Israel Will Export 40% of its Natural Gas. But How?
Prime Minister Benjamin Netanyahu, Minister of Energy and Water Resources Silvan Shalom, Minister of Finance Yair Lapid and Governor of the Bank of Israel Prof. Stanley Fischer agreed that Israel should reserve 60% of its natural gas for domestic use and export the remaining 40% ensuring that domestic needs are satisfied for at least 25 years.
The Tzemach committee had previously recommended that the natural gas reserves should be split in two halfs, one to be kept home and one to be exported. A big part of the public expressed its discontent with the recommendation by protesting on the streets and in front of the home of Energy Minister Silvan Shalom. Such concerns drove decision makers to reconsider the proportions and make sure that Israel’s energy independence and energy security are put first.
Netanyahu spoke publically after deliberating with Shalom, Lapid and Fisher and announced the content of their meeting. He said that the state of Israel will benefit from the direct use of the natural gas and from the billions of shekel that will result from the sales of the resources to export markets. Lapid said that the exports will bring Israel USD 60 billion. Shalom added that the funds will contribute to the educational and health systems. The chairman of the Knesset Finance Prof. Avishay Braverman stressed on the importance of keeping the decision process transparent and public given the importance of the decision.
Now that the answer to the question of whether Israel will decide to export its natural gas or reserve all its Leviathan for domestic use is no longer a mystery, another question gains topicality: where will the gas go and how? Only a few months ago, Israel and Turkey resumed ties. The recent and unexpected rapprochement led many to believe that Israel was considering exporting its gas via a pipeline and through Turkey. Such a route would give Israel access to a Russia-dominated Europe that is looking to diversify its energy portfolio and satisfy its growing needs for energy. However, such a pipeline would have to pass through Cyprus to avoid, for obvious reasons, the waters of Syria and Lebanon. The problem of the division of the island could be an obstacle to an Israeli-Turkish collaboration.
But Israel could be inclined to go for flexibility instead using the expertise of the Australian giant Woodside. Why choose a pipeline when an LNG facility, although costly, could give access to markets where gas prices are high and demand is growing? Israel signed a deal with Woodside in February according to which Woodside would acquire 30% of the Leviathan field for USD 1.25 billion. The expertise of Woodside would be valuable if Israel opts for this option. Finding a coastal site for the LNG terminal remains however tricky.
Israel might also consider exporting its gas via Cyprus. Noble and Delek both expressed their interest in participating in the construction of an LNG plant in Cyprus. Such an LNG could welcome gas from neighboring countries to process and sell. Charles Ellinas told Natural Gas Europe that a final investment decision to construct the LNG terminal will be taken between the end of 2015 and the beginning of 2016 and that Cyprus will be able to start exporting its natural gas by 2020.
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.
Follow Karen on Twitter: @karenayat
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