Current Affairs

Within reach of Europe are four massive gas fields, one that is yet to be developed because of internal squabbling by the Lebanese state, but in reality all these gas fields are coming on stream just at the right time. Zohr, is Egypt’s massive gas field, then there is Israel’s Leviathan field off the coast of Israel and an enormous field south of the city of Limassol, which according to the energy minister Giorgios Lakkotrypis, “is the biggest discovery […] in the last two years and could become an alternative to Russian gas for the European Union”.

Zohr gas field, which is the largest discovered field off Egypt in the Mediterranean, and is approximately 190 km north of the city of Port Said. The field is shared between Eni with a 50% stake, Rosneft with a 30% stake, BP has a 10% stake and Mubadal Petroleum also with a 10% stake.  As of December 2021, Eni proved reserves at the Zohr field amounting to 706 million metric barrels (MMBH), which means Egypt is self sufficient and has linked up to Israel and planning to link up with Cyprus and act as a terminal to export LPG to Europe.

The third is the Leviathan, which is located in the eastern Mediterranean sea off the coast of Israel. It is estimated to hold natural gas reserves of approximately 605 billion metric meters. Noble Energy own 39.6%, Delek group hold 22.67% and Ratio Oil Exploration owns 15%. Other fields are Tamir and Karish-Tanin, which is partially in Lebanese waters and contested by the Lebanese government with Israel, however if exploited they will enable Israel and Lebanon to be self sufficient and also act as exporters to Europe through the Egyptian gas terminal.  

Other options for Europe are fields in north Africa, which includes Morocco and Algeria, who already export through pipelines to Italy and Spain. There are also plans to upgrade the sub-Saharan pipeline from Nigeria, through Burkina Faso and join the Algerian pipeline into Spain and Italy. The problem is that natural gas as a commodity is not a problem to find, it is the transportation of the commodity into the European market place. Shipping is expensive and in the form of LPG, it is not as easily transferable into the containers as oil or any other commodity. Ships contain on average 43,000 tonnes or 84,000m3, and have to be kept refrigerated at -48 degrees Celsius, which is below the boiling point of LPG. Worldwide there are only about 200 bulk carriers designed to carry Liquid Petroleum Gas throughout the world.

The other option is to move LPG via rail, where each tank contains anywhere between 65,000 to 127,000litres, which is approximately 65 tonnes, but the need for facilities to deal with the cargo, means that rail is relatively ill served. Gas is found right through Africa, especially off the coast of Nigeria, Angola and Mozambique, but it is the exploration and transportation of this commodity that has forced up the price, because Russia, which has a 40% stake in the European Gas market has cut the delivery through Nord Stream 1 running into Europe. The other option, which is the main option at the moment is that LPG is imported from right around the world, especially America, which is making up the bulk of LPG deliveries into Europe at the moment, but there is also a pipeline that runs from Norway into northern Europe and Britain, but it is the quantity and availability of Gas supplies that has forced up the price of this commodity on the world markets. But if you consider that Russia will and is supplying Asia then the quantifiable equation has to be transference, and whether in the long term the price of gas will at some stage drop after all the gas containers have met the reserve for this winter.

The question is whether the city is looking at a bubble and how much harm this will do to the markets once it burst. Poland, Germany, France, Austria, Sweden, Norway and the United Kingdom have all met their winter quotas, it is only countries such as Estonia, Latvia, Czech Republic, Slovenia and Hungary that are struggling to reach winter reserve levels, but this itself will be amended as the market realises that the largest nations have found alternative markets to Russia’s and are sufficiently served by these other markets.

Last weekend, 10,000 demonstrated in the capital of the Czech Republic, Prague, because of the price of gas. The Czech Republic has only 60% of its winter supply and needs to find a way to build up its reserves. But it is the long term availability of gas as a commodity that is leading to questions of cost and availability in the long term. It must not be forgotten that the Russian President has done this before, cutting off Ukraine three times during winter, with arguments ranging from Ukraine was stealing gas and not paying its bill. Each time the European Union found answers, but it is likely that this winter will be a frugal year, with a push for alternative gas reserves to be found to service Europe as a whole.

Bibliography

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