Enter the bear: Russia muscles into the east Mediterranean gas bonanza, chalking up a 25-year deal with Syria for exclusive offshore exploration rights, part of Vladimir Putin's long-term strategy to restore Moscow's influence in the energy-rich region.
While the Americans and their allies have been snarled up in complex negotiations seeking a way out of the blood-soaked Syrian labyrinth and struggling to untie the Gordian knot of the Israeli-Palestinian conflict, Russia and its energy giant Gazprom have been muscling into the eastern Mediterranean in a big way.In recent weeks they have signed deals with Syria and the Palestinians, and are negotiating with Cyprus to establish Moscow's stake in the Levant Basin where the US Geological Survey reported in 2010 contained 122 trillion cubic feet (tcf) of natural gas and 1.7 bn barrels of oil.
In December 2013, Yuri Shafranik, chief executive of Russia's SoyuzNefteGaz and a former energy minister under President Boris Yeltsin, signed a deal in Damascus with Syrian Oil Minister Suleiman Abbas that opens the way for Moscow's move into the gas-rich region--if the Damascus regime survives the civil war that lurches into its fourth year this month.
Shafranik acts as Moscow's roving energy troubleshooter and was recently involved in the acquisition by Gazprom of two oil blocks in Iraqi Kurdistan, rapidly emerging as an upstart independent producer.
In 2013, Shafranik and his business partner Mikhail Kroupev, took a controlling interest in the British oil company Gulfsands, which was operating in northeastern Syria. Other shareholders include Rami Maklouf, Syrian President Bashar Assad's cousin and the key figure in the Assad dynasty's financial empire.
After skillfully handing President Barack Obama a face-saving way out of having to unleash military strikes against the Syrian regime by brokering a deal with Assad to surrender his arsenal of chemical and biological weapons, Russian President Vladimir Putin has pulled off another diplomatic coup that will give great impetus to his drive to restore Moscow's Cold War influence in the Middle East.
The 25-year agreement gives Russia's state-controlled SoyuzNefteGaz exclusive exploration, development and production rights over 2,188 sq. kms (845 sq.miles) of Syria's Exclusive Economic Zone (EEZ) in an area known as Block 2. That's roughly between the coastal cities of Banias and Tartous, where incidentally the Russian navy has its only base in the Mediterranean. This region is still in the hands of the Syrian regime.
The $20m deal gives the Russians, one of the world's leading energy producers and Assad's most strategic diplomatic ally their first real foothold in the Levant Basin.
"Though ostensibly technical and commercial, Moscow's involvement in Syria's offshore energy activities will not be regarded as benign," observed veteran Middle East energy analyst Simon Henderson of the Washington Institute for Near East Policy.
"Apart from possibly making the resolution of the Syrian civil war more difficult, these activities fulfill a particular vested interest for Russia.
Natural gas discoveries in the eastern Mediterranean, large in regional terms through small on an international scale, still have the ability to undermine Russia's dominant position as a natural gas suppliers to western Europe."
That, however, is bad news for the Europeans, who have been scrambling to develop other sources of gas to break their dependence on Russian exports, which Putin has cut off in the past when it suits his purpose.
A new source of gas right on Europe's southern doorstep would go a long way to helping achieve that, particularly in light of the collapse of the Nabucco pipeline project that would have pumped Caspian gas from Azerbaijan direct to Europe.
Gaza gas
On 23 January, Putin signed an investment agreement in Moscow with visiting Palestinian President Mahmoud Abbas to develop two gas fields off the Gaza Strip discovered 14 years ago by British Gas but never developed by the Palestinians because of strenuous Israeli objections and the second Intifada that erupted in September 2002.
Russia's official Itar-Tass news agency reported that Gazprom wants to produce 105.9 bn cubic feet of gas from the two fields, Marine 1 and Marine 2
Israeli Prime Minister Binyamin Netanyahu reportedly gave the green light for the Palestinian Authority to develop the fields in an apparent move to create joint economic interests between Israel and the Palestinians.
Israel can be more generous now than it was in 2000 because in 2009-10 it found major gas fields containing an estimated 30 tcf, making it the most advanced of the Levant Basin states--the others are Syria, Lebanon and Cyprus--in developing the region's gas reserves.
Under Abbas' deal with Russia, Moscow will reportedly invest $1bn to develop the Gaza fields which hold an estimated 1 tcf of gas at a depth of 2,000 feet under the Mediterranean worth $6bn to $7bn a year in revenues.
The prospects for further discoveries are good given the proximity of Israel's big Leviathan and Tamar fields further north up the coast.
Cyprus, a member of the European Union, is still in the early stages of exploratory drilling off its southeastern coast. But its Aphrodite field, now being explored by Noble Energy of Houston, Texas, the same company that found Israel's fields, estimate there could be at least 7 tcf there.
At the current rate of consumption, that's enough gas to meet the requirements of the Greek sector of the war-divided island for 200 years.
