February 13, 2017
Allison W. Good
The transition from the Obama administration to the Trump administration is bound to usher in a host of policy changes for Israel, but perhaps nowhere will this be felt more acutely than in energy policy. Despite the plethora of implications that eastern Mediterranean natural gas reserves have for international energy security and geopolitics, the region – and Israel more specifically – must prepare for a more hands-off U.S. approach. Since gas was first discovered in the Levant Basin in 2009, Israel, Lebanon, Jordan, Egypt, Cyprus, and Turkey benefited from an administration willing to spend political capital on clearing obstacles to development. President Trump’s isolationist energy platform and pro-Russian bent may not intentionally hinder the exploration, development, and distribution of eastern Mediterranean gas, but it does remove the active U.S. foreign policy factor that has helped speed up the exploitation of this resource.
President Barack Obama’s administration employed high-level personnel to negotiate gas export deals and the Israel-Turkey détente, as well as promote European energy security and a final resolution to the Cyprus conflict. Vice President Joe Biden took a personal interest in the Cyprus problem, visiting the island in 2014 during a round of peace talks. One of Biden’s last telephone conversations as vice president was with Cyprus President Nicos Anastasiades, who thanked Biden for his “continued efforts to solve the Cyprus problem.”
Former State Department Special Envoy and Coordinator for International Energy Affairs Amos Hochstein, meanwhile, helped broker both the Israel-Turkey reconciliation and memoranda of understanding that the Leviathan and Tamar consortia have with entities in Jordan and Egypt to export Israeli gas. Hochstein reportedly made 14 visits to Jordan just to clinch a $500 million deal sending gas from the Tamar field to customers in the Hashemite kingdom.
The current White House’s America First energy platform centers unabashedly on domestic policies that promote shale oil and gas development in the U.S. and independence from foreign oil imports. President Trump continues to reiterate his commitment to better bilateral relations with Russia, which implies at the very least a lid on the Obama administration’s rhetoric in favor of diversifying European energy supplies away from Russian gas. With few U.S. oil and gas companies looking to enter the eastern Mediterranean, there is also no particular need for the current administration to advocate on behalf of American industry.
This is particularly unfortunate for Israel, which is hedging its bets on gas sales to the European continent. Houston-based Noble Energy and its partners have an anchor contract to supply gas to Jordan’s National Electric Power Company, but the absent bilateral government-to-government agreement that would set the contract in motion has prevented Noble from reaching a final decision to invest in Leviathan. The Leviathan consortium also has a preliminary agreement to export gas to Royal Dutch Shell’s Idku liquefied natural gas (LNG) export plant in Egypt, but negotiations for an actual contract are at a standstill as the country ramps up its own production and expects to no longer import natural gas by 2020.
Israel’s only other viable option is to court European customers by promoting a pipeline from Leviathan to Italy via Cyprus and Greece. Despite several recent rounds of high-level contacts between Israel and these countries, however, experts maintain that such a route would increase gas prices in Europe to rates that would not be competitive with much lower Russian gas prices, or even with major LNG suppliers such as the United States. Marketing Israeli gas in Europe through Turkey has also become more plausible since the two countries reconciled last year, but since an undersea pipeline would have to cross Cyprus’s exclusive economic zone, that option hinges on peace negotiations between the Greek and Turkish Cypriots. There are also geological challenges that would further complicate pipeline construction.
With Israel scrambling to find international support for Leviathan gas sales, Cyprus is also counting on continued U.S. support. Energy minister Yiorgos Lakkotrypis recently reaffirmed his country’s close ties to the U.S. State Department and said he looks forward to starting discussions, but Secretary of State Rex Tillerson has given no indication yet that he intends to maintain the relationship at that level. Nor has Tillerson selected Hochstein’s replacement at the State Department’s Bureau of Energy Resources.
The only reason for the current administration to become personally involved in the eastern Mediterranean gas intrigue would be if President Trump reverses course on Russia. With all indicators pointing to the contrary, it’s time for Israel to take the U.S. out of the equation for its European pipe dreams.
Allison Good is a reporter based in Washington, DC. She has worked in strategic communications consulting for the oil and gas sector and previously interned at Noble Energy.