Lebanon enters the Eastern Mediterranean oil and gas fray

In February 2020, the Tungsten Explorer drilling ship launched operations to explore potential gas and oil deposits in part of the Lebanese seabed. In theory, during the first year of production, these hydrocarbons could generate US$8 billion – some €7.25 billion – according to a study by Lebanese bank Credit Libanais. Lebanon, caught in the throes of a banking, monetary and financial crisis, is looking for a ray of light at the bottom of the sea.

The Lebanese president, Michel Aoun, referred to the launch of the drilling operations – conducted by a consortium of energy giants comprising Total (French), ENI (Italian) and Novatek (Russian) – as an opportunity to “rise from the abyss”. But not everyone shares his optimism.

“It’s irresponsible to make people believe that this sector will save the country. No reliable forecast can be made until an actual discovery is made,” explains Sibylle Rizk, board member of the NGO Lebanese Oil and Gas Initiative (LOGI) and representative of the Kulluna Irada NGO, which focuses on political reform. The likelihood of finding a marketable deposit is 25 per cent and it is estimated that the resources would take seven years to be accessible.

“Exploration, particularly offshore exploration, is a long process, with lots of challenges and uncertainties. So, expectations should be kept in check,” says Mona Sukkarieh, risk analyst and co-founder of the Middle East Strategic Perspectives think tank.

In March 2020, the Lebanese government declared itself in suspension of payments, strangled by a public debt equal to 170 per cent of its GDP, according to official figures. The economic crisis stemming from COVID-19 was the last straw in a country with forty per cent of the population living under the poverty line. “The scale of the damage is now such that no deposit, other than one of the size they have in Saudi Arabia or Qatar, will be enough to cover our losses,” says Rizk, adding that she does not agree with allocating resources belonging to this and future generations “to cover losses caused by three decades of bad governance”.

The high levels of corruption in the country also create misgivings about the future distribution of the resources. “Lebanon is totally bankrupt, and not just the state but the entire economy. Lebanon’s system of governance is totally bankrupt and, so, entrusting a potentially wealthy sector to such a governance system is very dangerous,” warns Rizk, who also, as a representative of the LOGI, advocates for good governance to ensure that “the resources be used in the public interest rather that to serve private interests”.

The Italo-Franco-Russian consortium is expected to start operations in another part of Lebanon’s maritime space this year, but the jurisdiction of a strip of this area is disputed by Israel. Lebanon is a signatory to the United Nations Convention on the Law of the Sea (UNCLOS), but Israel is not, so the guidelines for demarcating their maritime boundaries are not the same. “And because the economic interest is not clear, no one is willing to budge,” says Rizk. The negotiations between Israel and Lebanon are blocked.

The geostrategic maze

Lebanon is a decade behind in the race to exploit offshore oil and gas resources. In 2009, when it was discovered that the eastern Mediterranean basin may, according to estimates of the US Geological Survey, house a mean of 1.7 billion barrels of recoverable oil and a mean of 122 trillion cubic feet of recoverable gas, expectations were raised that the countries of the East Mediterranean basin would leave behind their dependence on foreign energy and become exporters to the European market. But the complex web of geopolitical interests has dampened the initial optimism.

Egypt and Israel are the only gas exporters in the Mediterranean for now; Cyprus, Turkey and Lebanon have launched exploration; Greece plans to start drilling this year, and the Israeli blockade on the Gaza Strip has prevented Palestinians from accessing the deposit discovered in their waters in 1999.

“For many years I’ve been hearing how the discovery of gas in the East Med was going to bring everybody wealth and peace, because they would have too much to lose. But it hasn’t worked out that way,” says Steven Cook, a senior analyst for the Council on Foreign Relations, a US think tank.

Territorial disputes such as those between Cyprus and Turkey or Lebanon and Israel, coupled with the deterioration of Ankara’s relations with its neighbours, have increased regional tensions. “I don’t really see how they are going to avoid the ‘resource curse’,” says Cook.

Given the exploitation and transportation costs, regional coordination is essential to making hydrocarbon extraction viable. In 2019, Egypt, Cyprus, Greece, Israel, Italy, Jordan and the Palestinian Authority founded the Eastern Mediterranean Gas Forum (EMGF). Turkey was excluded. Sukkarieh points out that although the EMGF is a platform to facilitate discussions among the regional players, the poor relationship between these countries and Turkey is also probably “a factor that has encouraged the rapprochement among the members of the forum”. Turkey, meanwhile, “is feeling suspicious”, says Cook. “It feels that it has been cast out of its own ‘neighbourhood’, which is why the Turks have concluded their provocative agreement with the Libyans.”

