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Producers eye export routes for Israeli gas 12 mars 2013

Posted by Acturca in Economy / Economie, Energy / Energie, Middle East / Moyen Orient, South East Europe / Europe du Sud-Est, Turkey / Turquie.
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Financial Times (UK) Tuesday, March 12, 2013, p. 11

By John Reed and Daniel Dombey

Pipeline projects could boost ties with Turkey, write John Reed and Daniel Dombey
When Benjamin Netanyahu forms a new government in Israel in coming days, it will have a full agenda of pressing business, including plans to cut a growing budget deficit and to restart peace talks with the Palestinians.

One of the new cabinet’s most highly anticipated policy decisions is how much of its offshore natural gas reserves it will export and how much it will reserve for domestic use.

With Israel emerging as a regional energy power, the deliberations will be watched beyond its borders. Inside Israel two main investors in the sector are positioning themselves to export gas, possibly via new pipeline projects that could reshape the map of the eastern Mediterranean by deepening ties between Israel, Turkey and other states.

At present, the rift between Israel and Turkey remains a daunting obstacle – underscored recently when Turkish prime minister Recep Tayyip Erdogan called Zionism a « crime against humanity, » remarks Mr Netanyahu and US secretary of state John Kerry condemned.

However, proponents of greater energy ties argue that tensions between the two countries could be overcome by mutual economic interest.

Noble Energy and Delek Energy, shareholders in Israel’s two biggest gasfields, have been sounding out potential customers such as energy and chemical companies in Turkey and Jordan, which has seen its gas supplies from Egypt disrupted recently by sabotage attacks in the Sinai.

« Gas sales to Israel’s neighbours are a distinct possibility and one we are committed to exploring, » says Noble Energy. However, it adds: « Until the government decides on an export policy and clarifies other regulatory matters, we are unable to mature these discussions. »

Last year a committee set up to advise government on the gas reserves – among the largest offshore finds of their kind in the world – recommended that Israel export up to 500bn cubic meters of its gas and save at least 450bcm for domestic needs.

Mr Netanyahu’s new government is expected to form its energy policy based on the findings of that report, which was submitted to the prime minister and energy minister late last year.

At the same time, Israel’s anti-competition commissioner is examining a restraint of trade case brought against Noble and Delek over their control of the two biggest offshore fields found to date that could – depending on the watchdog’s decision – set back investment plans.

« We need certainty, » says one Israel-based energy executive. « We don’t want to invest then have the government change the rules. »

The potential pay-off for Israel’s economy is big. The smaller of Israel’s two big gasfields, Tamar, which is due to begin production in April, will contribute a percentage point to Israel’s projected 3.8 per cent gross domestic product growth this year.

Leviathan, which is the industry’s biggest offshore gas discovery of the past decade and nearly twice the size of Tamar, will supply well in excess of the small Israeli market’s domestic needs.

Noble and Delek are now exploring possible export routes to justify the big investment they will need to bring gas from the field to Israeli customers by 2016.

The two companies have argued that as Israel generates more of its energy from gas, it will face a shortage by the middle of the decade if Leviathan is not developed. At the same time, they say they need to export to underwrite the project’s estimated $4bn cost, either in the form of liquefied natural gas or via a pipeline.

Leviathan’s backers have mooted producing LNG – which they could sell profitably in Asia – onshore in Cyprus, Israel, or possibly even Jordan’s Aqaba free trade zone.

As for pipelines, senior Israeli and Turkish officials have suggested that Turkey is the one market in the region large enough to make the business case for Israeli gas exports.

Zorlu Holding, a Turkish company active in the Israeli energy sector, acknowledged recently that the issue of a pipeline with Israel had « come up » in its discussions, although it added that it had taken no formal initiative.

To go ahead, any Israeli-Turkish project would need to overcome two problems: the political rift between the two countries and the question of finding a workable route in a region riven by diplomatic rivalries.

Taner Yildiz, Turkey’s energy minister, said last week that before any pipeline project could go ahead, Israel would have to meet Ankara’s demands for redress over the 2010 storming of the Mavi Marmara, a ship trying to break the blockade of the Gaza Strip.

The issue of the pipeline’s route is problematic because Israel remains officially at war with Lebanon and Syria, while Turkey has no diplomatic relations with Cyprus, which has discovered big gas reserves of its own.

« The two options for running the pipe from Israel to Turkey are among the continental shelves, either of Cyprus or of Lebanon-Syria, » says Matthew Bryza, a former US ambassador to Azerbaijan. « Obviously, neither would be easy from a political perspective. But a pipe to Turkey makes lots more economic sense – including for Cypriot gas – than either liquid natural gas or a pipe to Greece. »

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