• Natural Gas News

    Win-Win-Lose from East Med Gas Cooperation


East Med gas – even from the deepwater Leviathan field offshore Israel – is cost-competitive with coal and has the potential to be exported by pipe. ipeline

by: William Powell

Posted in:

Natural Gas & LNG News, Europe, Security of Supply, Gas to Power, Corporate, Exploration & Production, Import/Export, Political, Ministries, East Med Focus, Infrastructure, Pipelines, News By Country, Israel

Win-Win-Lose from East Med Gas Cooperation

Gas produced from the eastern Mediterranean – even from the deepwater Leviathan field offshore Israel – is cost-competitive with coal and has the potential to be exported by pipeline, perhaps with other gas reserves if the combined volumes are big enough, panellists agreed at the Atlantic Council 2017 summit in Istanbul.

Improved political ties and the wish for greater co-operation however appeared to be the main driver for some of these pipeline schemes, rather than profit, which in an oversupplied world could look doubtful. The giant, uncosted, sub-sea pipeline mooted from Cyprus to Italy by way of Greece was the most obvious example of this, and merited the least discussion time, although the phrase "win-win" was used very often to describe the intangible gains from improved co-operation.

Indeed one of the panellists, Brenda Shaffer, a professor at the Atlantic Council, said in her opening remarks that it would be good to keep the twin strands – regional politics and commerce – separate, so that relations between important countries such as Israel and Turkey do not deteriorate even if gas accord talks fall through. She doubted the commerciality of some projects was compelling and pointed out that Turkey already has new gas due from the second phase of the giant Azerbaijan Shah Deniz field at the end of this decade, as well as LNG import capacity. However, Israeli gas could help to develop southeastern Turkey, she said.

Speaking for Turkey's energy ministry, Alparslan Bayraktar was keen to underline his country's use of coal, renewables and energy efficiency to cut import dependency and prop up the national current account. While Israel and Turkey had drawn closer politically, there was still a lot more progress to be done before Israeli gas could land. But that was possible in "three or four years," the Turkish energy ministry's deputy under-secretary said.

He pointed out that, for all its rhetoric about the importance of diversification in the European Union, the bloc imported more Russian gas than ever before last year, a trend that is continuing this year. "Commercial terms are the drivers for all projects," he said.

However Turkey does need new gas, depending on the price, he said, and the expiration of gas contracts in the coming years, and the shift to short term pricing and trading hubs, are adding flexibility, he said.

Israel's Delek Drilling CEO Yossi Abu (pictured, below) said that technically there were no show-stoppers where Israeli gas exports to Turkey "and beyond" were concerned.while fellow Leviathan partner Noble Energy's Keith Elliott said that the proven resources and recoverability were enough to develop a project, and now what is needed is "reasonably priced infrastructure" and the necessary geopolitics to move gas across borders for decades. "These things are beginning to fall into place," he said.

(Credit: Delek)

He said Israeli gas was competitive against imported LNG and the Tamar gas field had cut 30mn metric tons of carbon and $1bn in fuel costs from the Israeli power sector, although if the gas were cheaper there would be no need, as several speakers did, to justify its use in terms of its health benefits or to say it was cheaper after considering the externalities of coal such as greater health spending. 

What could help bring market prices down is competition. The Levant basin is young and only three plays have been found so far, the last being the deepest: Leviathan. More bid rounds will happen offhsore Israel; and also Lebanon, although only US – a keen proponent of energy diversification in Europe – Turkey and Israel were represented on the panel.

Elliott was full of praise for Egypt, where Eni's giant Zohr field is coming onstream soon. This could fill some of the region's demand once its own needs for gas were met. He said it was a great example of what the government can do to incentivise the industry. The Leviathan field was found at the turn of this decade but the government was until recently paralysed by indecision over how to develop it, with the final investment decision taken only this year.


William Powell