Pipelines, pipe plans, and pipe dreams : an economic and geopolitical perspective on building natural gas export infrastructure from Lebanon and the East Mediterranean

Abstract

Discoveries of natural gas reserves in the East Mediterranean have increased interest in the Levant Basin, and its potential to supply natural gas to regional and European countries. Lebanon is a potential newcomer to the East Mediterranean gas exporting countries, since the projected needs of the country are minimal as compared to the expected reserves. This work sheds light on different export pipelines connecting Lebanon with Turkey, Iraq, Egypt, and Italy. We investigate the economic and political potential of the various proposed pipeline projects under different discovery scenarios, prices of natural gas, and risk rates. Results indicate that the most attractive projects in economic terms are prone to significant political risks. According to the latest developments in the region, Russia’s chance of shaping the East Med resources is high. However, the final decision to build or forgo pipeline projects in the region is dependent on market conditions, sovereign decisions, and intervention of political powers affecting the East Mediterranean.