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socar and bp place bid to explore israeli hydrocarbons

SOCAR and BP Place Bid to Explore Israeli Hydrocarbons

Author: Josephine Freund


Image source: NewMed Energy

On July 17, the UK’s BP (British Petroleum)and State Oil Company of the Azerbaijan Republic (SOCAR) for the first time placed a joint bid with Israel's NewMed Energy in a licensing round for Israeli hydrocarbon exploration. This move comes amid a marked recent increase in interest toward Israel’s natural gas industry from important regional players. NewMed has the largest stake in the Chevron-operated Leviathan offshore field in the eastern Mediterranean basin that has 12 billion cubic meters (bcm) of gas. Toward this licensing round, Israel’s Energy Ministry stated, “Following the closing of submissions for the Ministry of Energy and Infrastructure’s bid round, four consortia, composed of nine different companies, of them five new to the Israeli market – have submitted six bids to receive licenses.”

The eastern Mediterranean Basin, rich in natural gas deposits, covers the area of Cyprus, Egypt, Israel, and Lebanon, and its deposits have become even more important to the international energy community to improve infrastructure, as the world seeks to diversify from dependence on Russian energy. In the last 15 years, significant deposits of natural gas have been discovered in the eastern Mediterranean. This has shifted Israel’s status, in that it gained the potential to become a major energy exporter. This is a significant development, because historically it has had to rely on energy from other powers. Moreover, NewMed and partners have reported plans to double the Leviathan’s production by 2027, as well as to develop a liquefied natural gas (LNG) terminal.

Israel’s key role in developing the eastern Mediterranean potential has seemingly been recognized by world powers, seeking to place their own stake in the developing industry. Just two months earlier, state oil company of the UAE, Adnoc, together with BP offered to buy 50% of NewMed for about $2 billion.

The development of the eastern Mediterranean Basin’s natural gas infrastructure is significant in that it will contribute toward an international push to diversify from Russian-produced energy because of Moscow’s war against Ukraine. Furthermore, the commitment to its development has the chance to reshape geopolitical relationships. The development of various energy pursuits in the eastern Mediterranean have proven to aid regional diplomatic cohesion, and this has been seen through both Türkiye and Greece working together on both the Trans-Anatolian Natural Gas Pipeline (TANAP) and the Trans Adriatic Pipeline (TAP). The development of eastern Mediterranean energy pipeline endeavors has been an important means to deliver Caspian energy to European and other global markets. 

For Israel, participation in the eastern Mediterranean’s development means a tangible step of economic integration into the region around it, as well as opportunities for strengthening diplomatic relationships through business endeavors. While Israel and Azerbaijan have been steadily reinforcing their strong diplomatic ties, especially in the realm of security and defense, this has paved the way for further numerous and significant levels of economic cooperation. In October 2022, Israel's I.D.E. Water Assets Ltd company and the Azerbaijani Investment Company OJSC signed an MoU on establishing a plant for desalination of water from the Caspian Sea. 

Overall, while this endeavor has not been formalized, the joint bid from SOCAR, BP, and NewMed, plays a part in a wider trend. And while it is significant, it does not necessarily come as a surprise.. Russia’s war in Ukraine, along with increased recognition by regional powers of Iran’s volatility, has led to the doubling down on new alliances. This comes down to an overall recognition of just how important energy diversification is to national and regional security. 

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