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Cyprus likely partner as Israel mulls gas exports, but Turkey beckons

Dec. 20, 2013 at 3:35 PM   |   Comments

TEL AVIV, Israel, Dec. 20 (UPI) -- Israel is studying its options for exporting its natural gas riches in the eastern Mediterranean, but instability in neighboring Egypt and friction with former ally Turkey are blocking possible undersea pipeline links with them to take the gas to Europe.

That leaves a joint export operation with neighboring Cyprus, which will be the next big offshore gas producer in the region, looking like the frontrunner -- for now, at least, because war-divided Cyprus lies at the center of a long and seemingly intractable dispute with Turkey.

Regional security problems are proving to be a major stumbling block in the Jewish state's drive to capitalize on its newfound energy wealth, with the Israeli navy undergoing an expansion driven by the need to protect Israel's offshore fields and infrastructure.

A recent report by the U.S. Energy Information Administration observed territorial disputes in the eastern Mediterranean could "jeopardize joint development of potential resources in the area and could limit cooperation over potential export options."

Israel, which has allocated 40 percent of its gas reserves for export, will have to decide soon what it's going to do if it wants to start building the costly export infrastructure exports will require.

Israel's Tamar gas field off its northern coast began producing in March. Its estimated reserves of 8 trillion cubic feet of gas will be used domestically, mainly to fuel power stations. That's enough to meet Israel's internal needs for the next 25 years.

Keith Elliott, executive vice president of the Eastern Mediterranean operations of Noble Energy, the Houston-based company that discovered the Israeli fields with its local partner Delek Group, says it should "generate more than $30 billion for the Israeli economy."

But the 18.9 trillion cubic feet contained in the larger Leviathan field is earmarked for export when it comes onstream. Elliott said Dec. 8 Leviathan is due to begin production in late 2017, a year behind initial estimates.

Nobel Energy is also conducting the exploratory drilling off the south coast of Cyprus controlled by Greek Cypriots. Leviathan is believed to extend into Cypriot waters.

Turkey has ruled the northern third of the island since it invaded and established the Turkish Republic of Northern Cyprus that no one but Ankara recognizes. It has declared the southern drilling illegal and warned it will use its navy, if necessary, to enforce Ankara's will.

Cyprus looms large in Israel's strategic planning in the burgeoning energy sector in a region long dependent on imported energy, because of its proximity and the benefit of pooling export programs.

It has been proposed Israel and Cyprus should jointly build a liquefied natural gas terminal, costing around $12 billion, in southern Cyprus linked to Leviathan by an underwater pipeline.

Cyprus belongs to the energy-hungry European Union, which should smooth Israeli exports to the 27-member bloc desperate to break its reliance on Russian gas.

Turkey was a longtime ally of Israel until the 2010 Israeli boarding of a Turkish ship trying to break the Gaza blockade that left nine dead.

Despite the governmental animosity, there's considerable commercial interest in both countries concerning a pipeline under the eastern Mediterranean from Leviathan to Turkey, from where the gas could be pumped westward to Europe.

It may well be Turkish Prime Minister Recep Tayyip Erdogan, whose personal hostility toward Israel over its occupation of the West Bank is intense, will bow to domestic pressure and negotiate a gas deal with Israel.

"Turkey hopes to take advantage of its location between Europe and Asia and become a regional energy corridor for oil and natural gas moving from Russia, the Caspian Basin, Central Asia and the Middle East to the large consumer market in Europe," the U.S. global security consultancy Stratfor observed in a November analysis.

"These ambitions largely mirror Turkey's foreign policy vision of restoring its dominant role in its historical area of influence. ...

"To get involved in eastern Mediterranean energy plans, Turkey would need to find a political resolution with both Israel and Cyprus," Stratfor noted.

Of Turkey's three regional adversaries, Greece, Cyprus and Israel, "Israel has the greatest incentive to repair ties with Ankara, allowing it to regain a strategic ally in an increasingly volatile neighborhood." The proposed pipeline could be the catalyst.

END

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