Big oil companies are pushing into Mediterranean waters off Israel, Lebanon and Egypt after years of U.S. diplomacy helped break open a political logjam around giant Middle Eastern natural-gas discoveries.

Exxon Mobil Corp., Royal Dutch Shell, Total SA, of France and others are planning to invest in exports and exploration in the Eastern Mediterranean. Their prospects were buoyed by a landmark contract last month between U.S., Israeli and Egyptian firms that breathed new life into the regional market.

Shell is in talks with investors in natural-gas fields off Israel and Cyprus to supply its Egyptian liquefaction facility, according to people familiar with the matter. If the deal advances, it would allow Israel to quickly export some of the extensive reserves of natural gas found in the Mediterranean Sea west of Haifa.

Italy’s Eni SpA and Total last month announced a new discovery off Cyprus. The two oil giants are also working together to explore in disputed waters off Lebanon. Exxon, too, is set to explore nearby.

The total natural-gas reserves in the waters off Israel, Cyprus and Egypt are estimated at 125 trillion cubic feet, according to Wood Mackenzie, the Scottish energy consultant. That is enough to meet U.S. demand for almost five years.

The flurry of activity comes after years of U.S. diplomacy aimed at knitting together the economies of once-hostile nations such as Israel, Egypt and Jordan, and developing the Eastern Mediterranean as a natural-gas hub to lessen Europe’s dependence on Russian energy. U.S. officials say they have worked to break down resistance among Arab countries to deals with Israel, now ready to tap its natural gas but with few neighbors willing to take its exports.

A breakthrough occurred in February when Houston energy firm Noble Energy Inc. and its partners signed a $15 billion agreement to supply gas from two Israeli gas fields—Tamar and Leviathan—to an Egyptian firm. Although Egypt and Israel have had a peace deal for four decades, the idea of depending on Israeli energy exports has long been controversial with the Arab public.

“For Israel to export energy to the Arab world, who could imagine such a situation 20 or 30 years ago?” Israel’s energy minister, Yuval Steinitz, said in an interview.

The deal was built on similar agreements between investors in Israeli fields and Jordanian firms brokered by former U.S. Secretary of State John Kerry, people familiar with the matter said. The Trump administration remains engaged in the region’s energy affairs, U.S. officials said, though it didn’t play a direct role in the most recent deal.

“An initial deal had to be done to breathe confidence into the market,” said Bas Percival, an analyst at Wood Mackenzie.

Israeli and Egyptian Mediterranean natural-gas finds have been among the largest in the world over the past decade. But the region was slow to develop because of Israel’s disputes with neighbors, local bureaucracy and legal disputes.

Shell, which was long reluctant to do an Israel-Egypt gas deal, is eyeing a 15-year deal worth up to $30 billion to buy gas from Israeli and Cypriot fields, liquefy it in Egypt and then transport it to Europe and beyond, one person familiar with the matter said.

A spokeswoman for Shell declined to comment on the potential deal. A spokeswoman for Noble said the company continues to negotiate gas sales with multiple parties for export.

BP has focused on gas discoveries near the Egyptian coast, which a spokesman called “a prolific basin.” In the past year, BP has started production at three new fields and is planning to pump gas from another field later this year.

Egyptian gas discoveries have benefited from a large domestic market for gas, with 95 million people and taxi fleets using compressed-natural-gas vehicles.

Elsewhere, though, there are obstacles.

Last month, the Turkish navy blocked a drill ship belonging to Italy’s Eni headed for Cyprus. Ankara objects to further exploration offshore Cyprus, which remains divided between an independent European Union nation and a Turkey-dominated offshoot with disputed maritime boundaries.

Exxon and Qatar’s state oil company are planning to drill off the shores of Cyprus in the second half of this year, said Exxon spokeswoman Rebecca Arnold. An Exxon ship is en route to the area, Turkish President Recep Tayyip Erdogan’s spokesman said last week, adding that Ankara would “take all necessary initiatives to keep protecting” Turkish Cypriots’ rights.

Exxon didn’t comment on whether a ship was headed there, but said the survey ships will have to complete their work in the next few months.

Meanwhile, efforts to find gas near Lebanon are running up against maritime disputes with neighboring Israel. Eni and Total have committed to drill near an area claimed by both Israel and Lebanon, adding to a broader war of words between the two countries.

Total says the location it plans to drill is over 25 kilometers (about 15 miles) from the disputed area and shouldn’t pose a problem.

The recent deal between Egyptian companies and the partners in the Leviathan development also still faces transportation hurdles.

Militants in 2012 attacked the gas pipeline from Egypt that supplied Israel and Jordan, stunting supply and leading to a raft of legal cases between the companies involved. Islamic State-linked militants remain in the Sinai Peninsula, where the pipeline is located, Egypt says it can deter such attacks in the future.

Source: wsj