations because of a conflict between Russia and the Ukraine over pricing. For over two weeks people froze in their homes and economies were shaken.
The oil discovery also means that Israel will no longer be dependent on Egypt for natural gas. After the overthrow of former President Hosni Mubarak, the pipeline between Egypt and Israel was blown up 18 times. The new government of Egypt wanted to charge higher prices and discussed halting service all together. The uncertainty caused natural gas prices to spike in Israel. People worried that there would be shortages. Hasty negotiations were brokered by the US between Israel and Egypt. Suddenly, all that is irrelevant.
There was some talk of exploring for natural gas off the coast of Gaza. Israel even invited British officials to help the Palestinians. The project had to be called off when Israel realized that the only way for Palestinians to sell the gas was by converting it to liquefied natural gas (LNG). An explosion of LNG could be stronger than the atomic bomb dropped on Hiroshima, a risk Israel wasn’t willing to take with Hamas-controlled Gaza.
What does the natural gas discovery mean for the average person in Israel? The same month that pumping began at the Tamar field, we were surprised to learn that electricity costs would be going up by 6.5 percent. The minister of Energy and Water Resources, Silvan Shalom, said this was because it would take time for the natural gas to reach the electric companies who would then pass on the savings to the customers. It was a reality check for people fantasizing the Tamar field would turn Israel into an oil-fat Gulf State. Yes, it’s nice to finally have a natural resource, but we shouldn’t give up on the hard working ethos that got the state this far.
Amy Styer is a freelance journalist based in Jerusalem, Israel.