January 28th, 2014 The building of a pipeline from Israel to Jordan turned out to be more than just a rumor. The 15 kilometer pipeline expected to be fully constructed by 2016 will allow Israel to supply natural gas to a thirsty neighboring Kingdom. The two countries are currently discussing the final terms of an agreement that would allow such a natural gas trade. Jordan is looking to receive 2.5 billion to 3 billion cubic meters of gas a year.
Exporting to immediate neighbor Jordan is a simple endeavor for Israel given the proximity of the two countries and the low cost infrastructure required. Jordan and Israel both share a same history of natural gas reliance on Egypt. While Israel suffered from a complete cut of natural gas supplies from Egypt, Jordan still receives negligible quantities that do not meet the terms set in the agreement between Egypt and Jordan. Jordan has suffered from a severe jump in its energy bill as a result.
The natural gas cuts were caused by severe attacks to the
pipeline connecting Egypt to its neighbors in the aftermath of the
uprising that caused the toppling of Husni Mubarak. Egypt
is currently shopping for its own supplier of natural gas due to severe
shortfalls at home and ongoing export obligations. Israel is looking to
supply natural gas to Egypt in its strategy to commence by exports to
immediate neighbors before reaching out for further markets.
Where exactly the gas sent to Jordan will be coming from is
however causing an internal debate in Israel. While Noble Energy and
Delek Group have interests in both the Tamar field and the giant
Leviathan field (Noble having 36% share of Tamar, and a 40% share of
Leviathan and Delek respectively 31% and 45%), smaller shareholders in
Tamar (such as Isramco and Aron Gas holding respectively holding
respectively 29% and 4%) are pushing for the natural gas to Jordan to
come from the Tamar field.
The reason why Texas-based Noble and Israel’s Delek
are inclined to secure a Leviathan deal with Jordan is clear. The giant
field needs substantial amounts of funds to be developed and any sealed
deal would help in that direction. The smaller shareholders have however
different interests, as they are looking to ensure that their shares in
the Tamar field are lucrative.
Israel’s current export strategy - exporting to immediate
neighbors - has raised the question of whether Israel will be looking to
reach further markets in Europe and East-Asia and whether to do so it
will opt for an LNG - through Cyprus
or its own - or a pipeline. Grabbing the momentum by taking advantage
of the severe demand for natural gas in its surrounding before exploring
other options seems to be, at the moment, the most obvious thing to do.
Karen Ayat is an analyst focused on energy geopolitics
in the Eastern Mediterranean. Email Karen on ayat_karen@hotmail.com.
Follow her on Twitter: @karenayat
SOURCE
