The discovery of the Zohr gas field in Egypt introduced new complexity to the geopolitics of Mediterranean region, as it seems to disturb the previous gas supplies agreements.
On the 30th of September ENI, Italian oil and gas company, announced about their new gas find off the Egypt shore. The new gas field, which was called Zohr, covers a surface of around 100 square kilometers. It is estimated to contain approximately 30 trillion cubic feet of gas, which makes it the largest gas field in the Mediterranean region and one of the biggest in the world. Claudio Descalzi, chief executive of the ENI, remarked, that the Zohr gas field discovery was a momentous event for Egypt and it would be able to transform its energy policy.
But the whole situation with the new gas find is not without strains attached. The amounts of gas, which Zohr field may provide may change the geopolitics in the Mediterranean region either for the better or vice versa.
Firsly, it's not only Egypt, that is in charge of making decisions about the future development of Zohr gas. The ENI has the rights to explore the Mediterranean shore in search of new gas fields. The company got this privilege, having paid Egypt's government good money and on condition of possession of future finds. A month before the Zohr find announcement, Egypt's state-owned gas company, EGAS, agreed with ENI to raise the cost of gas from $2.65 per million British thermal units up to something between $4 and $5.88. The new price is twice higher, than the previous one that suggests the entire price rising activity to be worked out in advance. The point is that ENI, having provided so precise data on Zohr's scales, must have known about it at least 3 months earlier, to conduct the necessary capacity evaluations. And now Egypt seems to lose their possible profit. According to energy analyst, Mika Mimio Paluello, the price of this deal was too high even on the previous terms. The agreement implies that eventually the Egypt's resources will be handed over to a foreign company on the terms that are not to be disputed. He also said that Zohr is definitely a huge find, especially for ENI, but for Egyptian economy it may be very bad.
Another concern to do with the new find is the gas trading relations in the Mediterranean region. First of all, it deals with the previous agreements with Israel. The gas from Israel's Leviathan field, which until recently was the biggest in the region, was to ensure gas supplies in the region. But now its role is questioned. Yuval Steinitz, Israeli Energy Minister called the Zorh a "wake-up call" for Islael which has been to slow in operating their own deposits. Until Egypt's own gas is produced, they are going to import more expensive liquid gas. Besides, the EGAS authorities claim the Zorh gas, when produced, will be for the domestic supply in the first place, export will depend on the discoveries. Egypt's Oil Minister, Sherif Ismail also assured that Zohr's discoveries will not affect agreements with companies, aimed at providing gas supplies from Israel and Cyprus to Egypt.
To sum up, only on Zohr gas field developing, we will know its real scales. After that, Egypt government and ENI are to decide how to command the resources. Whether Egypt preserve it for itself or become a leading gas exporter in the region will be clear in time.
Eni S.p.A. (Ente Nazionale Idrocarburi – national hydrocarbons authority) is an Italian multinational oil and gas company headquartered in Rome. It is operating in 79 countries and is now world's 11 largest industrial companies with market capitalization of about $90 billion.
Egyptian Natural Gas Holding Company (EGAS) is an Egyptian state-owned company, established in 2001. It deals with gas projects and issuing of natural gas exploration licenses.
