Friday, April 18, 2014

Can Israel's natural gas reserves pump up regional peace? | Christian Science Monitor

Can Israel's natural gas reserves pump up regional peace?

Israel is preparing to export a portion of its offshore natural gas reserves. The resulting business partnerships could hurdle political obstacles to better relations with neighbors.

By Staff writerCorrespondent / April 17, 2014
Israeli gas platforms, which produce newly discovered Israeli natural gas, are seen in the Mediterranean sea, west of the port city of Ashdod, February 25, 2013. Israel is poised to become an exporter of natural gas – provided it can find buyers.
Amir Cohen/Reuters/File
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JERUSALEM AND TEL AVIV
After years of relying on its neighbors for energy, Israel is poised to become an exporter of natural gas – provided it can find buyers. But some of the most promising customers or conduits for its newfound riches are the very countries with which Israel is at loggerheads.
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Optimists argue that the mutual economic benefits of natural gas investment could give governments the incentive they need to work together. Already, Israeli companies have signed deals to supply Palestinian and Jordanian companies with natural gas. 
Skeptics worry that they've got the order wrong: Diplomatic logjams need fixing before the gas can flow, lest investors get burned by politics. This risk is heightened by the location of Israel's offshore deposits and the challenge of where to build onshore processing plants.
Gideon Tadmor, chairman of Delek Drilling and one of the driving forces behind Israel’s recent discovery of natural gas fields in the Mediterranean, is among the proponents of energy cooperation as a path to peace. 
“The [Palestinian Authority] PA – with whom we signed a contract – Jordan, Egypt, Turkey, and Cyprus are all relevant export destinations in the region,” says Mr. Tadmor. “And so the gas not only brings huge economic benefits to these countries, but also becomes a bridge between nations and an important stabilizing factor in the region.”
While Israel has peace agreements with Jordan and Egypt, relations remain businesslike at best, particularly with Cairo. The hope is that gas deals could lead to warmer relations. With Palestinians, economic cooperation could build badly eroded trust. Perhaps the most promising is Turkey, which has long been a significant trade partner of Israel. Relations went into a deep freeze after an Israeli naval raid on a Turkish ship headed for Gaza in 2010. 
Nimrod Novik, a former Israeli business executive involved with East Mediterranean Gas (EMG), says there is a debate in Israel over which item needs to come first: peace treaties or commercial agreements.
“There are two schools. There are those who believe that business can pave the way for politics. And there are those who believe that political agreements must precede business, but once politics does its thing, business can create a safety net, and create a layer of common interests,” Mr. Novik said at last week’s Eastern Mediterranean Gas Conference in Israel. “I always believed that a stable political setting is a prerequisite for business involvement.”
EMG, a joint venture that sold Egyptian gas to Israel, learned a hard lesson two years ago, when Egypt’s state-run gas company canceled a 2005 deal to supply natural gas to Israel. Though both governments portrayed the breakup as purely commercial, the decision followed the 2011 overthrow of Egypt's longtime dictator and the rise of leadership more hostile to Israel.
That rupture illustrates some of the challenges Israeli companies and their partners now face as they consider gas deals that could involve building lengthy undersea pipelines, sharing liquefied natural gas (LNG) terminals, or potentially building a new LNG terminal outside Israeli territory – something that no other gas exporter in the world has managed to do.

Complicated 'win-win'

Israel’s natural gas reserves are located within two main gas fields in the eastern Mediterranean: Tamar, discovered in 2009 about 56 miles off the coast of Israel, with proven reserves of 10 trillion cubic feet (tcf); and Leviathan, discovered in 2010 and located 81 miles off the coast, with estimated reserves nearly double that amount (18-19 tcf).
Together, they could meet Israel’s energy needs for 30 to 50 years. Last year, the Israeli government took the controversial decision to make 40 percent of the proven reserves available for export. The decision could boost Israel’s new sovereign wealth fund to as high as $300 billion, but it could require Israel to import other fuel sources that some have estimated may cost as much as $200 billion
So far Israeli gas companies and their partners, which include the US-based Noble Energy, have signed a 15-year, $500 million deal with Jordan’s Arab Potash, as well as a 20-year, $1.2 million deal with the Palestine Power Generation Company (PPGC), despite distrust between the Israeli government and the Palestinian Authority.
"Commercially, the agreement is a win-win. What’s in the mind of the Palestinian Authority and Israel is not my field," PPGC’s chief executive Walid Salman told Reuters. "Palestine and Israel are neighbors – if you're going to get fuel, it's best to get it from your neighbor. Not from overseas."
Israel is also mulling the possibility of supplying gas to Turkey, which has surging demand in its domestic market – 98 percent of its natural gas is imported – and wants to build pipelines to Europe; Cyprus, which wants to build an LNG plant; and Egypt, whose LNG plants are underutilized.
Each potential deal is fraught with complications, and while the prospect of gas profits may provide an extra incentive, it can also pose additional challenges.
“Potential economic benefits are insufficient to overcome deep-rooted political conflicts that, in some cases, have persisted for several generations,” argued Brenda Shaffer, a specialist in energy supply and foreign policy, in a recent brief on potential eastern Mediterranean gas deals. “However, cooperation in the development of these resources can reinforce any political breakthroughs” and improve economic prosperity, she added.
She also argued that the theory that energy trade could lead to greater peace assumes it would bring interdependence – which is rarely the case with natural gas deals. But by enabling cheaper desalination and more affordable electricity production, natural gas deals with Israel’s neighbors could reduce conflicts over water, improve local economies, and shore up weak governments vulnerable to public anger over not only electricity shortages but also relations with Israel.

