EU energy diplomacy needed to bring about Eastern Mediterranean energy hub
In the past six years, close to 100 billion cubic metres of gas has been discovered in the Levantine Deep Marine Basin in the Eastern Mediterranean, raising hopes that the region could fulfil EU energy goals, according to a new report from the European Council on Foreign Relations.
These reserves could help Europe to diversify away from its current over-reliance on Russia, which supplies around one third of European gas imports and all natural gas imports to Estonia, Finland, Latvia, and Lithuania.
However, commercial and political hurdles stand in the way. Egypt is the only country in the region that could export gas to Europe independently because of the size of its reserves and its existing export infrastructure. But energy sector reforms will be needed to secure investor confidence in this option.
Cyprusʼs reserves are too small to be commercially viable and Israel needs a critical mass of buyers to begin full-scale production. Regional cooperation is the only way these two countries will be able to export.
There are now two options for regional export: to build an “EastMed pipeline” that connects Israel and Cyprus to southern Europe, or to create a network of pipelines into Egypt, from which gas could be liquefied and exported. The prospects for both of these options will be enhanced with European support.
Pipelines or Pipedreams: How the EU can support a regional gas hub in the Eastern Mediterranean argues that now is the time for the EU to step up its energy diplomacy in order to facilitate the emergence of a regional gas hub. In particular, Europe should designate components of the “Egypt option” as Projects of Common Interest (PCIs), as it has already done with the EastMed pipeline. This would accelerate planning and permit granting, lower administrative costs, and increase the project’s visibility to investors.
The EU should also seek to incentivise the needed reforms in Egypt, either through an EU-Egyptian cooperation framework or through expanding existing European Neighbourhood Policies. Such policies could provide preferential trade agreements in fuels or EU budgetary allocations, contingent on reforms in Egypt’s energy sector such as the phasing out of electricity subsidies.
Report author Tareq Baconi said:
“The prospect for the region to transform into a source of energy and security for Europe will increase the more Europe is willing to engage. The EU should play the long game and invest early in formulating policies that can assist the eastern Mediterranean transition into a politically stable economic powerhouse.”