The famous Greek historian Herodotus, "the Father of History", had once characterized Egypt as "a gift of the Nile" due to the country’s dependence on the river. But could he ever imagined that the triangle of unprecedented importance between Egypt, Greece and Cyprus, representing the current hotspot for energy developments, would be named after him and would become a contemporary gift to Egypt? Nowadays, when geography and history appear as very important geopolitical factors, such symbolically, the Herodotus Basin, located along Egypt’s northern coastline and forming a down-dip extension to the prolific Nile Delta province, probably shares multiple play elements with the Levantine Basin to the east, thus providing the untapped energy opportunities!
Eastern Mediterranean as an exploration frontier
Although the well-established Nile Delta province is now largely considered mature for exploration, deeper-water basins of the Eastern Mediterranean remain largely underexplored. Recent exploration successes within the Levantine Basin and Egyptian and Cypriot offshore have sparked renewed interest in the Eastern Mediterranean, distinguishing it as an emerging province for frontier exploration and attracting potential future investment for deep-water exploration in the region. Play-opening discoveries include the Tamar Field in 2009 in the northern Levantine Basin, and the giant Zohr discovery in the deep-water Nile Cone area. In February 2018, the Calypso discovery was announced by the Italian ENI. To date, exploration activity in the Herodotus Basin has been limited, largely hindered by challenges such as water depths ranging from 1000 to more than 3000 m and limitations in seismic imaging beneath the Messinian salt.
Nevertheless, the last few decades have seen the migration of Eastern Mediterranean exploration farther into the deep water, as well as targeting stratigraphically deeper reservoirs. So at the beginning of 2021, a group led by French Total has signed up to explore an offshore block in Egypt’s Herodotus Basin, in the Mediterranean Sea, thus further strengthening its’ Eastern Mediterranean position. While Total has a 35% stake and is the operator of the North Ras Kanayis Offshore licence, the other participants include Shell with 30%, KUFPEC with 25% and Tharwa Petroleum 10%. State-owned Egyptian Natural Gas Holding (EGAS) is also a party to the exploration and production agreement. Describing the Herodotus Basin as under explored, Total plans to shoot 3D seismic in the first three years.
Egypt’s energy ambitions driven by long term-vision
Meanwhile, Egypt is moving forward. The country has signed a new exploration agreement with Shell for an offshore section in the Red Sea, in addition to the 22 agreements signed during 2020 that included major International Oil Companies (IOCs), such as ExxonMobil, Chevron, Shell, BP, ENI and Total, which led to the discovery of 47 new oil and 15 gas fields in 2020, 13% more than in 2019, despite the pandemic! Moreover, Egypt's Oil Minister Tarek El-Molla announced in late January that the country intends to expand its petrochemical sector to take advantage of growing hydrocarbon reserves and growing prospects. Egypt has also benefited from the recent rise in LNG prices by resuming exports from the Idku liquefaction terminal, with most going to China, India and Turkey.
Egypt’s 2015 discovery of the supergiant Zohr gas field was supposed to propel the North African country into the Eastern Mediterranean limelight. Within less than 3 years Egypt shed its historical legacy of being a net importer, rekindled its hopes of finally using its existing (and vastly underutilized) LNG infrastructure to the extent it had always wanted and even boosted its licensing activities. Even the internal regulatory environment turned for the better – with the new gas law of 2018 private companies could already import and distribute gas on the domestic market. But then COVID happened and it all went down the drain. However, the first positive development came late in October 2020 when the Idku LNG plant was restarted. The Egyptian state companies EGAS and EGPC will from now on own 40% and 10%, respectively, while ENI will take 50% of the project. Egypt now claims that domestic gas needs can be fully met from the current output volume.
Additionally, as the North African nation seeks to become one of Europe’s main suppliers of fuel, the country is close to restarting its second liquefied natural gas plant after an eight-year hiatus. Vitol Group, the world’s largest independent oil trader, is expected to load a cargo at the Damietta port in northern Egypt, being the first shipment from the facility since 2012, which will mark a revival of the Egyptian exports. This re-opening of the LNG terminal just further emphasizes Egypt’s plan to become an export hub on Europe’s doorstep. Consequently, the main thrust of efforts should now be put towards boosting production volumes again. The vast reserves of Zohr notwithstanding, the return of Egypt’s LNG will inevitably depend on how LNG prices evolve in Asia – their precipitous decline in the second half of January 2021 has put Egyptian producers on alert, though LNG exports towards China and India still make economic sense.
