Gazprom’s Levantine Adventure
A few years ago Gazprom declared it was planning to export natural gas to Israel—under the Black Sea through the Blue Stream pipeline, across Turkey, and then via another underwater link in the Mediterranean. By late 2010, its managers admitted they had changed their minds and were seeking a role in developing offshore gas fields of Israel. Today, Gazprom is eager to just buy gas from an Israeli project.
A Swiss branch of the Russian gas giant’s trading arm Gazprom Marketing and Trading (GM&T) recently announced it had signed a 20-year contract to resell Israeli gas from the Tamar project. The other offtaker under the contract is Israel’s own Levant LNG Marketing Corporation.
The Tamar consortium is planning also to produce 3 mln t of LNG, starting in 2017, for the next 15-20 years. It has already placed an order for a FLNG plant at Daewoo Shipbuilding & Marine Engineering Co.
On Thursday, angry crowds were rallying against the contract in Israel claiming that the deal would harm interests of the Jewish state.
For Gazprom, the deal is hardly a commercial victory. The amount of gas is too small to matter on the LNG market, and the project will find it very hard to compete with other suppliers in Europe, especially in view of the falling demand for gas in North America.
The Russian company is evidently repeating what it is trying to do in Azerbaijan, that is, absorbing as much gas as it can from potential competitors and preventing them from reaching the traditional markets of Gazprom. Economic considerations, such as the prices, have nothing to do with this strategic purpose. When the Russians buy has from Azerbaijan, they pay a ‘European’ price but deliver this gas to North Caucasian regions, which do not pay for it.
The deal with Tamar can be regarded from the same angle. Gazprom wants to control the gas flow from Eastern Mediterranean before it reaches South European markets. With the same goal in mind, the Russian behemoth is making an attempt at establishing control over the Greek gas distribution company DEPA.
In April 2012, a special committee chaired by General Director of the Israeli Ministry of Energy and water Shaul Zemach published a report stating that between 2018 and 2030 the country might be able to export 10 bcm of gas annually. And encouraging signals keep coming from Cyprus where gas discoveries are also made. It is realistic to assume that a pipeline could be built in the future to deliver up to 20 bcm a year from the area to Europe.
It is hardly a desirable perspective for Gazprom, and the Russian player will spare no effort to neutralize this danger.
Published with the kind permission of RusEnergy. Mikhail Krutikhin is with RusEnergy, an independent privately-run company established in 2000 by a group of Russian experts with a long experience in consulting and publishing business. Based in Moscow, it specializes in monitoring, analysis and consulting on oil and gas industry of Russia, Central Asia, Azerbaijan and Ukraine