Egypt: Negative public sentiment, terrorist attacks

Egypt has twice as much natural gas as Israel, but mismanagement has led to widespread energy shortages and lawsuits for failing to honor its commitments with foreign gas exporters. Gas imports could ease both situations.
But most Egyptians – who criticize Israel’s treatment of Palestinians, its use of military force in the region, and its decades of cozying up to Egypt’s autocratic government – are adamantly opposed to any economic deal with their Jewish neighbor.
In addition, the fact that Israel benefited from an extremely low price on Egyptian gas – even after finding Tamar and Leviathan – has stirred public resentment in Egypt. Such subsidized prices, as well as official corruption, caused Egypt to lose as much as $10 billion in gas revenues, according to a new report from the Cairo-based Egyptian Initiative for Personal Rights. Egypt provided gas to Israel for $1.50 per million British thermal units (btu), when analysts say it could have been getting as much as $9, Al-Monitor reports.
The deal was canceled a year after Egypt’s 2011 revolution, after more than a dozen militant attacks on the Egypt-Israel gas pipeline through the Sinai Peninsula. The cancellation caused the Israeli economy 20 billion shekels ($5.7 billion) in direct damages alone, much of which hit the Israel Electric Corporation, which is now stuck paying much higher rates for gas.
But despite the fraught relationship, several companies, including British Gas and Eni of Italy, have reportedly pushed for permission to build an underwater pipeline that would connect Leviathan to Egypt’s LNG terminals, which are underutilized due to Egypt’s increasing inability to supply gas for export.
Magdi Nasrallah, head of the Department of Petroleum and Energy Engineering at the American University in Cairo, says both Israel and Egypt could benefit from sharing the LNG terminals. But he says that an indirect route – such as a pipeline from Cyprus – is more likely to be palatable to the public.
“Egypt will definitely be more than happy to get into some sort of indirect collaboration…. This will be good for everyone,” he says. “In a deal like this, we will also gain because our LNG plants will be working and in return we will get some of the needed gas.”
That could save Israel the billions of dollars that it would spend to build its own LNG plant, as well as the hassle of solving environmental and engineering complications, which would take at least five years to sort out. Once the gas is converted to LNG, it can be exported to Asia, where Israeli gas companies will fetch much better prices than in Europe.
But it could be risky. “Israelis will be uncomfortable … putting such a large part of its economic future in the hands of Egypt,” says Robin Mills of Manaar Energy Consulting in Dubai.
Novik, the Israeli executive, said that any Israel-Egypt natural gas deal must be reinforced by other joint ventures to create a critical mass of business interests – similar perhaps to Turkey, where the volume of trade enabled businessmen to largely ride out the political tensions of the past few years. The failure to do that with Egypt doomed the 2005 gas deal, as well as an oil refinery built by EMG where the company was forced to sell its stake after the second Palestinian intifada broke out in 2000.
“If we look at the history of EMG, you see that when the atmosphere between the two countries was sour.… The project became a victim of the political atmosphere, and became a lightening rod of all the political hostility,” he says.
Despite that troubled history, Novik thinks that Egypt is the best option to export Israeli gas because it optimizes politics and economics: The new military government in Cairo is likely to be more open to deals with Israel and there’s less investment in infrastructure required, compared to exporting to Turkey and Cyprus. “I don’t anticipate a [Europe-like] brotherly embrace, but I do expect a businesslike cooperation. That will become a viable option."