Powerful nations have since the last century used oil as a potent instrument of foreign policy, given its wide application in the modern economy. Therefore, control over the oil flow naturally became a tool to advance foreign policy and national interests among top producing countries and those with capital and military might. This practice, known as energy statecraft, has endured for generations. However, the strong emergence of green energy alternatives, including solar-charged electric vehicles and renewable fuels will definitely weaken the role of oil in international politics in the foreseeable future. Just like the geostrategic importance of different regions shifted as the world shifted from coal to oil, so too will the importance of different regions change as the world shifts from oil to renewable energy sources like solar and wind energy. To meet its soaring demand for energy, Egypt is also turning to renewable sources. Its targets, if accomplished, will see it become a pioneer in the African energy landscape. Rising demands, the falling costs of renewable energy, and the discovery of new natural gas sources have allowed Egypt to both diversify its energy mix and become an exporter of gas. Nevertheless, to ensure continuous security and stability of energy supply, Egypt has launched an energy diversification strategy, known as the 2035 Integrated Sustainable Energy Strategy (ISES), which aims to step up the development of renewable energy and energy efficiency in the country. The country is very ambitious and so is its energy plan. Egypt has introduced nuclear power and it is also developing a few megaprojects that will bring a massive amount of gas into its energy mix.
Defense, security & energy as "Strategic Holy Trinity" of Eastern Mediterranean
After 2008, the security and political order of the East Med subsystem collapsed due to worsening relations between the two most important regional allies of the United States – Turkey and Israel – and continuing turmoil in the Arab world. That order was replaced by a proxy civil war in Syria and Libya, and geopolitical rivalry between Turkey, Israel, Cyprus and Greece, as well as between the Western countries and the powers of Russia, Turkey and Iran, which enthusiastically aspire to a review of the regional status quo in Western Eurasia. In addition, the Eastern Mediterranean is becoming an increasingly important area for the international security system because of its natural resources, as the interests of regional actors interact with major international actors such as the US, France, Germany, the EU and NATO. The discovery of offshore gas reserves in the Eastern Med (2010), could provide the EU with a much-wanted energy resources diversification from Russian gas, Middle East energy resources included, and greater regional security.
Thus it was clear to everyone that this rise in tensions in Eastern Mediterranean during the previous summer was linked, somehow, to energy. A few, however, could articulate how energy might be linked to it. Taking into consideration that the waters where Greece and Turkey deployed naval forces were hundreds of miles away from the known discoveries in the Eastern Mediterranean, which are entirely within the exclusive economic zones (EEZ) of Israel, Cyprus, and Egypt, this was not a “conflict over energy resources”. However, a vacuum created by a disengaged United States created a sense that the geopolitical cards could be reshuffled in the region, which further has prompted states to try to reposition themselves and defend their interests, thus creating aforementioned tensions. The conflict between Greece and Turkey entered a new phase when Turkey intervened in Libya to support the government in Tripoli and secured a maritime delimitation agreement. In response to this move was the succeeding Greek delimitation agreement with Egypt. Subsequently, a part of France’s support for the Greek position can be traced to that dispute of France and Turkey over Libya. Still, a renewed emphasis on the Eastern Mediterranean along with worsening relations with Turkey over a number of issues, including defense systems and Syria coincided with the establishment of a number of bilateral and multilateral linkages that mostly left Turkey out. Greece, Cyprus, Israel, and the United States created the “3+1” structure to discuss areas of possible cooperation. Obviously, the energy issues were the basis of these developments. Moreover, having in mind the "Strategic Holy Trinity" of defense, security and energy we should not underestimate the implications of emerging tripartite cooperation between Greece, Egypt and Cyprus described as "a solid foundation", according to the statement of Greek Prime Minister Mitsotakis, for further discussion of their defense relations. As well as the fact that "Egypt and Greece are the pillars of stability in a troubled region ", according to the English-language edition of "Al Ahram" referring to the interview given by the President of the Hellenic Republic, Katerina Sakellaropoulou, in which she stressed that "the tripartite cooperation between Egypt, Greece and Cyprus creates a mechanism of stability and legitimacy in the region of the Southeast Mediterranean."
