Israel moves on gas exports, but how is a problem

June 21, 2013 at 2:28 PM
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TEL AVIV, Israel, June 21 (UPI) -- Prime Minister Binyamin Netanyahu is seeking cabinet approval to export 40 percent of Israel's offshore gas production, keeping the rest for domestic use to eliminate costly energy imports, transforming the economy and the region's energy map.

Netanyahu's government said this week gas exports would earn the Jewish state, energy poor until the big gas fields were discovered in 2009-10, some $60 billion in profits in the next two decades.

The rest of the gas is enough to meet Israel's energy requirements for at least 25 years, Netanyahu said.

If he gets the go-ahead at Sunday's weekly cabinet meeting for the long-awaited decision, three years in the making, the big question then will be how the gas will be exported.

Right now there are essentially two options, both of which have strategic implications for Israel.

One is to construct an underwater pipeline across the eastern Mediterranean to Turkey, to pump gas to Europe, desperate to end its reliance on Russian gas.

The second is to build a land-based liquefied natural gas processing plant in the southern Gulf of Eilat to export to Asia via the Red Sea or in nearby Cyprus, which is on the cusp of major gas strikes that also could be shipped to Europe.

An LNG plant is an expensive proposition, costing $10 billion-$15 billion. Against that has to be measured the prospect of dwindling global gas prices, in part the consequence of the expanding shale phenomenon.

An earlier option of an underwater pipeline to Europe from Cyprus via Greece appears to have been shelved -- at least, for now.

The division of Israel's gas decided by the government fits generally into the recommendations of a committee charged with determining export policy: 52 percent for domestic use and 48 percent for export.

Israel began producing gas from its Tamar field off Haifa March 30, but that's intended for domestic use to fuel electricity generation.

Tamar, the first large field found off Israel in 2009, contains an estimated 8 trillion-10 trillion cubic feet of gas.

The much larger Leviathan field, discovered in 2010 and slated to go online in 2014, contains around 20 tcf. Cyprus' Aphrodite-1 field, containing at least 7 tcf, abuts Leviathan.

All these fields are being drilled by Noble Energy of Houston and its main Israeli partner, the Delek Group.

The Cypriot cabinet Wednesday approved plans for a U.S.-Israeli partnership -- Noble Energy, Delek and Israel's Avner Oil Exploration -- and the Nicosia government to build an LNG plant on the island.

The Greek Cypriot sector of the island -- the northern part has been occupied by Turkey since 1974 but it has no international recognition -- is in dire economic straits because of the Eurozone crisis.

Bankrupt Nicosia's counting on Cyprus' still largely untapped energy resources to get it off the hook.

Nicosia estimates there's 60 tcf under its waters although some industry analysts suggest that might be wishful thinking by a hard-pressed government.

Cyprus signed additional exploration deals with Total of France and a consortium of Italy's Eni and South Korea's Kogas.

"The contest between the Turkish pipeline and the LNG installation is taking place on several levels simultaneously: economic, political and strategic," observed Israeli analyst Amiram Barkat.

Turkey, Greece's traditional rival, opposes the Cypriot drilling, but supports the option of a pipeline from Israel.

Turkey was once Israel's strategic ally, but they fell out in 2010 after the Israeli navy intercepted a Turkish flotilla of boats carrying humanitarian aid to the Israeli-blockaded Gaza Strip, killing 10 Turks.

Now, encouraged by U.S. President Barack Obama who sees the pipeline as a means of binding together two key U.S. allies in a volatile region, they're patching things up.

"Official and unofficial Israeli representatives are already talking to their Turkish counterparts," Barkat said.

"Several senior figures in the Turkish government have recently spoken in favor of the export of gas, and for its part Israel has authorized special energy envoy Michael Lotam to coordinate negotiations with the Turks."

On the political level, "the pipeline to Turkey beats the PNG installation by a knockout ...

"Gas and politics are very closely bound up with each other, especially in our region. Gas, it turns out, has considerable influence on the diplomatic and strategic planes."

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