Turkey/Cyprus: European gateway, but complicated politics

But Mr. Mills disagrees. The quickest and most economic option for Israeli gas companies looking for export routes, he says, would be to build a pipeline to Turkey, where some of the gas would be sold and the rest would go on to European markets.
While Israel-Turkey ties have been strained since 2010, trade has remained relatively robust with volume as high as $4 billion. 
A pipeline between Israel and Turkey would, however, pass through the exclusive economic zones of Cyprus’s rival halves: one aligned with Greece, the other with Turkey. And Cyprus has its own gas and would likely want to be in on the deal, adding a potential new dimension to the intractable conflict over how to share the spoils of this new resource.
“It would be so lovely if we would live like Adam Smiths by self-interest, but I’m not sure that’s going to happen. [Potential gas profits] may create a potential carrot … but defining that carrot and how it is to be divided is a new problem, and it’s not an easy one to resolve,” says David Tonge, managing director of the energy consultancy IBS Research & Consultancy in Istanbul.
Cyprus is eager to sign a deal with Israel to serve as a “hub” where Israel’s offshore gas is converted to LNG, says Israeli energy consultant Gina Cohen. But only a few countries have seriously considered that possibility, among them Bolivia and Chile, and were unable to establish a workable arrangement.

Israeli security concerns

Although developing its gas reserves will allow Israel to make decisions without worrying about continued access to Arab oil, that former worry may effectively be replaced by concerns about attacks on its gas infrastructure.
Any ship can come within a third of a mile of Israel’s gas installations, since they are located in international waters, which makes them hard to defend. In addition, Hezbollah has rockets in its possession that can reach at least some of Israel’s natural gas installations, though Israel has vowed to beef up naval security to protect its newfound assets.
But Israel's fortress mentality, borne out of decades of conflict with hostile neighbors, is counterproductive to the spirit of cooperation necessary for regional business, says former Jordanian foreign minister Kamal Abu Jabar.
“What is the sense of making peace if the Israelis are building higher walls around themselves than ever before?” he asks. “So long as Israel thinks of itself as a citadel, somehow outside the region and not belonging to it, how can you have real peace, real economics, real security?”




Link to source: http://www.csmonitor.com/World/Middle-East/2014/0417/Can-Israel-s-natural-gas-reserves-pump-up-regional-peace

Thursday, April 17, 2014

Will passing gas ease Israel's tensions with Egypt and Turkey? - ALBAWABA NEWS

April 16, 2014 - 23:02 GMT

Israel's drive to export its new-found natural gas could help to rebuild strained ties with old regional allies Egypt and Turkey, but could deprive Europe of a precious alternative to Russian gas.

Israel has in recent months already signed energy deals with Jordan’s Arab Potash Company and the Palestinian Authority, though relations with the Palestinians are at a low ebb, and now needs to expand its export horizons to cash in on its huge energy discoveries.

If all goes well, the latest developments could see first pipelines being laid between Israel and Turkey as soon as 2015, and gas cooperation between Israel and Egypt is also emerging, which would allow export access to Asia's major markets.

A growing population and soaring demand have left Egypt's own liquefied natural gas export (LNG) plants in need of new supply, as domestic shortages eat into seaborne exports through the Suez Canal to the world's most lucrative market in Asia.

Woodside output rises, but no Leviathan deal yet | Wall Street Journal

April 16, 2014, 8:26 p.m. EDT

Woodside output rises, but no Leviathan deal yet

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By Ross Kelly
SYDNEY--Woodside Petroleum Ltd. (WPL.AU), reporting a 16% rise in first-quarter production, said it continues to be frustrated in its efforts to finalize a deal to buy part of a giant natural gas discovery offshore Israel.
Woodside said it remains in talks with the Israeli government and partners in the Leviathan gas field, which include Noble Energy Inc. and Delek Drilling LP, after a March 27 deadline to seal a revised deal slipped.
The negotiations have already dragged on for more than a year, adding to investor worries about Woodside's ability to continue growing in its oil and natural gas production in the longer term. Last year, Woodside and partners including Royal Dutch Shell PLC (RDSB) delayed a decision on the multibillion-dollar Browse gas-export project offshore Western Australia state by at least two years.
In February, Woodside agreed to reduce its planned stake in Leviathan to 25% from an earlier plan struck in late 2012 to take a 30% stake.
"Discussions continue with the parties and the Israeli government with a view to resolving the remaining issues and executing definitive agreements," Woodside said.
Talks were drawn out last year as the Israeli government drew up a policy for gas exports. It finally approved the export of up to 40% of Leviathan's reserves in the middle of last year, with the rest earmarked for domestic supply.
The update on Leviathan came as Woodside--Australia's second-biggest oil company by production behind BHP Billiton Ltd. (BHP.AU) -- said revenue for the three months through March rose to US$1.68 billion. The increase was driven largely by its Vincent oil project offshore Western Australia coming back online after repairs last year.
Also on Thursday, Australian oil company Santos Ltd. (STO.AU) said its first-quarter revenue rose by 28% to 913 million Australian dollars (US$856 million), despite lower production, due to higher oil sales.
Write to Ross Kelly at ross.kelly@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires 




