Israel will Start by the Obvious: Exporting to Immediate Neighbors
On Sunday 23 June, the Israeli cabinet approved the plan to export 40% of Israel’s gas reserves and preserve 60% for domestic uses. Earlier this week, this decision was achieved as a result of in-depth discussions between Prime Minister Benjamin Netanyahu, Minister of Energy and Water Silvan Shalom, Minister of Finance Yair Lapid and Governor of the Bank of Israel Prof. Stanley Fisher.
The plan to export gas was objected against by a large number of people arguing that the gas should be all kept to meet the domestic demand. Israel, previously solely dependent on Egypt to satisfy its gas needs, has put a lot of efforts into attracting investors and developing the newly found riches. The uprising in Egypt since the Arab Spring in 2011 led to several attacks to the Arab Gas Pipeline that exported Egyptian gas to Israel and Jordan leading to severe disruptions in the flow of gas. Currently estimated at 900 bcm, the gas off the shores of Israel means that the country will become energy independent and will achieve the energy security it has long been longing for. It also means that Israel will no longer be an importer of gas but a net gas exporter instead.
Thirteen ministers voted in favor of the decision while three ministers voted against: Minister of Communications Gilad Erdan, Minister of Environmental Protection Amir Peretz, and Minister of Health Yael German.
Prime Minister Netanyahu stressed on the importance of achieving the right balance between what is to be exported and what is to be saved for home use. While the first will fill the state’s coffer with billions of Shekels, the second will ensure the country will consume cheaper energy. He added that it is paramount that the process of approving and facilitating exports is done expediently to avoid giving investors a wrong signal. Keeping them interested is crucial for Israel to continue its search for gas and obtain the Shekels it is hoping for.
Having not figured out the routes to reach potential consumers (Europe/Asia) yet, Israel will start by the obvious: exporting to immediate neighbours Jordan and Palestine. Because the Leviathan is not expected to come online until 2016, Israel will export 20 bcm of natural gas to Jordan from the Tamar field that came online in March of this year. Jordan is currently living a severe energy crisis having also suffered from the disruption of Egyptian gas. The Kingdom is in the process of developing its indigenous resources and has initiated several medium term projects that would achieve its energy security.
Reaching the European market that is looking to diversify its energy portfolio and loosen Russia’s grip over it or the Asian markets where prices are high and demand is rising will prove trickier. Although blessed with gas, Israel’s ambition to become a major gas exporter is hampered by complex geopolitical issues. Neighboring Cyprus, in desperate need for cash, has realised that timing is of the essence and is building the pillars of its LNG facility in Vassiliko to reach potential consumers before the gas market’s dynamics are altered by newcomers.
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.
Follow Karen on Twitter: @karenayat