CERA Official Sees Vast Potential for Gas in Levant Basin

Al-Monitor: Would a military conflict with Iran affect oil prices?

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Summary : Al-Monitor Europe and Middle East correspondent Sophie Claudet spoke with Leila Benali, director for Middle and North Africa with IHS CERA. Ms. Benali’s expertise includes advising government and international companies on energy policies, master plans and strategic investments. Author: Sophie Claudet First Published: March 8, 2012 Categories : Originals Iran   Lebanon

Benali: There are tensions already on the oil market due to the psychological fear of a conflict with Iran. If there is a conflict, we can only assume that the price of oil will increase.

Al-Monitor: Could the world live without Iranian oil?

Benali: Without 4 million barrels/day? At what price? Even if the market cannot compensate overnight for that loss, the world was able to live without Kuwaiti and Iraqi oil for some time during the first Gulf war.

Al-Monitor: How will the sanctions on Iran affect the supply of oil when they kick in next July?

Benali: Iranians have learned to live with sanctions. There is always a period of adaptation of course. Three, four months, then they come back on track. This time again, you can assume that they will find solutions to get their oil out. Iran is already getting its oil to India, Brazil and China but at a discounted price. With the sanctions, it might mean they have to sell their oil at further discount to Asian countries. The overall price of oil could be affected. But if the market is well supplied with Saudi Arabia, which has excess capacity, increasing it oil production again, the sanctions won’t have an impact on price. Iraq is also increasing its production and Libya is back. If the market is well balanced, there won’t be an impact.

Al-Monitor: Will eastern Libya’s declaration of semi-autonomy affect oil supply from that country?

Benali: When the conflict started in Libya last year, we had considered the scenario that Libya could split up. It has happened in other countries where oil is concentrated in one area, where you have weapons like Sudan. In the case of Libya, it is even more complex because we are talking of militias that are not necessarily representative of the people; there are no settled political parties. So yes, the flow of oil could be disrupted if the eastern province cannot reach an agreement with the central government in Tripoli to find a way to export oil. It is too early to tell, though it is a scenario we have envisaged.

Al-Monitor: What is the potential for the Levant basin?

Benali: There is a high potential there but the countries have to find a way to split the gas field like establishing maritime borders if you will. If you don’t find an agreement, that could lead to disputes. On the Israeli side, there is 33 trillion cubic feet of gas, we hear there is great potential too on the Cyprus and Lebanon sides. The gas discovery is enough to cover the needs of the whole Levant and to leave some gas for export. But there are political issues that could prevent that from happening. You also have to find a way to export that gas. One solution is to use the pipeline from Israel to Egypt. For the time being Egypt is exporting gas to Israel but Egypt is running out of gas. A solution would be to invert that flow. We [at CERA IHS] are testing the hypothesis that this huge gas discovery could be an opportunity for peace in the region.

Al-Monitor: What should we watch for in the 20 years to come?

Benali: By 2030, Iran and the UAE will have nuclear reactors. Other countries may want to master enrichment as well. Second, we are looking at renewable energies, solar and wind: we don’t see a major impact on the actual supply and demand balance. The volume is small but you might get more R&D in the Middle East and North Africa and investments down the line. The leading countries are the Gulf countries, Morocco and Israel. A third issue to watch for: will the region continue to be a net exporter of oil and gas or will it become a net importer instead? If you look at the aggregate region that won’t be the case but it will happen in some countries. The UAE and Kuwait are already importing liquefied natural gas though they are not net importers yet. Egypt might become an importer. Oman we don’t know yet. In other countries, the resources are there but there is not enough investment to develop them; developing gas is not as straightforward as developing oil.

Al-Monitor: How about peak oil?

Benali: We don’t see a peak in supply, we seek a peak in demand. In our forecast, we see a composite of demand destruction: countries stopping using oil for political reasons because they don’t want to be dependent on importing oil and favor gas instead, or because they want clean energy or because from a power generation perspective gas is more efficient. We see demand going to an asymptote roughly by 2030 or 2035.