Energy turbulence | in-cyprus.com (Cyprus Weekly)

Charles Ellinas — 26/12/2015

With respect to energy and hydrocarbons in Cyprus and the wider region, 2015 turned out to be something of a roller-coaster ride. The year commenced with quite a few setbacks on this front, but thereafter ended on a more hopeful note, albeit without really seeing substantial progress – with Egypt being the notable exception.

Aphrodite

The development of Aphrodite has been the ongoing saga of 2015. A plan was submitted by Noble to the government mid-summer, but this is still being negotiated even though it should have been approved within three months. The problem is identifying feasible exports, or lack thereof. Cyprus and Egypt have been investigating the feasibility of gas exports to Egypt for over a year, either for its own use or for liquefaction and onward export to Europe.

The Egyptian Energy Minister announced the results in July, but as far as Cyprus is concerned this is still … ongoing. To land gas in Egypt will cost $6.50 per mmBTU, already higher than prices in Europe. To get there, the costs of liquefaction, transportation and regasification must be added on-top, making such exports commercially challenging.

Meanwhile, five years on, marathon negotiations regarding the Unitisation Agreement between Israel and Cyprus are still continuing! The last technical committee meeting was in late November. It came and passed with nothing said, in other words no progress. Without this in place, development of Aphrodite will be difficult, as Israel has now formally declared that the gas reservoir extends into the Israeli EEZ, and in commercial quantities.

As a result of these problems and delays, and its own weak financial situation, Noble and its partners have postponed further drilling in Block 12 into 2016.

But BG came to the rescue. It ceased the opportunity to buy 35% of Block 12 and Aphrodite on the cheap and renewed hopes that it could spur its development. But this has to wait until BG’s acquisition by Shell is completed, expected early next year, and Shell decides on future investments and divestments.

So for the foreseeable future, Aphrodite will have to wait before she can emerge from the deep.

Isreal’s regulatory turmoil

Ever since Israel’s Anti-trust Commissioner declared Noble/Delek’s operations to constitute a monopoly in late 2014, Israel has been thrown into turmoil which also saw plans to develop Leviathan cease. Following a protracted campaign, a new gas regulatory framework deal was signed by the Prime-Minister earlier this month which should bring this saga to an end in early-2016.

Earlier this month, Israel’s fast-diminishing hopes to export gas to Egypt were dealt a blow by Egypt’s response to the decision of the International Arbitration Court to award $1.76billion to Israel’s Electric Corporation against Egypt’s EGAS as compensation for halting gas supplies in 2012. Egypt promptly launched an appeal and stopped all gas import negotiations with Israel.

Soon after, there was another twist to the story.

Drilling in Cyprus

At the end of March, ENI, after drilling two unsuccessful wells under the threat of the Turkish navy and Barbaros, decided to leave further drilling until later. It asked for a two-year extension to its licence so that it can re-evaluate its data and refocus its exploration.

Similarly, Total declared that it could not locate targets to drill and relinquished Block 10. However, it asked and has now received, an extension to its licence for Block 11.

The discovery of Zhor was a major factor in this. Based on Zhor geological data, Total revaluated its own and has now identified a target in Block 11 and plans to drill next year. Total probably regrets relinquishing Block 10.

Discovery of Zohr

At the end of August, ENI made a major gas discovery offshore Egypt and only about 6km from Cyprus’ EEZ. The aptly named Zhor gas-field (diamond in Arabic) is estimated to hold 30tcf gas, with possibly more beneath it.

Production of Zhor may start in 2018 and by 2020 it may make Egypt self-sufficient and, with other discoveries, may enable LNG exports to restart by 2022. This is a complete turnaround of events, from the current situation where gas shortages have forced Egypt to start importing expensive LNG, despite its own substantial proven reserves of 77tcf. This was the result of previous governments’ short-sighted policies, which the present government has managed to completely reverse.

The discovery of Zhor has led to renewed optimism that the East-Med does indeed hold substantial quantities of hydrocarbons and is spurring new interest for further exploration in the region, including Cyprus. But Zhor and commercial factors are challenging Cyprus’ and Israel’s plans to export their gas to Egypt for liquefaction and export to Europe.

As usual in the oil&gas sector, other fast-developing factors may be overturning these plans.

Oil price

2015 started with an oil-shock. The oil-price, which started tumbling down mid-2014, carried on falling until it reached a bottom in early February 2015. And the oil-world breathed a sigh of relief when into March the price carried on rising. Little did we know. We are now in December and we have a new low, with Brent crude finishing the year close to $36 per barrel, an 11-year low.

The world is now learning to live with ‘lower for longer’. The IEA forecasts that oil prices will remain low for the rest of this decade and possibly beyond.

Gas price

Similar problems apply to the natural-gas price. There is already too much LNG in the market and much more is coming during the rest of this decade. This is creating an LNG-glut, with prices down to £6-7 per mmBTU. This glut is expected to be deeper and last longer than anticipated and to persist for some years. In Asia, LNG prices may bottom-out by 2019 at $5 per mmBTU, and in Europe by 2020 at about the same level and recover slowly after 2022.

This makes Aphrodite gas exports to Egypt for liquefaction and export to Europe challenging.

Turkey’s search for gas

Until last month Turkey was energy-secure and at the centre of a number of potential pipeline routes to supply gas to Europe, including Turkish-Stream. The downing of the Russian bomber-aircraft over Syria on 24 November turned these plans upside-down. Russia stopped Turkish-Stream and Turkey is now scrambling to find alternative gas supplies.

Within weeks this led to rapprochement between Turkey and Israel and fast-developing normalisation of diplomatic ties. At the centre of this lie negotiations to export Leviathan gas to Turkey. Given the problems with Egypt, Israel is keen to proceed with this deal so that it can develop Leviathan within the planned time-frame 2019-2020.

Turkey needs the gas and Israel wants to sell it, but Cyprus is in the middle. Any pipelines from Leviathan to Turkey will have to pass through Cyprus EEZ. Let’s hope that this will be an incentive for Turkey to help resolve the Cyprus problem.

SOURCE

Work to be launched today at Zohr gas field | State Information Service (Egypt)

Saturday, 26 December 2015

Petroleum Minister Tarek El-Molla said that an agreement was reached with the Italian firm Eni to launch work at Zohr gas field, which was discovered by the company in the Mediterranean four months ago, as of Saturday 26/12/2015.

The Italian company is currently digging 20 fields with investment cost reaching nearly USD 12 billion to be paid fully by the company.

For his part, Eni's Chief Executive Officer Claudio Descalzi said that the direct support from President Abdel Fattah El Sisi and work with the Egyptian government help in facilitating work at Zohr gas field.

SOURCE

Renewed dynamism | Executive

2016 looks good for the offshore oil and gas sector in the Eastern Mediterranean

by Mona Sukkarieh

After a year riddled with difficult market conditions, dry wells and regulatory hurdles, the offshore oil and gas sector in the Eastern Mediterranean finally has good reasons to look forward to 2016.

In Egypt, the August 2015 discovery of the so-called “supergiant” Zohr offshore natural gas field could not have come at a better time for Egyptian authorities. While the exact size of the field will only be clear after appraisal drilling, Zohr is hoped to bring Egypt some balance between supply and demand, and extricate the country from its energy crisis. That said, and based on what we currently know, more gas is needed to restart exports. All the more reason to ensure a favorable climate for investors, and encourage exploration and production. Although tempting, it would be unwise for Egypt to halt reforms at this stage. Pricing reforms, plans to phase out subsidies and paying down debt owed to international companies (now standing at $3 billion, down from $6.5 billion) have all contributed to restoring confidence in the sector. There is still more to be done, yet policymakers are already backpedalling on earlier promises. On December 14, Prime Minister Sherif Ismail cancelled the previous government’s decision to fully eliminate subsidies within five years; now we are talking about a much less ambitious 30 percent reduction.

Cyprus too received a boost from Zohr after several disappointments in the first half of 2015. France’s Total relinquished its rights to one piece of the country’s offshore acreage (Block 10) in February 2015, one month prior to Italy’s ENI having drilled a second well that failed to find exploitable hydrocarbons. After Zohr, however, Total looks set to extend its soon-to-expire license in Block 11 for another two years. The company, and others, has also recently been inquiring about areas along the Cypriot-Egyptian maritime border. This renewed interest has prompted some to consider the possibility of organizing a new licensing round. The end of 2015 brought more good news for Cyprus: On November 23, the UK’s BG announced it was acquiring a 35 percent stake in Block 12, where Aphrodite is located. This is a major development, which will see the entry of another big player in the Cypriot gas sector (BG is about to complete a merger with Shell). But its main advantage could well be the stake that BG holds in the Idku export facility in Egypt, improving the prospects of sending Aphrodite gas (from Block 12) to Egypt, although some difficulties could persist. A breakthrough in the negotiations between Greek and Turkish Cypriots, resumed in May 2015, could lead to gas cooperation with Turkey and the laying of a pipeline carrying Cypriot (and possibly Israeli) gas to Turkey and European markets, if conditions are right.

In Israel, Prime Minister Benjamin Netanyahu, acting in his capacity as Minister of Economy, approved a gas  framework deal on December 17, after invoking national security. A year earlier, the antitrust commissioner David Gilo had revoked a previous agreement that allowed US based Noble Energy and Israeli company Delek to retain ownership of Israel’s biggest offshore field, Leviathan, in return for giving up two small fields, Tanin and Karish. The decision brought the Israeli gas sector to a halt and both delayed and complicated development of Leviathan, the country’s largest offshore gas field. The gas deal outlined by the government was approved by the Knesset in September, but to bypass the Antitrust Authority, the Minister of Economy – at the time Aryeh Deri – would have had to activate clause 52 by invoking national security. Deri refused. However, he resigned from his post on November 1 and was replaced by Benjamin Netanyahu who proceeded with the gas framework deal soon after. A petition was filed at the High Court of Justice against some of the clauses in the deal, and the Court will examine the case in early 2016. Once the process is complete, it is hoped to bring some stability to the regulatory framework. The authorities are building on that to resume offshore exploration, and are hoping to organize bid rounds in 2016 or 2017.

Also, on December 17, a major breakthrough in the negotiations between Israel and Turkey was announced. A normalization of relations between the two countries would pave the way for gas cooperation. The frequently discussed laying of a gas pipeline between the two, however, will have to go through the Cypriot Exclusive Economic Zone, a considerable obstacle for now, unless progress is indeed made between Greek and Turkish Cypriots.

Meanwhile, the vulnerability of offshore installations is still a matter of concern for Israeli authorities. Israel is reportedly planning to install the Iron Dome missile defense system on navy vessels, a temporary measure until German offshore-patrol vehicles are delivered in 2019.

For its part, Lebanon stands exactly where it was a year ago, with only negligible progress, including data interpretations and reinterpretations. The offshore tender, launched in the absence of basic documents to actually close the bid round, is still on hold. Delays in the sector are largely a part of the overall political deadlock, although a possible breakthrough in electing a new president could have positive ramifications elsewhere, potentially even unlocking the oil and gas file. However, the opportunity cost of procrastination was entirely neglected. International interest, currently at its lowest, would have to be revived. In current market conditions, this is easier said than done.

Finally, while the war is still raging in Syria, post-war reconstruction and opportunities, including in the energy sector, are on everyone’s mind. Identifying offshore prospects is a process that can take place before the arms are silenced. The opportunities, on the other hand, depend on the outcome of the war. In December 2013, Russia’s state-controlled Soyuzneftegaz was awarded an exploration and production license in Syria’s block 2. In September 2015, its chairman Yuri Shafranik decided not to proceed with the project because of the risks involved at this point, and announced that the project would be passed to another Russian energy company. The current Syrian regime would like Russian involvement in offshore Syria, but does not perceive this involvement as exclusive.

All told, 2016 looks like a promising year for offshore oil and gas in the Eastern Mediterranean.

Mona Sukkarieh is the cofounder of Middle East Strategic Perspectives (http://www.mesp.me), a Beirut based political risk consultancy

Lebanon and Italy Vow Increased Energy Cooperation | Natural Gas Europe

December 25th, 2015

Lebanese Prime Minister Tammam Salam met his Italian counterpart Matteo Renzi in Beirut on Tuesday. The two leaders discussed ways of strengthening bilateral ties, particularly in the field of energy. The Lebanese Prime Minister stressed on the importance of Italy’s expertise in the oil and gas sector, and the increasing role it is playing in the Eastern Mediterranean region. In a joint press conference, Tamam vowed to increase his efforts to help Lebanon open its first licensing round. The country’s first offshore bidding has been delayed by the government’s inability to issue two essential decrees that would delineate the offshore blocks open for bidding and lay out a model sharing exploration agreement.

Italy’s ENI is already involved in the region. It holds licenses for drilling in Blocks 2, 3 and 9 of Cyprus’ Exclusive Economic Zone. ENI commenced exploration activities in Block 9 of Cyprus’ waters, but its two drillings in this block did not lead to any discovery. The company is however committed to pursue its search efforts off the island's coast. ENI’s drilling in Egyptian waters proved to be more fruitful. In August 2015, the Italian giant discovered a massive field, Zohr, located in the Shorouk Block in close vicinity to Cypriot waters and estimated to hold up to 30 Tcf of natural gas. The discovery not only reinforces ENI’s presence in the Eastern Mediterranean but also gives a great boost for the neighbouring countries in their exploration activities.

ENI’s Zohr discovery is likely to end Egypt’s natural gas shortages in the medium term. The country is still looking to import natural gas from its neighbours as an interim solution to attend the pressing needs of its population. A growing consumption, a flat production and export obligations have led the country into a severe energy crisis. Cypriot gas, from the Aphrodite field, could provide Egypt with temporary relief. Egypt was also considering Israeli gas, but recent tensions may block such a gas deal from being sealed.

Lebanon attracted substantial interest when the country opened a pre-qualification round in Spring of 2013. Major oil and gas companies expressed interest to tap into Lebanon’s potential hydrocarbon wealth. Out of 52 international companies that applied, 46 were successful, 12 as right-holders Operators (including Exxon Mobil, Shell, Chevron, Statoil, ENI, Maersk, TOTAL), and 34 as right-holders non Operators. The political vacuum suffered by the country leading to the major delays in opening the licensing round may deter those companies from any involvement in Lebanon. Investors are said to be losing patience, and faith in the country's ability to lead the process to fruition. The progress in the neighbouring countries, including Cyprus, Israel and Egypt may play to Lebanon’s disadvantage, unless the pending pieces of legislation are issued fast and efficient progress follows.

Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Karen is also a co-founder of the Lebanese Oil and Gas Initiative (LOGI). She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat 

SOURCE

Turkey-Israel-Cyprus – Could this be the Next Gas Triangle? | Natural Gas Europe

December 25th, 2015

Turkey natural gas consumption was 48 bcm in 2014 and it is expected to reach 75 bcm by 2025. Russia currently supplies Turkey 55% of its gas needs. With this relationship going sour and the Turkish Stream project on-hold, Turkey is in search for alternative gas supplies, especially in order to ensure its future needs are met.

At the same time Israel, having approved the gas regulatory framework deal but with potential gas exports to Egypt under question, is in need to identify other gas export markets to enable development of Leviathan.

Turkey needs gas and Israel needs to sell it, but Cyprus is in the middle, making a perfect triangle. A pipeline from Israel’s Leviathan gas field would need to pass through Cyprus’ EEZ to reach Turkey. But this would require solution of the Cyprus-problem. President Anastasiades has already declared that Cyprus would not agree to such a pipeline without it. 

Lets look at this East Med triangle in more detail.

Turkey: Suspension of talks on the Turkish Stream gas pipeline has been one of the most serious consequences of the expanding Russian-Turkish geopolitical and now economic conflict. Even though Russia has not cut gas supplies to Turkey, its growing gas demand makes Turkey’s future needs vulnerable. In addition, among others the western route Russian gas supply contract will be up for renewal in 2021 and Black Sea route contract in 2025. In total over 36 bcm per year contracts will be up for renewal between 2021 and 2025. And on top of that Turkey would need to find another 26 bcm by 2025 to cover its growing gas needs. Turkey will be looking to secure substantial quantities of gas over the next ten years and with its main gas supplier out of bounds it will be a challenge.

Hence the the recent scrambing to secure gas from Azerbaijan, Kurdistan, then Qatar and now Israel. But it may not be enough. 

Israel: Gas exports to Turkey had always been the preferred option for Leviathan. In March 2014 at least 10 bids were received in a tender by Noble and its partners to supply 7 to 10 bcm gas to Turkey by subsea pipeline, but by August Turkey ruled out buying gas from Israel following Israel’s incursion into Gaza.

Soon after that the anti-trust case raised its head. In the meanwhile Israel concentrated its efforts into exporting its gas to Egypt and Jordan. But even though the anti-trust case has just been resolved, gas exports to Egypt have come into a grinding hold. Earlier this month the International Arbitration Court awarded $1.76billion to Israel’s Electric Corporation against Egypt’s EGAS as compensation for halting gas supplies in 2012. Egypt promptly launched an appeal and stopped all gas import negotiations with Israel. 

But soon after there was another twist to the story!

With the rapprochement between Turkey and Israel they will be proceeding to normalize of diplomatic ties. At the centre of this lie negotiations to export Leviathan gas to Turkey. Given the problems with Egypt, Israel is keen to proceed with this deal so that it can develop Leviathan within the planned time-frame 2019-2020.

Cyprus: Negotiations between Greek Cypriots and Turkish Cypriots for the solution of the 40+ year-old Cyprus problem have been progressing well. It is hoped that 2016 will be a watershed. Turkey’s role to achieve this is critical.

Lets hope that securing gas from Israel is an incentive to Turkey to help resolve the Cyprus problem. Should this happen gas from the Aphrodite gas field could potentially join Leviathan gas to Turkey. Between the two as much as 25 bcm per year could be exported to Turkey, sufficient to make an impact to its needs. The key to this is solution of the Cyprus problem.

Dr Charles Ellinas

SOURCE

Egyptian prime minister says won't allow import of Israeli natural gas | Jerusalem Post

By JPOST.COM STAFF \  12/24/2015

Sherif Ismail

Egypt's acting prime minister, Sherif Ismail, announced on Thursday that his government will not permit local companies to import natural gas from Israel.

In a statement to the press, Ismail said that his government was committed to preventing Israeli natural gas from penetrating the Egyptian market. He called on all Egyptian companies to cease all negotiations on the matter.

National Infrastructure, Energy and Water Minister Yuval Steinitz on Wednesday approved the first deal to export gas from Israel to Egypt.

The seven-year agreement signed between the Tamar reservoir partners and Egypt’s Dolphinus Holdings Ltd. in March aims to convey 5 billion cubic meters of gas through the now defunct East Mediterranean Gas pipeline, which used to bring gas in the opposite direction from Egypt to Israel. EMG, however, has repeatedly denied its involvement in or recognition of such a deal.

In addition to the fact that EMG continues to reject the agreement between the Tamar partners and Dolphinus, the gas export arrangement also may face some hurdles within the Egyptian government.

In 2008, two Egyptian national gas companies began selling gas to the Israel Electric Corporation through the EMG pipeline – supplying the country with about 40 percent of its natural gas provisions.

SOURCE
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same story in Natural Gas Europe
December 24th
GOVERNMENT APPROVES FIRST GAS EXPORT CONTRACT FROM ISRAEL TO EGYPT

Israeli Energy Minister, Yuval Steinitz, signed yesterday (Wednesday) approval for the Tamar Partnership to export natural gas to Egypt via Dolphinus Holdings. The approval is for a 7-year interruptible contract, worth $1.2 billion for the export of 5 BCM.

The gas will be transmitted to Egypt through the undersea EMG pipeline that was used to import gas to Israel from Egypt before repeated terror attacks and change of regime in Egypt caused cancelation of the contract in 2012. Last month Israel Electric Corp (IEC) won in an arbitration a compensation of $1.8 billion from the Egyptian gas suppliers for the contract cancelation. Following the arbitration result, Egypt President, Abdel Fattah el-Sisi, ordered to freeze natural gas negotiations with Israel. However, the instruction was likely concerning Egyptian national gas companies rather than private ones, although private deals, like this one, would need governmental approval.

Dolphinus Holdings is a mysterious entity and the company intends to sell the gas to private customers from various sectors of the Egyptian economy.

It is still not clear why the contract approval by Israel Energy Ministry was delayed for 9 months and why it was given today. The approval was never conditional on the approval of the natural gas regulatory framework, which was signed last week. The framework has yet to overcome its last hurdle, petitions to the Supreme Court to be heard next February.

In the past, Tamar Partnership said that only a period of a few weeks and an investment of some $10 million in the EMG pipeline is needed from contract approval to start of gas delivery. However following the freeze on natural gas negotiations between Israel and Egypt further talks on a political level are needed. Yitzhak Molcho, a personal envoy of Israel PM, is expected soon to head the negotiations. It is still not clear what demands EMG, the undersea pipeline owner, would present to the Tamar Partnership and Dolphinus Holdings in order to let them use the pipeline. In the past, there was unofficial information that the Tamar Partnership hasn’t asked to use the pipeline but those rumors were denied. A person with knowledge about the Dolphinus contract, who was not allowed to speak publicly, said that probably during 2016 gas transmission to Egypt would start.

The EMG pipeline is a 100 km undersea branch of the Arab Gas Pipeline that connects Egypt with Jordan, Syria and Lebanon. EMG is an Egyptian company with an international group of share holders, among them Thai state-owned PTT (25%), Mediterranean Gas Pipeline Company (28%), the Israeli Merhav Group holds 25% of the shares via 2 entities, Egyptian Natural Gas Holding (10%) and others.

As part of the IEC arbitration with Egyptian companies, it was ruled that EMG, who was the mediator in the gas deals between Egypt and Israel, is entitled to $324 million in compensation. EMG shareholders also sued Egypt for $8 billion and the arbitration is still ongoing. It is assumed that Egypt would demand dropping the arbitration claim as a condition for the approval of the gas contract. However, it is unclear whether the shareholders will be willing give up without nothing in return, apart from reactivating the pipeline.

Ya'acov Zalel

SOURCE

Turkey to focus on Natural Gas Storage Energy Minister Says | Daily Sabah

Istanbul, 24/12/2015 - Energy and Natural Resources Minister Berat Albayrak said Thursday that the ministry's priority will be increasing the natural gas storage capacity of the country. Albayrak gave a briefing about energy policies, investments and plans of the energy ministry to deputies representing the Marmara region.

The government will support investments in two natural gas storage facilities with a total capacity of 4 billion cubic meters with a comprehensive stimulus package. The investment aims to make a major contribution to natural gas supply security and trade in Turkey as a part of endeavors to increase the natural gas storage capacity.

The government is set to offer a stimulus package for two new natural gas storage facilities to be constructed in Mersin by Bendis Energy via Toren Natural Gas Storage and Mining Inc. and Gas Storage and Mining Inc. Bendis Energy will invest nearly $10.5 billion in the storage facilities that will have a total capacity of 4 billion cubic meters.

The natural gas supply from Russia to Turkey was brought to the agenda right after a Russian Sukhoi-24 fighter jet violating Turkey's airspace in the southern province of Hatay was downed by Turkish F-16 fighters last month. The Russian government decided to implement some economic sanctions against Turkey including banning some Turkish goods from entering the country. Yet due to binding agreements, the Russian natural gas flow to Turkey continues uninterrupted; however, Turkey held talks with several natural gas suppliers since the incident to ensure energy security.

Albayrak said the government does not think or expect that Russia will cut natural gas flow to Turkey due to the crisis, adding that, nevertheless, all possibilities are taken into consideration and necessary measures have been taken. He added that Turkey has hydroelectric power plants, coal plants and other alternatives regarding liquefied natural gas (LNG), gas capacities and cargo handling.

Pointing to the fact that Turkey imports 56 percent of its natural gas from Russia, Albayrak stated the government will take steps to diversify this supply. The minister also said that Turkey is holding positive talks with Qatar, Turkmenistan and Azerbaijan on natural gas import.

Underlining that the first thing to be done is to increase the capacity of natural gas storage facilities in Turkey, Albayrak said investments in this area will be rapidly actualized. Also, storage facilities will be put into operation in Thrace and Lake Tuz.

Turkey's first underground natural gas storage facility in Silivri, which has a storage capacity of 2.6 billion cubic meters, is operated by the Turkish Petroleum Corporation (TPAO). The second one will be put into operation in Lake Tuz as of 2016 and will have a storage capacity of 500 million cubic meters in the first phase. Its total capacity will be increased to 1 billion cubic meters in the second phase, which will be put into use in 2019. The Ministry of Energy and Natural Resources is developing projects to store around 10 percent of the imported natural gas in Turkey every year over the next five years.

Toren Natural Gas Storage and Mining Inc. will invest nearly $7 billion in a 3-billion-cubic-meter storage facility. The company will import machines and equipment worth more than $695 million for the facility that will employ 48 people.
Gas Storage and Mining Inc. will make a fixed investment of nearly $3.5 billion in a storage facility where 1 billion cubic meters of natural gas will be stored. The company will import machines and equipment worth more than $360 million for the facility that will employ 24 people. The natural gas storage facilities will be supported with investment incentives such as value-added tax returns, value-added tax exemptions, customs duty exemptions, a 90 percent tax deduction, investment support of 50 percent, seven years of support for an insurance premium employer deal, the allocation of investment placement and interest support.

SOURCE

A Short History of the Regulatory Natural Gas Framework in Israel | Natural Gas Europe

December 24th, 2015

Last week Israeli Prime Minister Benjamin Netanyahu signed Article 52 to the Israeli anti-trust law, enacting an article that enables the government to abolish competition in the Israeli natural gas market in order to improve Israel's energy security, security, and foreign relations interests. In doing so Mr. Netanyahu set a precedent; it was the first time Article 52 was enacted since the law was passed.

In recent times, the regulatory framework, known in Hebrew as the Mitveh Hagaz, became the most talked about topic in Israel. In certain circles of the Israeli public, mainly in the civil society, the framework has provoked outrage. For the last few weeks, rallies and demonstration have been held against its implementation in many cities and town around the country. The organisers, including NGOs and civil associations, tried to distance themselves from any political affiliation and identification. Politicians, although a few of them attended rallies and supported the framework's opponents, were not allowed to address the public from the podiums.

Turkey-Israel warming could benefit Cyprus natgas | Cyprus Mail

Cypriot president Anastasiades (left), Turkish prime minister Davutoglu (middle) and President of the European Council Tusk at the Meeting of the EU heads of state with Turkey, 29/11/2015 

By Elias Hazou, December 24, 2015

THE recent deal between Turkey and Israel, which could lead to normalised relations between the two nations since they soured in 2010, could have a positive impact on Cyprus’ own natural gas export plans.

Under the agreement reached recently in Switzerland, the countries will discuss the possibility of constructing a pipeline to supply Turkey with gas.

According to energy expert Charles Ellinas, this rebooted Israel-Turkey cooperation can benefit Cyprus as well.

“Turkey needs gas and Israel needs to sell it, but Cyprus is in the middle, making a perfect triangle. A pipeline from Israel’s Leviathan gas field would need to pass through Cyprus’ EEZ to reach Turkey. But this would require solution of the Cyprus problem. President Anastasiades has already declared that Cyprus would not agree to such a pipeline without it,” he said.

As far as Turkey is concerned, noted Ellinas, “the suspension of talks on the Turkish Stream gas pipeline has been one of the most serious consequences of the expanding Russian-Turkish geopolitical and now economic conflict. Even though Russia has not cut gas supplies to Turkey, its growing gas demand makes Turkey’s future needs vulnerable.”

Turkey will be looking to secure substantial quantities of gas over the next ten years and with its main gas supplier out of bounds it will be a challenge.

“Hence, the recent scrambling to secure gas from Azerbaijan, Kurdistan, then Qatar and now Israel. But it may not be enough,” said Ellinas.

For Israel, gas exports to Turkey had always been the preferred option for the Leviathan gas field. In March 2014, at least ten bids were received in a tender by Noble and its partners to supply 7 to 10 bcm gas to Turkey by subsea pipeline, but by August, Turkey ruled out buying gas from Israel following Israel’s incursion into Gaza.

Meantime, Israel concentrated its efforts into exporting its gas to Egypt and Jordan. But even though the anti-trust case in Israel has just been resolved, gas exports to Egypt have come to a grinding hold. Earlier this month, the International Arbitration Court awarded $1.76bn to Israel’s Electric Corporation against Egypt’s EGAS as compensation for halting gas supplies in 2012. Egypt promptly launched an appeal and stopped all gas import negotiations with Israel.

The latest twist came with the rapprochement between Turkey and Israel, potentially leading to a normalisation of diplomatic ties.

“Given the problems with Egypt, Israel is keen to proceed with this deal so that it can develop Leviathan within the planned time-frame of 2019-2020,” said Ellinas.

Completing this triangle, he added, is Cyprus, where negotiations for the solution of the Cyprus problem have been progressing well.

“Let’s hope that securing gas from Israel is an incentive to Turkey to help resolve the Cyprus problem. Should this happen, gas from the Aphrodite gas field could potentially join Leviathan gas to Turkey.

“Between the two as much as 25 bcm per year could be exported to Turkey, sufficient to make an impact to its needs. The key to this is solution of the Cyprus problem.”

SOURCE

Cyprus Can Boost Shipping's Role in Economy, Wilbur Ross Says | Bloomberg

Wilbur Ross - Photographer: Daniel Acker, Bloomberg

by  Paul Tugwell & Georgios Georgiou, December 24, 2015 

Cyprus’s target to increase the contribution that shipping makes to its economy by around two percentage points over the next three years is achievable, U.S. billionaire investor Wilbur Ross said.

The country needs to increase the share of the global fleet managed by companies on the island to 4.8 percent from 4 percent in order to push shipping’s contribution to gross domestic product to around 9 percent from 7 percent, “not such a heavy lift,” said Ross, who owns shipping interests and serves as vice chairman of lender Bank of Cyprus. Cyprus has structural and geographical advantages, “they just need to do more promotion,” he said by e-mail.

Revenue from ship management services alone rose to 464 million euros ($506 million), equivalent to 5.4 percent of GDP, in the first half of 2015 from 421 million euros in the second half of 2014, according to the central bank. Ship management companies based on the island include Bernhard Schulte Shipmanagement Cyprus Ltd, Columbia Shipmanagement Ltd and Interorient Navigation Co Ltd.

“Cyprus has a strong registry like Malta, but it also has a strong resident industry,” Transport Minister Marios Demetriades said in an interview in Nicosia. The government plans to be more aggressive in attracting new business by strengthening regional offices in shipping centers like New York, Rotterdam and Piraeus, he said.

Cyprus is already the world’s second-largest ship management center, with island-based companies controlling a merchant fleet of 2,200 vessels with gross tonnage of 50 million, according to the Cyprus Investment Promotion Agency. Cyprus also has the third-largest merchant fleet in the European Union, after Greece and Malta.

Right Conditions

Cyprus has the right conditions to attract more shipping companies and quality ships to its registry, according to Thomas Kazakos, director general of the Cyprus Shipping Chamber. The requirements include a competitive EU-approved tax system coupled with a business-friendly maritime administration ready to work with the private sector, and “we have this in Cyprus," he said in an interview.

Cyprus also has the potential to become an eastern Mediterranean base for shipping companies offering services to the oil and gas industry following recent discoveries in countries including Egypt and Israel, Ross said. As a stable country in an unstable part of the world, Cyprus is “perfectly positioned” to be the entry point to Europe, North Africa and the Middle East, he said.

Reunification of the island, which would see Turkey lifting its embargo on Cyprus-flagged ships, would further boost demand for Cypriot shipping services given its proximity to Turkey and could promote development of ports to service the Turkish market, Demetriades said.

SOURCE

Steinitz approves first gas export deal to Egypt | Jerusalem Post

"After years of debate and delay, we are beginning to move forward, and to position Israel as a natural gas super power in the region," Steinitz said on Wednesday.

By SHARON UDASIN \  12/23/2015

National Infrastructure, Energy & Water Minister, Yuval Steinitz granted his approval on Wednesday for the first deal to export gas from Israel to Egypt. 

The deal, a 7-year agreement signed between the Tamar reservoir partners and Egypt's Dolphinus Holdings Limited in March, aims to convey 5 billion cubic meters of gas through the now defunct East Mediterranean Gas pipeline, which used to bring gas in the opposite direction, from Egypt to Israel. The EMG company, however, has repeatedly denied its involvement in or recognition of such a deal. 

"After years of debate and delay, we are beginning to move forward, and to position Israel as a natural gas super power in the region," Steinitz said on Wednesday. 

In addition to the fact that EMG continues to reject the agreement between the Tamar partners and Dolphinus, the gas export arrangement also still may face some hurdles within the Egyptian government. 

In 2008, two Egyptian national gas companies began selling gas to the Israel Electric Corporation, through the EMG pipeline – supplying the country with about 40 percent of its natural gas provisions. Yet saboteurs began thwarting the flow through Sinai pipeline explosions in 2011, which ultimately led the Egyptian government to terminate the gas sale agreement with Israel in April 2012. 

Earlier this month, the International Chamber of Commerce awarded the IEC $1.76 billion in compensation from the Egyptian national gas firms, prompting the Egyptian government to declare a freeze in gas import talks with Israel. 

Nonetheless, Steinitz maintained that authorizing gas exports to Egypt is "a sign of cooperation in energy that will develop in the coming years with countries in the region, such as Egypt, Jordan, Greece and Turkey – and with European countries in general." 

In mid-November, the Leviathan reservoir partners signed a letter of intent with Dolphinus as well, to negotiate the export of as much as 4 billion cubic meters of gas annually for 10-15 years, through the EMG pipeline.  At the time, representatives of EMG likewise denied that any such talks were taking place. 

Aside from the Dolphinus deals and negotiations, the Tamar partners signed a 15-year letter of intent in May 2014 for the provision of 71 BCM to the Spanish Union Fenosa liquefied natural gas (LNG) production plant in Damietta, Egypt. Meanwhile, in  June 2014, the Leviathan partners signed a letter of intent for the 15-year supply of 105 BCM to the empty British Gas liquefaction plant in Idku.

Also in the gas sector on Wednesday, Steinitz announced that he was appointing a professional team to guide the implementation of the country's natural gas outline – which was officially activated by Prime Minister Benjamin Netanyahu last Thursday. 

Leading the inter-ministerial team will be Energy Ministry director-general Shaul Meridor, with the participation of Petroleum Commissioner and Natural Resources Administration director Yossi Wurzburger, Natural Gas Authority director Alexander Varshavsky, Finance Ministry Budget Department director Amir Levi, forthcoming National Economic Council chairman Avi Simhon, Environmental Protection Ministry director-general Yisrael Dancziger, Economy Ministry director-general Amit Lang and Deputy Attorney-General Avi Licht. 

The team has been tasked with ensuring that country's natural gas companies are complying with the terms of the outline, and will be required to file quarterly progress reports to the ministry. 

"Finally, after years of discussions and delays, we are taking practical steps to develop natural gas in Israel," Steinitz said. "The team, which includes senior officials from relevant ministries to advance the matter, will ensure the removal of possible obstacles to expected development."

SOURCE

Turcas CEO: Israel gas will flow to Turkey by 2020 | Globes

Batu Aksoy predicts that half of the gas in Israel's Leviathan field will be exported to Turkey.

23/12/2015, Hedy Cohen

"Half of the natural gas in Leviathan, 250 BCM, is slated for Turkey in the next 20-30 years. Starting in 2020, 8 BCM of gas will flow to Turkey each year," Turcas Petrol CEO Batu Aksoy stated yesterday at a press conference in Ankara. His remarks were widely reported in the Turkish press.

"In terms of the eastern Mediterranean gas, the Turkish-Israeli friendship is based on long-lasting history. As we enter the year 2016, we are in a period where we must further enhance our connections with not only our neighbors but also world countries." For months, the owners of the rights to the Leviathan gas reservoir have been negotiating the exporting of Israel gas with Turkish companies, including Turcas and Zorlu Petrogas Petrol Gaz. As of now, however, no concrete deal is yet being discussed. Since the Marmara incident, relations between the countries have deteriorated, and Turkish President Recep Tayyip Erdogan has banned imports of gas from Israel. Given the difficulty in exporting Israel gas to Egypt, however, and in view of the fact that Turkey has experienced repeated disruptions in its supply of gas from Russia, both sides have expressed a desire to renew the negotiations.

Only two weeks ago, "Globes" interviewed Turcas board member Matthew Bryza, who asserted that economically and strategically, exporting gas to Turkey is currently the best option for development of the Leviathan reservoir. "We need energy and we are willing to pay for it," Byrza said, adding that exporting gas to Turkey was also the best option for Israel. "The Israeli gas that Turkey could buy from Israel will be purchased at a lower rate than its other suppliers, but still higher than the price Israel would receive from Egypt,” he claimed.