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Noble Energy, Inc. chairman & chief executive officer to retire in 2015 | myFoxHouston


Noble Energy, Inc. chairman & chief executive officer to retire in 2015

Posted: Apr 17, 2014 12:21 AMUpdated: Apr 17, 2014 12:22 AM

© PRNewsFoto/Noble Energy, Inc.© PRNewsFoto/Noble Energy, Inc.
HOUSTON (FOX 26) -
After more than one decade at the helm, a new administrative era will begin in 2015 for Houston-based Noble Energy, Inc. without Charles D. Davidson.
Since joining the company in 2000, Davidson has served as chief executive officer. He is scheduled to retire on May 1, 2015 when he exits from the Noble Energy board of directors.
Davidson, 64, who also serves as the chairman of the board, will maintain that title until the 2015 annual meeting.
During its scheduled April 22 organizational meeting, the board will propose the election of David L. Stover as a director who would be appointed as the company's CEO in October.
Stover, 56, serves as the president and chief operating officer for Noble Energy. He was elected to those positions in April 2009, seven years after he joined the company.
"Noble Energy has an exciting future that has been created over many years by an incredibly deep and talented organization," said Davidson. "I am announcing my plans to retire next year with full confidence that the team led by Dave Stover will successfully deliver our exceptionally strong growth plan over the coming years. Dave has played a key role in Noble Energy's success in recent years and has all the necessary skills to lead the Company to even greater performance in the future. While it will be extremely difficult for me to leave my fellow employees at Noble Energy, I will leave knowing that the time is right and that the Board has thoroughly planned for this leadership transition and succession."
"Under Chuck's leadership Noble Energy has been transformed into a highly successful global exploration and production company," said Michael Cawley, Noble Energy lead independent director. "He will be greatly missed when he retires, but executive succession planning has been a focus of Noble Energy's Board of Directors for many years. Today's announcement that Dave Stover will become Noble Energy's next CEO reflects the Board's extensive planning and confidence that Dave is the right leader for the future Noble Energy. With implementation of the succession plan stretching over 12 months, we anticipate this to be a smooth and seamless transition."
Before he served in several other executive positions throughout his career with Noble Energy, Stover was employed by BP America, Inc., Vastar Resources and Atlantic Richfield. He has approximately 35 years of industry experience.


Read more: http://www.myfoxhouston.com/story/25266588/2014/04/16/noble-energy-charles-davidson-chairman-chief-executive-retire#ixzz2z9ueTlMC



Link to source: http://www.myfoxhouston.com/story/25266588/2014/04/16/noble-energy-charles-davidson-chairman-chief-executive-retire

Leviathan gas reservoir partners bid on Cyprus gas supply project | Jerusalem Post

Leviathan gas reservoir partners bid on Cyprus gas supply project

04/16/2014 18:40

The tender calls for the supply of between 0.7 to 0.95 billion cubic meters of natural gas annually to the Cypriot market.

Leviathan gas site.
Leviathan gas site. Photo: Albatross
The Leviathan reservoir partners have submitted a bid to supply gas through a pipeline from the Israeli Eastern Mediterranean basin to Cyprus, they announced in a Tel Aviv Stock Exchange report on Wednesday.

Responding to a tender issued by Cypriot Natural Gas Public Company (DEFA), the partners submitted their bid on Monday, they said. The tender calls for the supply of between 0.7 and 0.95 billion cubic meters of natural gas annually to the Cypriot market through two delivery routes, one that will begin supplying the resource in early 2016 and the other in no later than the second half of 2017. Initially concluding at the end of 2022, the tender includes a possibility of three one-year extensions through the end of 2025.

