Expert casts doubt over Turkey-Israel gas pipeline

Although the likely consumer is Europe, which would require pipelines to pass through Turkey, companies may decide instead to export gas from the Levant basin to Jordan, Egypt or the Asian continent.

Expert casts doubt over Turkey-Israel gas pipeline

World Bulletin / News Desk

As tensions between Turkey and Israel increase over the Israeli assault on the Gaza Strip, a political crisis between the two regional powers threatens to veer a pipeline project linking Israel's Levantian gas field in the eastern Mediterranean sea basin to Europe via Turkey off-track.

However, putting political tensions aside, an expert has cast doubt on the pipeline project, citing practical obstacles.

Michael Leigh, a senior adviser at the German Marshall Fund of the United States, told Monitor Global Outlook that unresolved questions over pricing, the long term risks regarding the involvement of private firms, and the mutual benefits of the project could pose potential barriers.

“A project of this sort would cost $3 billion, and the risks would be borne out by Turkish firms over a period of about 20 years,” Leigh said, adding “the costs of extracting from these offshore fields are steep, and profitability depends on how fast Turkey's energy demand rises, as well as the cost of gas in Europe over the next 20 years.”

Leigh also claimed that Turkey's incentive to build the pipeline comes across as weak, as Turkey would only “marginally” gain in its effort to diversify energy imports due to limited quantity.

“Turkey can also readily diversify away from, say, Russia, by buying more gas from Iran and Azerbaijan,” Leigh added.

Turkey currently depends heavily on Russia for its natural gas supply, but at the same time is in negotiations to establish a pipeline linking the country to Azerbaijan and Turkmenistan in order to benefit from gas reserves in the Caspian Sea region.

Likewise, Turkey is in talks with Israel and the Greek Cypriot administration regarding pipelines that would allow reserves in the Levant basin, including both Israel's 21.9 trillion cubic feet (tcf) Leviathan and Cyprus' nearby Aphrodite gas reserve.

MGO pointed out that Israel's incentive for joint development diminished in October of last year, when the Cypriot government revised down its estimates of Aphrodite's reserves from 5-8 tcf of gas to 3.6-6 tcf, but that did not deter Turkish energy firms Zorlu Group and Turcas Petrol from entering a joint bid with German electricity utility RWE A on March 10 to oversee the project.

US-listed Noble Energy Inc., which owns a 39.7 percent stake in the project, is leading the development of the Leviathan field. Delek Group's Delek Drilling and Avner Oil Exploration both own 22.7 percent each, while the remaining 15 percent is owned by Ratio Oil Exploration.

Although the likely consumer is Europe, which would require pipelines to pass through Turkey, the companies may decide instead to export the gas to Jordan for domestic consumption, just as Noble and Delek Group had agreed to export $500 million worth of gas to Jordan from Israel's Tamar field over 15 years in February.

On the other hand, exports may go to Egypt, which hosts the only Liquified Natural Gas (LNG) plant in the region. Once liquified, exports may be transported to the Asian continent, as Egypt cannot supply its own demand for natural gas with LNG due to its lack of a regasification plant.

Israel has considered plans to begin building an LNG plant in Cyprus in 2016 in order to allow Israel to supply the Asian demand for a cheap price. However, in order to compete with Australia, Mozambique, the US, Canada and Russia, who have already offered to supply the far-east with LNG by 2018-2020, Israel needs to act quickly and therefore cannot afford to wait for the Greek Cypriot administration to complete this project.

Güncelleme Tarihi: 25 Temmuz 2014, 15:18