Wednesday, November 04, 2015

Don't Get Too Excited

So is a large natural gas field going to disrupt our efforts to keep Egypt at peace with Israel? Let's restrain the instinct to panic--about that prospect, anyway--okay?

This is good news for energy supplies. Is it bad news for our diplomacy?

[Italian energy company Eni's] gamble worked. The company, using drilling rights from the Egyptian government, found what it called a “supergiant” natural gas field. It may be the largest discovery yet in the Mediterranean and is one of the world’s biggest new gas finds in years.

Eni will need to drill more wells to prove its claim that the field, which it calls Zohr, holds up to 30 trillion cubic feet of gas. That could be worth about $100 billion, even when taking into account current low energy prices. But the promise of Zohr — the Arabic word for noon — is already brightening the prospects of the Egyptian economy, which has been benighted by an energy shortage and years of political turmoil. ...

Egypt’s becoming more energy-independent could sidetrack efforts — backed by the United States — to use energy diplomacy to improve relations between Israel and its Arab neighbors. Israel has its own ambitions for offshore natural gas, including a long-gestating plan to sell gas to Egypt.

Mr. Descalzi met recently with the Egyptian president, Abdel Fattah el-Sisi, to discuss next steps. And on Thursday, the Eni chief plans to visit Jerusalem in an effort to persuade the Israeli prime minister, Benjamin Netanyahu, that there are still opportunities for Egypt and Israel to jointly prosper by developing their gas fields.

I don't know how long a field produces. Is that $100 billion spread out over 20 years? If so, that's just $5 billion per year. How much of that goes to Egypt?

Egypt has about 90 million people and a GDP of about one trillion dollars.

So this could be nice for Egypt. But hardly decisive. Especially when you consider how large Egypt's population is and the size of their GDP.

And if Third World natural resource bonanzas are any predictor for Egypt, Egypt may squander the new wealth with overambitious plans and increased corruption, quite possibly making things worse for Egypt in the long run.

So I guess you can stop worrying about the bad effects on our current round of diplomatic efforts. But do worry about new problems, eh? A new Nigeria closer to the Middle East isn't exactly a boon for our diplomatic efforts.