Monday, July 5, 2010

Natural Gas Revisited


The USGS has declared the large potential of the Levant field in the Eastern part of the Mediterranean Sea but the Lebanese authorities have failed so far to either demarcate officially the Lebanese exclusive economic zone, or initiate a process of attracting bids for exploration rights from credible exploration companies. The Lebanese authorities have even failed so far to pass a law to govern the exploration of such resources inspite of the fact that te process of adopting an institutional structure similar to that of Norway was started by the late Prime Minister Rafic Hariri.

Israel on the other hand had auctioned some blocs, natural gas has been found and its commercial production is expected to start by 2012. The find at Tamar1 and the potential of the other fields could make Israel a major exporter of natural gas to Europe in a matter of years. The great potential of this find is not purely economic but carries with it huge political implications. Israeli exports of natural gas to Europe ,if they materialize could affect significantly the power that Russia hold over Europe by being the only major supplier of natural gas to Europe.

As the above map shows, the Tamar1 find is within Israel's territorial exclusive economic zone. That is not an issue. The real problem arises if the Lebanese can show that a natural gas/oil field spans the territorial boundaries of the two state. In that case what is the accepted international procedure for determining who gets what?

Interestingly enough and maybe even surprising to some, there is no single standard principle. There are two principles:

(1) The Right Of Capture principle says that each side is permitted to lift as much as it can on its side of the border. This principle is in effect all throughout the state of Texas but more importantly it is what governs the relationship between the US and Mexico in the Gulf of Mexico.

(2) Both sides of the dispute would resort to international arbitration.

Keeping in mind that Lebanon and Israel are in a state of war and given that the Israeli side has already started the exploration and the construction of the required infrastructure which of the above two principles is going to apply if Lebanon can demonstrate that there are natural resources that span the internationally recognized boundary? You have guessed it, The Right of Capture is most likely to be applied.

Based on the above what is the rationale of taking the Natural Resources discussion to the Hiwar/Dialogue table the place where nothing ever gets done?

This is a link to a map of the natural gas finds in the North Sea. Note that although some of the fields lie exactly at the border of the territorial waters that separate the UK and Norway yet no armed conflict has arisen :-)
http://www.aftenbladet.no/energi/energymap/ (North sea )

5 comments:

Anonymous said...

Can you explain to me, how on earth Lebanon can clain that those driliings belong to it?

It's so obviously inside Israel.

ghassan karam said...

Anon, As I have indicated earlier the above map is not "official" although I think that it is pretty accurate. You are right that Tamar1 is totally within the Israeli sector. The fear is that this pool of natural resources spans the borders. If that is so then should one apply a principle of arbitration or should one use the Right of Capture? That is the rub.

G said...

Ghassan,

I don't think the gas reserves found in the area are significant enough to change the Russian, or Iranian position as leading exporters. Those countries proven reserves are one, if not two, order of magnitudes larger than the total (estimated!) Gas findings by Israel.

The real significance for the region is the impact on Israel, Lebanon and Palestine's economies.

If I were the Palestinian Authority, I wouldn't wait but negotiate an agreement with the Israeli gas finders now, giving them a right to future gas finds in the Gaza waters in exchange for a nice percentage.

Even considering all you posted about drilling rights and gas fields across borders, I think Israel would be glad to reach a settlement on that front and the Palestinians sure need the financial independence this could offer now(provided they put it to good use).

But like the Lebanese, I am afraid the PA may prefer to keep fantasizing about extracting it themselves without the means to do so while Israel will keep pumping the fields dry from its side of the border.


G

ghassan karam said...

G,
I did not mean to imply that the Levant field will place Israel-Lebanon above Russia in Natural Gas Reserves but I merely am floating the idea that if the USGS estimates are actualized then the levant will be larger than all of the 3 major Western European countries combined (UK, Netherlands and Norway).
Natural gas, up until now, is difficult to ship long distances and so it is treated as a regional resource to some extent. That could mean that the best market for the natural gas from the Levant is Western Europe.
This is pure speculation but if the quantity from the Levant field is large enough as to affect significantly the Russian exports to Western Europe would there be any repercussions?

G said...

Ghassan;
I don't think Israel would try to compete with Russia on supplying gas to Europe no matter how large the fields are.

This is because of Russian aggressive behavior on such matters, the need to invest years and billions of $ into a pipeline network spanning hundreds of miles, etc'.

But I definitely can imagine Israel trying to get more Russian cooperation on other matters (such as supplying advanced weaponry to Syria, Iran) in return for Israel not even trying to pursue such competition.

The most likely consumers for Israeli gas are the Israelis themselves - switching to heavier reliance on gas for electricity (The new power station in Ashklelon), water desalination (already the major plants erected are powered by gas) and gas powered vehicle transport.

For a country in perpetual conflict with the world’s major Oil producers, this is very important. Of course there may be export deals signed with various European countries as a “side-kick”, but not much more than that.


G

 

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