Israel’s natural gas reserves reshape Middle East dynamics

As the prospects of another war in the Middle East increase, one country is looking to cut its energy ties with the region and manage its own needs, thanks to newly discovered gas riches.

Indeed, the recent discovery that Israel’s offshore natural gas reserves are far larger than previously thought has the potential to revolutionize the country’s economic fortunes. The find could save Israel tens of billions of dollars in energy imports from Egypt and other places, and see it positioned as a new natural gas source for Europe, one of the world’s largest LNG markets.

According to the U.S. Geological Survey, recoverable natural gas in the Levant Basin located in Israeli and Cypriot waters of the eastern Mediterranean Sea, amounts to a massive 18.9 trillion cubic feet.

One industry CEO called the finding “a once-in-a-decade opportunity.”

The Leviathan Field, 130 kilometres off the Israeli coast and under 5,000 feet of water, is a potential game changer not just for the country’s economy – the third-largest in the Middle East – but in shaping broader regional dynamics.

For Israel, a country once with little or no domestic energy resources, natural gas is set to become the beating heart of future energy plans.

Experts say gas from the nearby Tamar field, which opened this year, will meet domestic demand for the next 25 years, acting as Israel’s “safety net” and leaving Leviathan free for export markets.

This month, Israel signed a memorandum of understanding with Greek Cyprus and Greece to cooperate on energy, binding Israel and Cyprus together over Leviathan, a section of which is located in Cypriot waters. Israel also began talks this week with other regional interests, including Turkey, about constructing a pipeline to pump gas to Europe.

Having aligned with Cyprus, any proposal to build a pipeline with Turkish assistance appears somewhat remote. Tensions have been high between Turkey and Greek Cyprus ever since the former’s invasion and occupation of northern Cyprus in 1974.

As a result, many in Turkey blame Greece for continually stalling Ankara’s European Union accession bid. Observers in Turkey are also questioning the feasibility of a deep-water pipeline from Israel to Greece that would run through Cyprus because of the sheer distance involved: The span of water from Israel to Turkey’s Ceyhan port is a quarter of that to the Greek mainland.

This year Ankara warned Israel against signing a gas deal with Greek Cyprus saying resources should be divided between both political entities on the island.

“The Greeks’ insistence on unilateral disposal of natural resources in the south of the [Cypriot] island shows that they don’t have the will to re-establish a partnership with Turkish Cypriots,” read a recent Turkish foreign ministry statement.

Boasting the world’s most expensive gas at the pump, Turkey’s rapidly growing economy and energy shortage means it is desperate to have a say on where Israel’s gas bounty ends up to the extent that this year Ankara announced the end of a 30-year conflict with Kurdish separatists. Shortly afterwards, it reached a deal with the Kurdistan Regional Government in Iraq to pump oil through Turkey to the international market.

“It’s obvious the considerations are not only economic, there are political ones, too. Much depends on some sort of long term guarantees that relations with Turkey would be stable,” said Eytan Sheshinski of the Hebrew University in Jerusalem.

A report published last week by the U.S. Energy Information Administration points out that territorial disputes in the eastern Mediterranean “jeopardize joint development of potential resources in the area and could limit cooperation over potential export options.”

The rapidly increasing global supply of natural gas as a result of fracking operations also means Israel needs to move quickly. Despite the treasure at its hand, experts say Israel must engineer a direction for exporting gas sooner rather than later.

Turkey could hold up the process — or be the key. Ankara launched its own oil exploration vessel in February, illustrating the need felt in Turkish circles to explore all possibilities, but also its relative newcomer status to oil and gas exploration, say observers.

“Obviously they need that gas. Turkey’s main concern is that Cyprus and Israel establish a relationship that impacts Turkey. Turkey is trying to lure away Cyprus from that deal,” said Halil Karaveli, the editor of the Turkey Analyst.

Full article: Israel’s natural gas reserves reshape Middle East dynamics (Financial Post)

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