Policy: Environment & Energy

Middle East waters hold energy gold

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Israel,PennAve,Tim Mak,Energy and Environment,Middle East,Oil,Natural Gas,Offshore Drilling,Magazine,Lebanon

A border dispute off the coasts of Lebanon and Israel threatens another violent conflict in the Middle East, as the two countries battle over a zone that has the potential to produce billions of dollars in energy revenue.

The dispute, which has defied U.S. efforts at mediation, is the result of Israeli and Lebanese claims over a potentially lucrative plot of territory in the Mediterranean Sea. The 850 square kilometers in the triangle-shaped area, which both countries consider to be their Exclusive Economic Zone, could be full of offshore natural gas and oil.

The Daily Star newspaper in Lebanon estimated the worth of the zone to be between $5 billion and $8 billion.

Lebanon has delayed its offshore activities because of political turbulence in the country. But the recent formation of a government will allow it to move ahead with decrees that signal the beginning of bidding for drilling rights.

“Lebanon intends to open the bidding round in the coming weeks once the decrees have been issued,” said Karen Ayat, an energy analyst for Natural Gas Europe, though she cautioned that an ongoing Lebanese presidential election and the Syrian conflict next door could lead to a delay.

Tensions run deep: The countries are technically still at a state of war. Lebanon has expressed fear that Israel could "siphon" off oil and gas through a pipeline, and Israel views Lebanese tenders for drilling as a challenge to its sovereignty.

Mere disagreement could escalate to a military confrontation with just one provocative move - and critics of the Lebanese government argue that its energy minister is aligned with Hezbollah, a militant group and political party that has been designated a terrorist organization by the United States.

“There's always a risk of conflict with these sorts of things … if international oil and gas firms are willing to bite and take that risk [to bid and drill], there's a very significant possibility that this could lead to increased tension on both sides, either as conflict through miscalculation, or an intentional effort by Hezbollah to escalate,” said David Weinberg, a senior fellow at the hawkish Foundation for Defense of Democracies.

Neither the Israeli nor the Lebanese embassies in Washington responded to requests for comment.

As the Lebanese government moves ahead, the Israeli government is in a bind over how to react and has avoided issuing tenders to disputed maritime areas.

“If Israel sticks up for their claim, they risk violence and international criticism. If they don't speak up about it, they could be losing billions of dollars of revenue,” Weinberg said.

U.S. officials have tried to tamp down the potential for a fracas, but efforts by the U.S., U.N. and Cyprus to mediate the issue have not worked. Frederic Hof, previously a special coordinator for regional affairs at the State Department, tried to mediate the issue in early 2013, without success. And a discussion between President Obama and Israeli Prime Minister Benjamin Netanyahu later that year didn't lead to a settlement.

“A resolution of the conflict is essential for the Eastern Med[iterranean] to fully develop its hydrocarbon potential," Ayat said. "Investors fear to inject funds in an unstable area that could be subject to a serious dispute.”

A senior U.S. official warned Lebanon this month not to drill until an agreement on maritime boundaries was reached.

“The most advisable policy for choosing where to drill is to reach an agreement on the disputed zone so there isn’t a disputed zone,” Amos J. Hochstein, U.S. deputy assistant secretary for energy diplomacy, told the Daily Star. “It would be good not to touch the disputed zone until there is a resolution for this dispute.”

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