Although Cyprus has a natural gas reservoir of its own in the Eastern Mediterranean and further exploration is ongoing, the tender allows for a short-term supply of gas needed at the Vasilikos Power Station, according to DEFA. The Vasilikos Power Station is located on Cyprus’s southeastern coast, between Larnaca and Limassol and has an installed capacity of 640 megawatts. All in all, DEFA has received four proposals for the tender.

The offer of the Leviathan partners is contingent upon, among other things, a binding agreement occurring between the bidders and the Cypriot government no later than August 21, 2014, the TASE report said. Financial close on both the Leviathan reservoir’s development and the pipeline construction, as well as receipt of necessary Cypriot government approvals, would also need to occur by this point, the report said.

Houston-based Noble Energy owns a 39.66 percent portion of the 535-billion cubic meter Leviathan field, while Delek Group subsidiaries Delek Drilling and Avner Oil Exploration each hold 22.67% and Ratio Oil Exploration owns 15%.

Australian hydrocarbon firm Woodside Energy has long been expected to acquire a $2.71b. chunk of the reservoir, but negotiations have been delayed due to disagreements with the Israeli Tax Authority.

If the partnership does pan out, however, Woodside will hold 25%, Noble Energy will own 30%, Delek Drilling and Avner will each own 16.93% and Ratio will hold 11.12%.

Appraisal drilling on the neighboring Cypriot Aphrodite reservoir concluded during the summer, indicating that the basin likely contains between 102 and 170 billion cubic meters of gas. Noble Energy holds a 70% share of this Cypriot reservoir, while Delek Drilling and Avner Oil Exploration each hold 15%.

“The Cypriots want to have a supplier that will provide an allin- one solution, namely including gas and any infrastructure if required,” Gina Cohen, a lecturer at the Technion’s Natural Gas and Petroleum Engineering Graduate Study Program and a consultant in the gas industry, told The Jerusalem Post on Wednesday.

This goal, she explained, could be accomplished by constructing a pipeline or by importing liquefied natural gas (LNG) via a floating storage regasification unit similar to the one off of Israel’s shores.

“The only pipeline option is from Israel, so in this aspect, Israel is in a unique position to be able to compete to supply this, although it will not necessarily be easy for any entity to meet this timetable, including not for Leviathan,” Cohen added.

At the Leviathan reservoir, exporting gas is necessary in order justify the huge expenses associated with the field’s development, Cohen stressed. The Cypriots are facing a similar quandary with their Aphrodite reservoir, and because they require less than 1 billion cubic meters per year of gas domestically – and it is not economically feasible to develop a field for such small volumes – they have chosen to import gas, she said.

Although the Israeli government approved a policy capping natural exports at 40% on June 23, 2013, the question remains to whom the Leviathan partners will export the gas that has not been reserved for the domestic market. A medley of export options are under exploration – such as a pipeline to Turkey with or without distribution to the European market, usage of a future Cypriot onshore LNG facility, usage of largely abandoned Egyptian LNG facilities, establishment of a floating LNG facility off of Israel’s shores and various combinations of all of the above.

Officials for the Delek Group and Noble Energy had no further comment on the Cypriot pipeline bid beyond what appeared in the TASE report, nor did they comment on what such an agreement might mean for future export deals.

When asked by the Post if the construction of a pipeline from Leviathan to Cyprus for small annual imports on the island might pave the way for larger opportunities, Cohen said that the Leviathan partners “may want to try get a foot in the door.” Supplying some gas from Leviathan to Cyprus could serves “as the first step to having this added option of piping more gas from Leviathan there for a potential future export facility,” she added.

In the meantime, however, Cohen said that the small sale of gas to Cyprus could show “goodwill” by Noble Energy and the Delek Group to the neighboring country. Additionally, the companies could potentially receive high prices for the gas from Cyprus, as the island is operating on very expensive oil to generate electricity, she explained.

“But building an expensive LNG facility to export gas to the wider world from Cyprus is – in my opinion – an altogether different issue,” Cohen stressed.

While Delek and Noble will want to monetize the gas in the Aphrodite field through an export facility, at this point more gas is required in order to justify constructing such a facility – either from Leviathan or from future discoveries off Cyprus’s shores, she said.

Yet Cohen approached even the current gas supply tender with caution.

“This is the third time that Cyprus has tendered to buy gas, and so far they have failed in each tender, so there is no guarantee this tender will succeed and/or if it does succeed, that Leviathan will win the tender.” 



Link to source: http://www.jpost.com/Enviro-Tech/Leviathan-gas-reservoir-partners-bid-on-Cyprus-gas-supply-project-348665