By Rory Jones in Tel Aviv, Sarah Kent in London and Bradley Olson in Houston
Big oil companies are pushing into Mediterranean waters off
Israel, Lebanon and Egypt after years of U.S. diplomacy helped
break open a political logjam around giant Middle Eastern
natural-gas discoveries.
Exxon Mobil Corp., Royal Dutch Shell PLC, Total SA of France and
others are planning to invest in exports and exploration in the
Eastern Mediterranean. Their prospects were buoyed by a landmark
contract last month between U.S., Israeli and Egyptian firms that
breathed new life into the regional market.
Shell is in talks with investors in natural-gas fields off
Israel and Cyprus to supply its Egyptian liquefaction facility,
according to people familiar with the matter. If the deal advances,
it would allow Israel to quickly export some of the extensive
reserves of natural gas found in the Mediterranean Sea west of
Haifa.
Italy's Eni SpA and Total last month announced a new discovery
off Cyprus. The two oil giants are also working together to explore
in disputed waters off Lebanon. Exxon, too, is set to explore
nearby.
The total natural-gas reserves in the waters off Israel, Cyprus
and Egypt amount to an estimated 125 trillion cubic feet, according
to Wood Mackenzie, the Scottish energy consultant. That is enough
to meet U.S. demand for almost five years.
The flurry of activity comes after years of U.S. diplomacy aimed
at knitting together the economies of once-hostile nations such as
Israel, Egypt and Jordan, and developing the eastern Mediterranean
as a natural-gas hub to lessen Europe's dependence on Russian
energy. U.S. officials say they have worked to break down
resistance among Arab countries to deals with Israel, now ready to
tap its natural gas but with few neighbors willing to take its
exports.
A breakthrough occurred in February when Houston energy firm
Noble Energy Inc. and its partners signed a $15 billion agreement
to supply gas from two Israeli gas fields -- Tamar and Leviathan --
to an Egyptian firm. Although Egypt and Israel have had a peace
deal for four decades, the idea of depending on Israeli energy
exports has long been controversial with the Arab public.
"For Israel to export energy to the Arab world, who could
imagine such a situation 20 or 30 years ago?" Israel's energy
minister Yuval Steinitz said in an interview.
The deal was built on similar agreements between investors in
Israeli fields and Jordanian firms brokered by former Secretary of
State John Kerry, people familiar with the matter said. The Trump
administration remains engaged in the region's energy affairs, U.S.
officials said, though it didn't play a direct role in the most
recent deal.
"An initial deal had to be done to breathe confidence into the
market," said Bas Percival, an analyst at Wood Mackenzie.
Israeli and Egyptian Mediterranean natural-gas finds have been
among the largest in the world over the past decade. But the region
was slow to develop because of Israel's disputes with neighbors,
local bureaucracy and legal disputes.
Shell, which was long reluctant to do an Israel-Egypt gas deal,
is eyeing a 15-year deal worth up to $30 billion to buy gas from
Israeli and Cypriot fields, liquefy it in Egypt and then transport
it to Europe and beyond, one person familiar with the matter
said.
A spokeswoman for Shell declined to comment on the potential
deal. A spokeswoman for Noble said the company continues to
negotiate gas sales with multiple parties for export.
BP has focused on gas discoveries near the Egyptian coast, which
a spokesman called "a prolific basin." In the past year, BP has
started production at three new fields and is planning to pump gas
from another field later this year.
Egyptian gas discoveries have benefited from a large domestic
market for gas, with 95 million people and taxi fleets using
compressed-natural-gas vehicles.
Elsewhere, though, there are obstacles.
Last month, the Turkish navy blocked a drill ship belonging to
Italy's Eni headed for Cyprus. Ankara objects to further
exploration offshore Cyprus, which remains divided between an
independent European Union nation and a Turkey-dominated offshoot
with disputed maritime boundaries.
Exxon and Qatar's state oil company are planning to drill off
the shores of Cyprus in the second half of this year, said Exxon
spokeswoman Rebecca Arnold. An Exxon ship is en route to the area,
Turkish President Recep Tayyip Erdogan's spokesman said last week,
adding Ankara would "take all necessary initiatives to keep
protecting" Turkish Cypriots' rights.
Exxon didn't comment on whether a ship was headed there, but
said the survey ships will have to complete their work in the next
few months.
Meanwhile, efforts to find gas near Lebanon are running up
against maritime disputes with neighboring Israel. Eni and Total
have committed to drill near an area claimed by both Israel and
Lebanon, adding to a broader war of words between the two
countries.
Total says the location it plans to drill is over 25 kilometers
(about 15 miles) from the disputed area and shouldn't pose a
problem.
The recent deal between Egyptian companies and the partners in
the Leviathan development also still faces transportation
hurdles.
Militants in 2012 attacked the gas pipeline from Egypt that
supplied Israel and Jordan, stunting supply and leading to a raft
of legal cases between the companies involved. Islamic State-linked
militants remain in the Sinai Peninsula, where the pipeline is
located, Egypt says it can deter such attacks in the future.
--Summer Said in Dubai and Jared Malsin in Cairo contributed to
this article.
(END) Dow Jones Newswires
March 13, 2018 17:38 ET (21:38 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Exxon Mobil (NYSE:XOM)
Historical Stock Chart
From Aug 2024 to Sep 2024
Exxon Mobil (NYSE:XOM)
Historical Stock Chart
From Sep 2023 to Sep 2024