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    The Future of Israeli Gas



Noble Energy has held talks with Jordan and Egypt for the purpose of exporting the Leviathan gas to their markets. The deals are pending regulatory approvals.

by: Karen Ayat

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Natural Gas & LNG News, Top Stories, News By Country, , Israel, East Med Focus

The Future of Israeli Gas

Since its discovery of substantial amounts of natural gas under its seabed, Israel has been struggling to formulate a clear and defined export strategy. The country was divided for months before its cabinet issued on June 2013 the decision to export around 40% of its proven reserves then. The decision was controversial, a conservative school arguing that after years of energy dependence and vulnerability, Israel should reserve a larger quota for its domestic use. Israel’s Supreme Court in October 2013 ratified Netanyahu’s cabinet’s decision and opened the door for the sale of gas in international markets.

But how? That was the second important question. Israel has a lot of gas. Its Leviathan holds as much as 21 Tcf of natural gas. Tamar is the second largest field discovered by Noble in Israeli waters and it is estimated at 10 Tcf. In other words, the country has enough to keep Israel gas independent for decades and to bring in for the Israeli economy up to 60 billion Shekels as estimated by the Israeli government. Due to Israel’s geopolitical positioning, exporting the gas is no easy task. Israel contemplated various export scenarios, but to date none has been made final.

Israel’s exports options included using Cyprus’ planned LNG facility, recruiting Woodside’s expertise to build its own LNG facility, building a pipeline to Turkey and exporting to immediate neighbours via pipeline. However, Israel did not express to date an intention to pool costs with the Cypriots for the purpose of transporting gas via Cyprus’ planned onshore LNG terminal at Vassilikos. And despite Tel Aviv’s reconciliation with Ankara, diplomatic ties between the two states deteriorated after the 50 day war on Gaza rendering the Leviathan-Turkey pipeline scenario less likely. As to a domestic solution, a tax dispute between the Australian giant Woodside and the tax authorities jeopardized Israel’s access to international markets via LNG.

Recent talks between Israel and the Kingdom of Jordan on the one hand and Egypt on the other hand revealed Israel’s intention to sell gas to its immediate neighbours. In fact, Jordan imports 95% of its energy needs and is undergoing a severe energy crisis due to the disruptions in the flow of Egyptian gas. Noble Energy representing the Leviathan partners conducted talks with Jordan’s National Electric Company for the purpose of supplying Jordan with 45 bcm of gas over 15 years at a price to be determined The deal is worth USD 15 billion and is a game changer for a Jordan desperately looking to find alternative sources of supply. Jordan is even looking to import gas from Cyprus at a later stage, determined to no longer be dependent on a single source of supply. Noble also held talks with Britain’s BG Group for the export of Israeli gas to its Egyptian liquefied natural gas export plans. Egypt would facilitate through its unused export terminals the flexible delivery of gas to export markets including Europe and lucrative Asia.

The agreements with Jordan and Egypt are not binding. They are pending regulatory approvals from all interested parties. Noble Energy is pressured to finalise the talks in the immediate future (by November of this year) in order to stick to the agenda: getting the field to the production stage by 2018. Despite technical and commercial feasibility, the deals between Israel and its Arab neighbours remain sensitive in regional politics.

Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat