The partners in Israel’s largest offshore natural
gas fields announced the signing of letters of intents to transport
Israeli natural gas via Egypt’s unused export terminals. Noble Energy Israel’s Delek Group
plan to deliver as much as 6.25 trillion cubic feet of gas from the
Tamar and Leviathan offshore fields to LNG facilities in Egypt’s
Damietta port and the coastal town of Idku. Final agreements are
expected to be signed by the end of the year.
Egypt is in need for natural gas. The country is
undergoing a severe energy crisis due to ongoing export obligations, a
growing domestic consumption and a flat production. The closing of the
deals between the Leviathan and Tamar partners on the one hand and the
operators of the terminals in Egypt on the other would allow Israel the
flexibility to reach export markets. Building a pipeline to Egypt would
be a quick, low cost and efficient solution for Israel. Israel has been
struggling to formalise an export strategy. The prospect of a floating
LNG facility faded with the failure of the Israeli authorities and the
Australian giant Woodside to reach an agreement. Israel has not formally
expressed an intention to use Cyprus’ planned onshore LNG terminal and
the likelihood of a Leviathan-Turkey pipeline decreased since Israel’s
action on Gaza. Despite an amelioration of the diplomatic relations
between Israel and Turkey since Netanyahu’s US-brokered apology to the
Turks in 2013, the diplomatic ties remain tensed due to Israel’s stance
on Gaza.
Cyprus may also be considering Egypt as an export route. Cyprus’ minister of energy recently visited Egypt to discuss natural gas matters. Highlighting Egypt’s urgent need for natural gas, the minister said that Cyprus may use Egypt as a route to reach customers. Advanced talks will resume following ENI and KOGAS’ exploratory results. The consortium plans to begin exploration activities in Blocks 2, 3 and 9 of Cyprus’ Exclusive Economic Zone by the end of 2014. The gas found under Cypriot waters would be transported to Egypt via pipeline, and the gas would then be shipped from Egypt’s export terminal to international markets. The minister added that Cyprus’ onshore LNG terminal remains the island’s strategic goal as it would allow Cyprus the flexibility to reach any market, including Europe and Asia but that Cyprus will be looking to diversify its export options. Cyprus is a key player in the Eastern Mediterranean because of its EU membership. The EU is looking at Eastern Mediterranean natural gas in its quest to diversify its sources of supply, and assisting Cyprus’ path towards energy production fits in the EU’s overall strategy.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Email Karen on karen@minoils.com. Follow her on Twitter: @karenayat
