Uniting for gas

Hany Ghoraba
Tuesday 21 Jan 2020

The formation of the East Mediterranean Gas Forum with its headquarters in Cairo is a win-win for all the countries concerned, writes Hany Ghoraba

A game-changing group was set up in Cairo in January this year to set policies for the exploitation of the natural gas in the East Mediterranean in the shape of the East Mediterranean Gas Forum (EMGF).

Egypt, Greece, Cyprus, Italy, Israel, Palestine, and Jordan all signed the forum’s charter in the presence of representatives from the European Union and the World Bank. France has filed a request for membership, and the United States has issued a request to be a permanent observer at the forum. 

The steps taken during the meeting and the signing of the forum’s charter are of historical proportions. It may represent the first steps towards a gas lobby to parallel that of the oil producers in OPEC, and the group should be able to monitor and safeguard the production of gas and prevent prices from falling below profitable economic margins. 

The EMGF, which will eventually be registered as an international regional organisation, will have long-term political and economic effects on the Middle East region as it combines a number of once-hostile countries around the same table, now for mutual economic benefits and cooperation. 

Some three decades ago, the production of natural gas did not have the same importance that it does now in the global economy. The average oil price per barrel was around $11.91 in 1998, but after the US-led invasion of Iraq in 2003 all hell broke loose. Reduced supplies as a result of the situation in Iraq and global tensions led oil prices to jump to a whopping $91.17 per barrel a decade later in 2008, even exceeding $100 per barrel in some markets. 

These changes have forced countries and international producers to tap into other alternative energy resources, including solar, hydro and natural gas reserves, especially reserves at sea. Another reason for the change has been the shift from the more expensive and polluting oil industries to cheaper and more environmentally friendly energy resources. Natural gas has gained high importance over the past decade as a result, and what was once a neglected source of energy has become very highly coveted. 

Egypt has been blessed by an enormous wealth of natural gas that has helped the country to shift towards becoming a global leader in the industry. This status was manifested by the initiation of the EMGF with its headquarters in Cairo. The new forum consolidates Egypt’s status as a regional energy hub. Moreover, the signing of a $15 billion deal between Egypt and Israel for the latter to export natural gas to Egypt for re-exporting purposes is a landmark and is the first agreement of this magnitude since the signing of the peace treaty between the two countries at Camp David in 1979. 

Under the deal, the Egyptian government will liquefy natural gas supplies from Israel’s gas fields such as the Leviathan Field to be re-exported to international markets, particularly European ones.

The agreement represents a win-win situation for both countries since Israel had faced difficulties in exporting its natural gas through traditional means to Europe, and it lacked the facilities to liquefy it without resorting to constructing huge new facilities that would have required billions of dollars of investment and years of construction work. 

At the same time, Egypt, which has enjoyed self-sufficiency in gas production since 2018, will be able to utilise its liquefaction plants in Edco and Damietta to their full capacity for exporting purposes and obtain financial gains from the liquefaction process as well. The deal also allows Egypt to secure a strategic gas reserve to face any unforeseen future spikes in local demand for gas or shortages in supply. The proximity of the Egyptian liquefaction plants to the Israeli natural gas fields was used by Egypt to secure the deal.

Aside from the financial benefits, the deal also represents a great step towards consolidating the peace between Egypt and Israel, and as a bonus the Palestinian Authority is now also represented in the forum. This step paves the way for possible economic cooperation between all the parties, adding an extra economic incentive to conclude a peace agreement between the Palestinians and Israelis in the future.

On the political side, the deal has ended Turkish President Recep Tayyip Erdogan’s ambitions to claim a piece of the regional natural gas pie through bullying and warmongering in the region, and it effectively nullifies his recent deal with the interim Libyan prime minister on naval demarcation between the two countries. This Turkish-Libyan deal has been categorically refused by forum members the European Union and the United States. 

Though there is also Erdogan’s recent deal with Russia to build a natural gas pipeline from the Russian and Azerbaijani gas fields to Europe through Serbia and Bulgaria, the scope of this remains limited in comparison to the scale of the deals signed between the forum countries, and gas from the pipeline will not find its way into European markets as Russian and Turkish officials have hoped. Bulgaria has also not constructed the necessary infrastructure for the gas pipeline to pass through its territory.

The EU countries that are currently in a state of diplomatic hostility towards both Turkey and Russia are not interested in entertaining these two countries as middlemen for European gas supplies given their past records of transgression and hostility towards some members of the European Union. The EU is more interested in working with EU countries such as Greece, Cyprus, and Italy, along with Mediterranean partners such as Egypt. 

Aside from the above countries, a founding member of the European Union, namely France, has also applied to be a member of the EMGF despite its not having shared marine borders or natural gas fields with the members of it. However, France has vested interests in the exploration and trade of natural gas in the region, especially if this means it does not have to deal directly with Erdogan’s Turkey or president Vladimir Putin’s Russia as relations with both have deteriorated. 

Erdogan’s Turkey is a main financier and supporter of international terrorism, and he has been accused by his French counterpart president Emmanuel Macron of supporting terrorism.

Turkey has opposed the signing of the charter of the forum, claiming that it is illegal, but as with most of the Erdogan regime’s statements no one has paid much attention. Even the last-minute attempts by Erdogan to lure the Israelis to sign a deal for a pipeline between Israeli gas fields and Turkey failed miserably, since the Israelis no longer find Erdogan a reliable partner despite the long-standing relations between the two countries. 

As the world economy continues to grow, driven by the developing countries’ economies, world energy consumption is expected to increase by 25 per cent by 2040, according to an ExxonMobil report. Accordingly, investments in oil and gas exploration will yield benefits in the foreseeable future, and the new forum will help to ensure that no conflicts arise between the gas-producing countries. 

The formation of the EMGF is a political and economic victory for Egypt and the rest of the founding members, since they can now build upon this step towards more economic cooperation in the future. Through years of hard work and determination, the Egyptian government has managed to make its way to being the regional energy hub that the country has now become. The culmination of these efforts, which have included massive gas exploration efforts, the construction of production facilities and offshore platforms, and marine demarcation deals, has finally materialised in the form of the new forum, which is only one step in many to solidify Egypt’s status as a power to be reckoned with in the region.

This is true not just on the military level, but also on the economic one as well. 

The writer is a political analyst and author of Egypt’s Arab Spring and the Winding Road to Democracy.


*A version of this article appears in print in the 23 January, 2020 edition of Al-Ahram Weekly.

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