The Israelis and Greek Cypriots are discussing a joint export programme. They haven't decided yet whether to build a $10bn liquefied natural gas (LNG) plant and ship to Europe and Asia by tanker, or build an undersea pipeline to either Greece or Turkey.
A pointer to which option Israel favours is a 31 January report by Israel's Globes business daily that Australia's Woodside company, LNG specialists, is to buy a 30% share in Israel's giant Leviathan field, with up to 20 tcf of gas, with the Delek Group, Noble Energy's main Israeli partner, for $3bn.
Lebanese lode
Russia, the world's eighth biggest LNG exporter in 2011, made its first effort to move into the eastern Mediterranean on 26 February 2013, when Gazprom subsidiary Gazprom Marketing and Trading Switzerland, signed an agreement with Israel's Levant LNG Marketing Corporation, to market LNG from the Tamar field.
It has reserves estimated at 8 tcf and began producing in March 2014, the first of Israel's major fields to come onstream. Leviathan, the field everyone wants a piece of, is scheduled to start producing in 2017.
But for the moment, Russia's agreement with Damascus is the most strategic since it not only influences the Syrian regime's calculations in its civil war, in which rebel forces are seeking to bring down Assad's brutal, Iranian-backed dictatorship, but also the drive by regional powers to exploit the gas riches of the Levant Basin which will transform their economies.
Clearly, the Syrian deal is unlikely to be implemented until the civil war is ended. But if it ever is, Russia will have a firm energy foothold in the Middle East which it has never had before, not even during the apogee of Soviet influence in the 1970s and 80s.
And if gas, or oil, is found in any commercial volume, whatever regime Assad may then have--most likely a truncated state embracing Damascus and the coastal region that is a stronghold of Assad's minority Alawite sect--it will be an important source of revenue since much of Syria's landward oil-producing zones in the Euphrates Basin are in rebel hands and may not be relinquished as part of any peace agreement that emerges.
But as these are already declining, the offshore prospects are of major importance.
The signs that there is oil and gas in Syria's EEZ are evident in its southern neighbour, Lebanon. Beirut claims seismic surveys show that the 45% of its EEZ that's been surveyed so far contains 96 tcf of gas and 850m barrels of oil.
The Lebanese government expects similar results from the rest of its EEZ. If that proves to be the case, it augurs well for Syria and the Russians.
SoyuzNefteGas, largely owned by Russia's central bank, secured two oil exploration blocks in Syria before the current conflict broke out. It drilled two wells, but no oil has yet been found.
Some analysts believe Russia could be the catalyst for exporting and marketing the region's energy riches.
Securing gas reserves in the east Mediterranean, however substantial they may turn out to be, will also help Moscow safeguard its dominant position as a natural gas supplier to western Europe that could be challenged by new competitors in the region.
Cypriot bailout
But the Russians are buying into a region plagued by conflict and political turmoil.
Syria's civil war is spilling over into an ever inflammable Lebanon and threatening Jordan, Israel and Turkey. There's friction between Lebanon and Israel, including a dispute over ownership of a potentially gas-rich 840-sq.km triangle of seabed, and then there's the 40-year-old Greece-Turkey riff over Cyprus that seems as intractable as the Israeli-Arab conflict.
This has scared off major investment and curbed development of the Levant Basin. Exploratory drilling off Lebanon has been delayed because of the political problems there, and could be put on hold if the country is once more consumed by sectarian savagery.
Russia's deal with Syria could be a regional game-changer, even if it does take several years to start producing gas or oil in commercial quantities.
Financial Times analyst Nick Butler argues that in the absence of an agreement by Israel and Cyprus on how to export their gas "the parties involved might settle for allowing Russian companies to manage the development process across the basin. Russian links are not limited to Syria."
Moscow's relations with Israel are surprisingly cordial. The Russians are well entrenched in Cyprus, and have been since the collapse of the Soviet Union two decades ago when the emerging Russian oligarchs and their Mafia allies stashed their money in offshore banks in Nicosia and Limassol. Russia has offered Cyprus up to $5bn to help it ride out the crisis caused by Greece's financial meltdown.
"The investment gives Russia the potential to lead the development of the whole region and to manage the use of the gas and the pace and destination of any exports," Butler observed.
"To many in the region, Russia will seem a more secure, consistent ally than the retreating Americans and Europeans. By moving into the region, President Vladimir Putin is doing no more than filling a vacuum ...
"The move into Syria is not just entirely rational economically and politically--it is also a mark of the changing balance of global power."
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| Title Annotation: | Business/ENERGY |
|---|---|
| Comment: | Enter the bear: Russia muscles into the east Mediterranean gas bonanza, chalking up a 25-year deal with Syria for exclusive offshore exploration rights, part of Vladimir Putin's long-term strategy to restore Moscow's influence in the energy-rich region.(Business/ENERGY) |
| Author: | Blanche, Ed |
| Publication: | The Middle East |
| Geographic Code: | 4EXRU |
| Date: | Mar 1, 2014 |
| Words: | 1722 |
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