Aksoy is now officially backing this line, saying, "Israel can help Turkey become a hub" and "Turcas is part of a consortium of companies that wants to import Israeli gas and market it to customers in both Turkey and Europe."

Aksoy spoke about Turkey's need to diversify its sources of supply, and stated, "Diversification of Turkey's natural gas sources, which will include Israel, among others, will help it lower the price of energy in the country… There have been substantial gas discoveries in the Middle East… We can achieve our goals only through resource variety."

The Turkish economy's consumption of gas is seven times that of the Israeli economy, and is projected to increase sharply and double in the next 20 years. Turkey has no gas resources itself, and is being forced to import gas from Iran, Russia, and Azerbaijan. Turkey pays a high price for the gas it buys: an estimated $15 per MMbtu to Iran, $12 per MMbtu to Russia, and $10 per MMbtu to Azerbaijan.

A pipeline is cheaper than LNG

The Turcas CEO also spoke about building a gas pipeline connecting Israel and Turkey, saying that exporting through a pipeline is always cheaper than exporting liquefied natural gas (LNG). He thereby hinted that exporting through the liquefaction facility in Egypt would be more expensive for Israel.

"A pipeline in the Middle East will be cheaper than exporting as LNG," Asksoy said, adding that the tension between Turkey and Russia only reinforces the need to build such a pipeline. If Israel exports gas to Turkey, it will be through an undersea pipeline from the Leviathan reservoir through Cypriot territorial waters to the southernmost place in Turkey, a distance of 485 kilometers from the reservoir.

Beyond the technical difficulties of building a pipeline in relatively deep water, another difficulty is that up until now, Cypriot prime ministers have rejected the idea, due to the tense relations between Cyprus and Turkey, which occupied the northern part of the island in 1974. Bryza commented on this in an interview, saying that the political disputes on the island were probably close to a solution, and that a referendum on the matter would be held in Cyprus next fall.

"Settling the conflict will help move the gas pipeline forward, and Cyprus will be very interested in such a pipeline," he said, adding, "Gas can be sent to Cyprus through the pipeline, and when the Aphrodite reservoir is developed, the direction of the pipe can be reversed, with gas flowing from Cyprus to Turkey," Aksoy asserted.

Published by Globes [online], Israel business news - www.globes-online.com - on December 236, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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Same story in the Cypriot press follows:
Turkey could take Israel’s gas by 2020 | in-cyprus.com (Cyprus Weekly)
23/12/2015

The rapprochement between Israel and Turkey could see a rapid deal on gas, with the prospect of Turkey taking imports of gas from Israel by 2020, according to Turkey’s Today’s Zaman newspaper.

“We consider the Mersin port a feasible destination for Israeli gas,” the chief executive officer of Turcas Batu Aksoy told Today’s Zaman.

“The pipeline could then be connected either to the current infrastructure with some extra investment or to [the Trans-Anatolian Pipeline] TANAP, which is under construction. … The third option is to build one from scratch.”

Turkey and Israel are currently in talks on restoring official ties between the two countries after they broke down in 2010 following the Mavi Marmara incident. A final deal will not take long, a Turkish official told Reuters on Friday.

“I think that there is a serious, meaningful chance for thawing and normalising relations between Israel and Turkey. I also think that this is proof of the diplomatic value of the gas and the gas plan,” Israeli Energy Minister Yuval Steinitz told Tel Aviv radio.

The main obstacle to the long-delayed development of Israel’s giant Leviathan field was finally removed last Thursday when Prime Minister Benjamin Netanyahu signed a gas framework agreement after invoking Article 52 of the restrictive trade practices law to bypass a ruling from antitrust authority.

Delek, which is a partner in both Leviathan and the Cyprus Aphrodite field, announced shortly thereafter that it would “carry out the necessary actions for the rapid development of the Leviathan field and the expansion of the Tamar field”.

Given the ongoing conflict in Syria and the fact that Israel does not have a liquefied natural gas (LNG) plant, supply of Israeli gas to Turkey would probably have to go through the Exclusive Economic Zone (EEZ) Republic of Cyprus, which has no diplomatic relations with Turkey.

Under Article 79 of the UN Convention on the Law of the Sea (UNCLOS), “all States are entitled to lay submarine cables and pipelines on the continental shelf”. At the same time, “The delineation of the course for the laying of such pipelines on the continental shelf is subject to the consent of the coastal State.”


However, neither Israel nor Turkey are parties to UNCLOS. Nor is the US, the home of Noble Energy, also a partner in both Leviathan and Aphrodite.

SOURCE

Egypt struggles to pay for oil, LNG supply amid foreign currency crisis | Reuters

LONDON/MILAN | By Sarah McFarlane and Libby George

Dec 23 - Egypt is struggling to pay for U.S. dollar-priced oil product and liquefied natural gas (LNG) imports, cancelling purchases, and asking suppliers to extend payment terms amid an acute foreign currency crisis, industry sources said.

Egypt, which depends on oil and gas imports, has faced a sharper decline in foreign currency receipts after a plane carrying Russian tourists crashed in October while low oil prices limit aid from Gulf allies, banking and trade sources said.

The sources said that Egypt has asked oil and LNG suppliers to extend payment terms to 90 days after delivery earlier this month due to its foreign currency crisis.


Egypt is struggling to pay for U.S. dollar-priced oil product and liquefied natural gas (LNG) imports, cancelling purchases, and asking suppliers to extend payment terms amid an acute foreign currency crisis, industry sources said.

Egypt, which depends on oil and gas imports, has faced a sharper decline in foreign currency receipts since the Russian airliner disaster in October, which has hit tourism, while low oil prices limit aid from Gulf allies, banking and trade sources said.

The sources said that Egypt has asked oil and LNG suppliers to extend payment terms to 90 days after delivery earlier this month due to the currency crisis.

According to existing arrangements, Egypt is obliged to pay for LNG imports 15 days after a cargo unloads.

"The combination of the weaker tourism sector, along with low oil prices tightening the budgets of GCC countries who have traditionally helped Egypt pay for commodities, is hitting foreign currency reserves," a banking source said.

"These elements and the Central Bank's wish not to close the year while depleting the levels of reserves triggered the request (to extend payment terms)," he said.

Short of dollars, Egypt has also cancelled the purchases of six gasoil cargoes initially scheduled for early January, oil market sources said.

"Those who can handle it will consider the extended payment," one oil trader said.