A new Belt and Road Initiative
President Biden recently announced a Pentagon task force to review military policy toward China, commenting that America will “meet the China challenge” and “win the competition of the future.” But in defining America's future national strategy, it should be taken into account that China’s long-term strategy stretches beyond the issues of trade policy, great power rivalry, nuclear proliferation and military expansion, while the Belt and Road Initiative is an important component of its strategy. In addition to it the recent release of the International Energy Agency (IEA) highlighting that India will make up the biggest share of energy demand growth from now until 2040 - ahead of China – comes at just the right time for the U.S.’s new strategy to counter China’s rapidly increasing influence in the Middle East, that politically began most obviously with the signing in August 2020 of the U.S.-brokered Israel-UAE ‘normalisation deal’.
This deal announcement heralded that a new corridor of co-operation was being developed from the U.S. (and Israel), through the UAE (and Kuwait, Bahrain, and in part Saudi Arabia) as a regional counterbalance to China’s growing sphere of influence. According to eminent energy analysts, with Bahrain later following the UAE in making a similar deal with Israel, Washington could be rather optimistic concerning the further establishment of such deals with the other Gulf Cooperation Council (GCC) states, comprising Kuwait (already firmly in the U.S. sphere of influence), Saudi Arabia, Oman and Qatar. Soon after the announcement of August 2020 of the U.S.-Israel-UAE-deal, it was also stated that the three countries now agree to co-operate in the fields of oil and gas. Assuming that the U.S. needed a powerhouse of a country with limited oil and gas resources of its own, expected to see massive economic growth in the coming years, this newly U.S.-aligned group appears to be an ideal corporate proxy to advance power projection all the way up to China’s border through increased co-operation with India. And not by an accident!
With the promise of double-digit economic growth in 2021, India is set to become the world’s largest energy consumer and Indian energy demand is expected to grow by some 3% per annum until 2030, according to the statements of India’s Minister of Oil and Gas, Dharmendra Pradhan. Outlying the objective of a “gas-fired economy”, under which the share of gas in the energy mix would jump from 6% today to 25% by 2030, he explained that India’s steady decline in domestic gas production created the need to import LNG.
It should be noted here that although Qatar is India’s historic supplier, the United States and the United Arab Emirates are also becoming increasingly important partners. As well that recent agreement, between Israel, the United Arab Emirates and Bahrain offers the possibility of extending this international cooperation to countries that until now did not even recognize each other diplomatically. Taking into consideration that India’s domestic production of natural gas can only partially fulfill the expected increase in demand in the coming years, such huge dependence on external sources cause that India must keep monitoring gas discoveries in African countries too.
Energy potential of Egypt as the key to changing geopolitics of energy
During his participation in the activities of the CERAWeek conference, one of the most important global conferences in the field of energy, which was held virtually this year from 1 to 5 March in Houston, Texas, the United States due to the precautionary measures for the Corona pandemic, the Minister of Petroleum and Mineral Resources of Egypt, Mr. Tarek El Molla, confirmed that Egypt is moving forward on the path of becoming a regional hub for energy trade and circulation. Explaining that in recent years Egypt has been able to forge international and regional partnerships that serve this goal, whether with the eastern Mediterranean countries or the United States and the European Union, he indicated that the country took the initiative in cooperation with these countries and entities to establish the Eastern Mediterranean Gas Forum as an umbrella for effective cooperation between the countries of the region in achieving the maximum economic benefit from natural gas resources and exporting it to Europe.
Consequently, the gaining prominence of Egypt for its rising natural gas production and new discoveries, in combination with the recent discussion about changing the route of the much-publicized East Med gas pipeline (so that it starts from the giant Leviathan field in Israel and then, instead of going to Cyprus, to head to Egypt), and a fact that the country already has similar to aforementioned above pact with Israel, as well as the very large hydrocarbon reserves that could eventually alleviate the anticipated energy deficit which Europe is about to face in near future, necessarily raise the question if the hidden potential of Egypt represents the unrevealed secret of this changing geopolitics of energy, elevating its’ position to "Knight Maneuvering" at the global "Energy chess-board"?