Elections in Turkey and Gas Discoveries in Egypt Bode Ill for Israel’s Natural-Gas Industry https://mosaicmagazine.com/picks/israel-zionism/2018/07/elections-in-turkey-and-gas-discoveries-in-egypt-bode-ill-for-israels-natural-gas-industry/

July 13, 2018 | Oded Eran and Elai Rettig
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While the dictates of economics, geography, and technology suggest that Turkey would be the best possible market for the natural gas beneath Israel’s coastal waters, politics dictate otherwise. Recep Tayyip Erdogan, recently reelected to the Turkish presidency, has been hostile to the Jewish state since first coming to power, and is unlikely to be eager to set up a gas pipeline between the two countries. But, write Oded Eran and Elai Rettig, further gas extraction is only worthwhile if the gas can be exported, and it is now unclear whether Egypt, the only viable alternative to Turkey, will be any more receptive:

Turkey’s regional relations in general, and with Israel in particular, do not provide the gas companies with the stability required to build an inter-state pipeline and sign off on such capital-intensive contracts. Although the deterioration of Turkish-Israeli bilateral relations that began in late 2008 was halted temporarily by the normalization agreement signed in June 2016, it resumed with even greater intensity over the past year with the violent events on the Temple Mount and in the Gaza Strip. . . . It is currently doubtful that Erdogan will approve an agreement whereby Israeli companies supply natural gas to Turkey. It is also doubtful that the gas companies themselves will agree to incur the risk of relying on a Turkish president so hostile toward Israel. . . .

A greater worry [stems from] reports on a new gas-field discovery in Egypt, [which preclude] Israel’s use of the liquefaction facilities in Egypt. The new field, if confirmed, will meet the Egyptian demand for natural gas for the foreseeable future and will rekindle Egypt’s desire to export liquid gas to Europe through its underutilized facilities. New Egyptian discoveries leave no room to accommodate Israeli gas and will create additional hurdles for Israel’s desire to reach the European market, [since the most efficient way to get the gas to Europe would be first to send it to Egypt for liquefaction]. Although a new and larger Egyptian gas field could encourage the construction of an additional liquefaction facility in Egypt or the expansion of the existing facilities, any such addition would require a substantial investment of time and capital.

The natural gas that was discovered in Israel’s [coastal] waters has the potential to generate immense profits and revenue, as well as to improve Israel’s relations with its neighbors. However, the prolonged internal political process within Israel regarding the development of the reserves, the method of taxation, and the ratio between domestic use and exports, in addition to the recent developments in Turkey and Egypt, make it difficult for Israel to realize these benefits. . . .

[E]ven in the most optimistic of scenarios, the Israeli economy cannot itself absorb a large enough volume of gas in the coming years to justify the capital investment needed for the development of the Leviathan gas field. If the gas export deal with Egypt does not materialize, the gas partners will become dependent on the relatively small export deal with Jordan as their only anchor. . . . Therefore, gas companies should push for the rapid implementation of the export deal with Egypt while the Egyptian gas shortage continues. In turn, the Israeli government should provide behind-the-scenes assistance in this matter to the extent necessary.

Read more on Institute for National Security Studies: http://www.inss.org.il/publication/new-obstacles-facing-israeli-natural-gas-exports/

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