Payment delays have created a logjam of cargoes outside Egyptian ports, including at least six clean and three dirty product cargoes.

A source familiar with the matter estimated that Egypt is late in paying around $350 million to LNG suppliers.

"There's a possibility that some suppliers will not be accommodating and will walk away," he said, although LNG suppliers surveyed by Reuters denied they had any such intention.

Egypt imports around six to eight cargoes of LNG per month, valued at around $20 million to $25 million per cargo.

Its suppliers include BP, Shell, Gas Natural, Trafigura, Vitol, EDF Trading, PetroChina and Noble.

Egypt has emerged as a major new market for LNG as the government looks to ease the worst energy crunch in decades.

Falling output and rising demand have transformed the country from an oil and gas exporter to net importer.


Meanwhile on Wednesday Egypt's General Authority for Supply Commodities said it had changed the terms of payment for wheat purchased in its tenders.

(Additional reporting by Oleg Vukmanovic in Milan, Dmitry Zhdannikov in London and Lin Noueihed and Eric Knecht in Cairo.; Writing by Oleg Vukmanovic; Editing by Jane Merriman, Greg Mahlich)

SOURCE

When Bibi's Right: How Gas Is Driving Turkey Back Into Israel's Arms | Haaretz

Dec 23, 2015
David Rosenberg

They made fun of Bibi for saying energy can be a strategic asset, but it seems access to Israeli natural gas is compelling Erdogan to overcome his aversion to the Jewish state.

They all laughed when Bibi sat down at the piano to play his song about natural gas and its vital role in enhancing Israel's national security. 

The prime minister has sounded the notes over and over again about how energy exports will form the basis of deep and lasting friendships with Egypt, Jordan, Cyprus, Greece, maybe even Turkey. But this is the Middle East, his critics sneered, where the basis for alliances is politics and religion, not business and economics. Anyhow, Egypt recently found plenty of its own gas and has enough to supply Jordan, too, so they don't need Israel, they said.

Cyprus-Jordan pipeline talks intensify | in-cyprus.com (Cyprus Weekly)

23/12/2015

Relations between Cyprus and Jordan are said to have strengthened as the two countries intensify talks over a gas pipeline.

Two meetings have already taken place between Energy Minister Yiorgos Lakkotrypis and the Jordanian Minister of Energy and Mineral Resources Ibrahim Saif with the most recent between the two men taking place on Tuesday. The two meetings have already seen the resumption of technical committees from both countries being assembled to look into ways of transferring gas from Cyprus’ sea reserves to Jordan situated some 570km away.

The talks between the ministers were spurred on by an agreement between the government of Cyprus and Jordan during President Nicos Anastasiades’ recent visit to Amman.

The two committees will look into the possibility of transporting natural gas from Cyprus to Jordan via a pipeline but also the possibility of transferring the gas in liquid form.

Transferring the gas via Egypt is proving difficult due to the instability in the Sina Province which has already seen pipelines linking Egypt and Jordan destroyed.

In recent years, Sinai has been the site of several terror attacks against tourists, the majority of which are Egyptian. Investigations have shown that these were mainly motivated by a resentment of the poverty faced by many Bedouin in the area.

SOURCE
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SAME STORY IN NATURAL GAS EUROPE

December 23rd, 2015

CYPRUS AND JORDAN IN COOPERATION ON NATURAL GAS TRADE

A new energy alliance is germinating in the Eastern Mediterranean and its two protagonists are Cyprus and Jordan, the first one a prospective natural gas producer and the second one a natural gas customer. Yesterday (Tuesday), Giorgos Lakkotrypis, Cyprus Energy Minister and Ibrahim Saif, the Jordanian Energy Minister, met in Nicosia and announced the establishment of a technical committee to discuss options for cooperation in the gas sector.

Since 2011, Jordan has suffered from natural gas shortages due to terror attacks that damaged the pipeline that transmitted gas from Egypt to Jordan through Sinai. Following those incidents, gas supply from Egypt was halted and, for a few years, Jordan's power generation was based on expensive and emissions-rich oil.

This year Jordan started importing LNG cargoes from Qatar through Shell. An FSRU ship is anchored near Aqaba port in the Red Sea and convert the LNG into gas that is then transmitted through a pipeline to various customers, mainly for power generation.

According to the Cyprus Mail, the ministers haven't ruled out a cooperation between Cyprus, Jordan and Greece with the possibility of adding Egypt to the mix.

In 2011 Noble Energy, the American E&P energy company, and Delek Group, the Israeli business group, discovered a 4.5 trillion cubic feet (tcf) natural gas field offshore Cyprus, Aphrodite. Since then, not much has changed and the gas field is still awaiting development.

The two energy ministers discussed options to transmit that gas from Cyprus to Jordan through Egypt either by pipeline or as LNG, though the second option seems less viable because of the short distance from the Egyptian shore to Jordan. Israel, which could be viewed as a natural transit country, wasn't mentioned, according to the report.

"About 97% of the energy needs in Jordan is imported and we regard Cyprus as a strategic partner in terms of the potential cooperation between both countries," said Mr. Saif. "We are really here to explore long-term cooperation."

Earlier this year Jordan was supposed to sign a $15-billion contract with the Leviathan Partnership in what was supposed to be one of the project's anchor contracts. The contract signing ceremony was planned to take place at the White House last January; it was cancelled due the regulatory problems that had arisen in Israel. It is still not clear whether Jordan is still committed to the agreement, which was achieved with the support and the mediation of the U.S. State Department but was opposed by the Jordanian public opinion.

Developing Aphrodite efficiently will demand cooperation between Cyprus and Israel, in order to reach a unitisation agreement, so the development will be carried out in coordination between Leviathan and Aphrodite. Those two fields are close to each other and are under the same ownership of Noble Energy and Delek Group, a situation that should ease commercial negotiations. When political issues between Cyprus and Israel are resolved and commercial terms are concluded, it will be logical and more secure to transmit Cypriot gas to Jordan through Israel. However public opinion in Jordan largely opposes contact with Israel--likely even if only as a transit territory for gas purchased from Cyprus.

Next year the Tamar partners are supposed to start delivering natural gas to Arab Potash Company, a Jordanian company, based east of the Dead Sea, in a relatively small contract of 1.8 billion cubic metres in 15 years and worth $500-$700 million.

Ya'acov Zalel

SOURCE