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    Israel: An Overview of Export Options



Israel's strategy to export to immediate neighbors does not dismiss the fact Israel will still seek to reach further markets. Exports routes remain complicated.

by: Karen Ayat

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

Israel: An Overview of Export Options

Recent talks between Israel and its immediate neighbours have suggested that the newly gas rich country has opted for exports regionally. The strategy does not however dismiss the fact that Israel will still aim to reach further markets, in Europe or Asia. The decision to export approximately 40% of its gas means that Israel will still have a lot of gas to sell after potentially having supplied Jordan, the Palestinian Authority and Egypt with natural gas from its Tamar and Leviathan fields. Which markets will Israel attempt to reach and via which route is where it gets a bit trickier.

Energy analysts agree, almost unanimously, that if the Eastern Mediterranean turned out to be blessed with gas, it has been cursed by neverending geopolitical tensions that threaten to slow down or even halt a promised regional prosperity resulting from the monetizing of offshore gas riches. But what are Israel’s export options? Will it go for LNG, FLNG or pipeline?

Israel’s talks with Woodside led to believe that it had chosen the LNG option for the flexibility such a move would provide. Liquefying natural gas for exports to Asian markets would be lucrative. However, with Israel’s new strategy to take advantage of regional shortfalls first, it might have put aside the costly and complicated endeavour of building an LNG terminal. At least for now. Environmental and security concerns could have also deterred such an onshore project. A floating LNG could still be a possible solution in the future, although Israel has not expressed its intention to opt for this new technology yet.

The two possible scenarios left would be to use Cyprus’ LNG facility for liquefying and exporting the gas from Israel’s giant Leviathan or building a pipeline to Turkey. Going for Cyprus’ proposal in conjunction to exporting to Israel’s immediate surrounding remains a possible scenario that the island would happily welcome. The recent downsizing of Cyprus’ Aphrodite field in Block 12 has, if not halted, certainly delayed the island’s multi-billion dollar project and an Israeli participation would certainly speed up the progress of the project. Israel might however seek to diversify its energy routes for security reasons.

A pipeline to Turkey became possible after the Israeli-Turkish rapprochement in March 2013. Turkey’s pressing need for natural gas and its strategic position at the crossroads the Caucasus, Central Asia, the Middle East and Europe also put it in an advantageous position. The Eastern Mediterranean could supply EU’s additional gas needs. However, such scenario is only likely to materialise if the Cyprus dispute is resolved first (Cyprus and Turkey have had no diplomatic relations since 1974).

For now, with Lebanon’s plans delayed and Israel’s short distance ambitions not yet fully concretised, the only prospect of the Eastern Mediterranean being exported to Europe and/or Asia is the completion of the LNG terminal in Vasilikos Cyprus. Further discoveries by ENI and Total in Cyprus’ EEZ and/or the participation of investors would render the plan feasible and would allow the East Med gas to escape regional barriers.

A dual export strategy, via a Turkish pipeline and a Cyprus LNG, has also been suggested but that scenario will also have to fulfil the same cumulative conditions: a restoration of the Cypriot-Turkish diplomatic ties and a reconfirmation of the shaky Israeli-Turkish relation.

Until then, and regardless of the abundant natural gas discovered in the Levant basin, energy experts find it difficult to see a gas bonanza resulting from the discoveries before a resolution of the various conflicts on the ground.

Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.  Email Karen on ayat_karen@hotmail.com. Follow her on Twitter: @karenayat