Last November, the Turkish president, Recep Tayyip Erdoğan, and Libya’s Government of National Accord redrew their exclusive economic zones (under international law, this zone extends from the baseline to a maximum distance of 200 nautical miles – 370.4 km or 230.2 miles), overlapping with Greek, Egyptian and Cypriot waters. After months of escalating tension, in February 2020, the Council of the EU took restrictive measures in response to Turkey’s illegal drilling activities in Cyprus’ exclusive economic zone.

The historical conflict between Turkey and Cyprus is at the root of these territorial disputes: Ankara does not recognise the exclusive sovereignty of the Republic of Cyprus over the island, and, in addition, is not a signatory to the UNCLOS Convention on the Law of the Sea, and therefore considers that it has maritime jurisdiction over waters laid claim to by the Republic of Cyprus.

If Turkey were to be left out of the distribution of resources in the eastern Mediterranean, it would lose its strategic position as a transit country for Russian gas to Europe. But Erdogan’s ‘aggressive’ tactics, such as sending a warship in 2018 to prevent an Italian ship from drilling off the coast of Cyprus, do not seem to be helping ease its regional isolation. In the meantime, Egypt, Israel, Cyprus and Greece are weaving new networks. “I don’t think the Israelis, Egyptians or the Greeks are willing to pay the price for their relationship with Turkey, given how provocative its moves have been,” says Cook.

The distance between Ankara and Brussels increased after the recent opening of Turkish borders to allow refugees into the European Union. “I don’t see any major global power coming in and playing a kind of referee between all these groups,” says Cook, who does not rule out the accidental outbreak of a conflict in the Mediterranean.

Is the EastMed pipeline viable?

Meanwhile, Greece, Israel and Cyprus agreed, in January 2020, to build the EastMed pipeline: 1,900 km of underwater pipes connecting Israeli deposits with southern Europe, at an estimated cost of €6 billion (about US$6.6 billion).

Sukkarieh has her doubts about the competitiveness of the proposed pipeline, for two reasons: Russian gas is cheaper and Egypt already has LNG terminals in place to liquefy and export gas. Added to that, Turkey is laying claim to an area that the pipeline would pass through.

For Cook, the insistence on pushing ahead with the pipeline project, regardless of the serious commercial and geopolitical challenges, is down to geostrategic interests. From an Israeli perspective, the influence gained by being a supplier of gas to Europe may help to “blunt European public criticism and policies towards Israel over issues like the Palestinians”, the analyst explains.

The European Union, for its part, wants to reduce its dependence on Russian gas, which accounts for 40 per cent of its supplies. “Russia, as a major gas supplier, is obviously going to lose out if the East Med pipeline comes to fruition,” explains Cook. But Moscow has already positioned itself by obtaining the exploitation concession on the Syrian coast and taking part in the exploration of Lebanese waters.

The environmental cost

Seismic airguns are used in the perforation of the seafloor, which can produce lethal acoustic injury to whales, dolphins, turtles and sharks, according to Ziad Samaha and Maria del Mar Otero, marine experts from the International Union for the Conservation of Nature (IUCN). They caution that many of the species that make up the seafloor ecosystem would be affected by the sediments and debris generated by the drilling. “Drilling uses certain oil-based fluids and produces mud that can introduce heavy metals and other toxic materials into the marine ecosystem,” warn Samaha and Otero.

The risk of accidental oil spills would also put birds and marine mammals at risk. And the backdrop to this is the European Green Deal adopted by the European Commission, which calls for a move away from fossil fuels, such as oil, to achieve a net-zero emissions economy by 2050.

Gas is often presented as a ‘clean’ fossil fuel because it emits up to 50 per cent less CO2 when combusted than coal or oil. The IUCN, however, warns that “drilling and extraction of natural gas from wells and its transportation through pipelines can also result in the leakage of methane”. Methane gas is responsible for 25 per cent of global warming, according to the Global Energy Monitor.

“Gas is not a bridge fuel or transitional fuel from dirty energy to a cleaner one, if we really want to reach a sustainable liveable future we have to decrease our dependency on any kind of fossil fuels,” insists Efe Baysal, an environmental rights activist from the 350.org platform.

According to the World Wildlife Fund, the expansion of the gas industry is incompatible with the goal set by the International Panel on Climate Change (IPCC) of limiting global warming to 1.5ºC above pre-industrial levels.

In the Lebanese context, however, gas could, in fact, be considered a comparatively cleaner energy. The country’s power plants are unable to produce electricity 24 hours a day, so the Lebanese use highly-polluting electricity generators during the daily power cuts. Rizk explains that, given the situation in Lebanon, securing 30 to 40 per cent renewable energy within a few years would already constitute a success. “As for the remaining 60 per cent, if rather than importing it we can benefit from our own resources, it would make sense for us to use them,” she argues.

All will depend on what the Tungsten Explorer finds at the bottom of the sea.

This article has been translated from Spanish.