On Sunday, Cairo-based independent News Amwal Al Ghad reported that Egypt had signed a deal with five EU and US oil companies for drilling contracts, with exploratory drilling to begin in early 2021. Egypt is just one of many countries around the world that is exploring and drilling. The entire Mediterranean has been caught in conflict over vast undersea oil reserves found over a decade ago. The Gulf region has also been dominating headlines. Russia has made headlines too, with the EU, Turkey and China. At a time when fear of war between nations cycles, the economic competition between nations has carried on in the background largely unnoticed.
The oil and gas industry has suffered setbacks due to political pressures and market instability. In 2019 energy was the lowest performing sector of the stock market. Last July, a Charter of Cooperation was signed between the Organization of Petroleum Exporting Countries (OPEC) and Russia. Parties agreed to collaborate on energy infrastructure and oil-market stability. In December, the International Energy Agency (IAE) declared that even if OPEC cuts production as planned, there would be an oversupply of oil in 2020. Also in December, Forbes reported that Liquified Natural Gas (LNG) would soon make gains on the coal industry and dominate the market. Leading LNG exporters like Qatar and Cyprus have vastly improved their gas sectors to take advantage of the trend.
On January 2nd Greece, Cyprus and Israel signed an agreement to establish the East Med pipeline, which will connect Israel’s Levantine Basin to Italy through Greece. The project is a split venture between two Italian and Greek utility companies. Israel became a major energy exporter last December, after signing a permit to export LNG to Egypt. Israel also has had a difficult time in Jordan recently, where the Jordanian congress unanimously passed a resolution on January 19th opposing the 10 billion dollar deal between a Jordanian utility company and US- Israeli, Texas-based Noble Energy.
Though its neighbours have all found much oil in the Mediterranean, Turkey has not found any in waters it indisputably owns. This has caused much conflict over the years, which has spilled over into Lybia. In January Turkey announced it would send troops to Lybia to protect the UN-backed Government of National Accord (GNA) in Tripoli, with which it has negotiated to drill off Lybia’s shores. The Lybian National Army (LNA) opposition forces under General Haftar are backed by Egypt and the UAE, and have strongly opposed Turkey’s ambitions to drill for oil. On December 13, Beirut-based AMN news agency cited local media in reporting that LNA Chief of Staff, “revealed an agreement with Greece to block the sea lane linking Crete and the eastern sea borders of Libya to Turkish ships.” The victor in the battle for Tripoli is yet to be determined. While Lybia has made deals to drill for oil offshore with EU energy companies, Turkey’s ambitions have received condemnation in Brussels. In October last year the European Council reaffirmed its solidarity with Cyprus, which on January 19th this year called Turkey a ‘Pirate State’.
Iran has struggled to exert its regional power under crippling US sanctions. Despite sanctions Iran has sought new ways to be competitive. In 2018 Iran began using Cryptocurrency to evade US sanctions, and began to push other Muslim nations to do so as well. Last December Iranian parliament approved the creation of a special economic zone at their port in Jask, and found vast oil fields and LNG deposits, giving them a huge boost in the energy market. Also in December, more EU countries joined the INSTEX mechanism designed for them to evade US sanctions to trade with Iran. Recent tensions between Iran and the US has led to more US sanctions against the Iranian economy.
Stock market values for oil went up sharply in early January, following the assassination of Iranian General Soleimani. They went back down after a lack of response by Iran and a speech by President Trump, but cyberdefense and other stocks held a higher value. The future of oil markets is still unclear, yet regardless, countries around the world continue to explore, drill, and connect their energy infrastructure.
Saudi Arabia’s crown Prince last year announced economic reforms which among other things, opened nationally owned oil companies to privatization, and sought to sell five percent of the giant Saudi oil company Aramco. Its sale has been delayed many times, as experts disagree on the high valuation of two billion dollars given by the crown Prince, valuing it instead at 1.7 billion. The Kingdom has made headlines recently. In January Aramco signed a participation agreement with Sempra LNG to invest in 25 percent of the Port Arthur LNG project in Texas, and to purchase LNG yearly upon completion.
Syria in December announced it would switch to LNG for its transportation system. It hopes to develop infrastructure off its coast. Though it has recaptured some oil fields, with the help of Russia, Syria has lost many eastern fields to the Kurdish and US forces. The United States last year took up a policy of not allowing Syrian oil fields to be developed by ISIS or anybody else, including Syria itself. In December local media reported the US to be building a new base on Deir Ezzor, at the al-Omar oil field. Also in December the Middle Eastern Monitor reported that local sources reported seeing drilling equipment, Saudi soldiers and a delegation of oil experts arriving at al-Omar aboard helicopters. Saudi Arabia later denied the allegations.
While Central European nations like Poland seek to diversify their energy with LNG imports from the USA, the EU has opted to connect with Russian oil giant Gazprom. Last December Russia and Ukraine agreed to a deal to pipe petroleum through Ukraine to Europe, a result of the Normandy summit brokered by France and Germany. The Nord Stream 2 pipeline will connect Russia to the EU through Ukraine and Moldova. In late December the US State Department issued a warning that work on the pipeline is sanctioned, and that violators will be revealed to Congress within two months. Russia has other major energy aspirations. Last month it declared it will invest 300 billion for oil developments in the Arctic Sea. In January Russia and Turkey inaugurated the new TurkStream pipeline, which bypasses Ukraine entirely. Last December, Russia opened a LNG pipeline to China through Mongolia, and hopes to open another line soon.
China has its own ambitions as well. On November 30th of last year the UK’s Independent news cited a spy report revealing that China’s military is using the cover of science expeditions to explore the Arctic’s mineral riches. In December China entered into an agreement with Cyprus for $320.7 million USD, to develop Cyprus’ first LNG terminal. On December 21st last year SCMP reported that China had signed a contract with a Saudi energy company to install 10 million smart meters, in a big part of China’s Belt and Road Initiative. Later in December China released its Natural Gas Development Report for 2019, which indicated that China’s increased dependence on LNG will require double-digit growth in that sector.
The big power competition between nations marks the turn of our new decade. Many conflicts over resources are ongoing, while much progress has been made in every region of the earth. Different nations have economies that are faced with different struggles. One thing that unites us all is our mutual need to consume energy. Sharing energy may foster conditions for future peace. Though many nations have prospered, some like Turkey and Iran have been left out in the cold. The results of that shifting dynamic may shape regional if not global conflicts, into the next decade or beyond.
Well written and informative! Appreciate the professionalism