Time for regional alliances | in-cyprus.com (Cyprus Weekly)

Charles Ellinas — 16/01/2016

As the 28 January tripartite summit between the leaders of Cyprus, Israel and Greece looms, rapid developments in the region make the case for closer cooperation between Nicosia and Tel Aviv more compelling.

With a solution of the Cyprus problem this year looking more likely, possible resumption of diplomatic relations between Israel and Turkey and the gas regulatory framework deal coming into force in Israel soon, the way will be opened for a number of gas developments in the region involving Leviathan and Aphrodite gas.

PAPER | Turkey's Role in Energy Security through Eastern Partnership | IndraStra Global

Image Attribute: Turkey's Oil and Natural Gas Pipelines
Source: The Middle East Eye

Saturday, January 16, 2016, IndraStra Global, By Tolga Demiryol 

What role does energy security play in the Eastern Partnership (EaP)? How can Turkey, as a regional partner to both the EU and most EaP countries, contribute to the energy platform of the EaP? This article discusses the prospects and challenges of EU-Turkish energy cooperation within the context of the EaP. Turkey’s relevance to the energy initiatives of the EaP in part stems from Turkey’s geopolitical position as an energy corridor.

Edison looks to sell part of Egypt’s Abu Qir field | Energy Egypt - Reuters

Edison Abu Qir (Source: Edison Website)

JANUARY 15, 2016 / ENERGY EGYPT

Edison, Italy’s No. 2 energy company owned by France’s EDF, is trying to sell part of its Abu Qir field in Egypt and has opened the books to prospective buyers including Kuwait’s KUFPEC, people familiar with the matter said.

Edison, which paid around $1.4 billion for the field in 2009, owns all exploration and production rights at Abu Qir but manages it in a joint venture with Egypt’s EGPC.

“The data room is open and KUFPEC is one of at least four companies that have had a look,” one source said.

A second source also reported the Kuwaiti company’s interest along with others but said the fall in oil prices was slowing the process.

Iraq's Kurds to Start Natural Gas Exports to Turkey in 2019-2020 | Bloomberg

Nayla Razzouk, January 15, 2016

• Gas exports to be doubled later, cost of link not finalized 
• Kurdish region holds 3 percent of world's total gas reserves 

Iraq’s semi-autonomous Kurdish region plans to start exporting 10 billion cubic meters a year of natural gas to Turkey by 2019-2020, according to an official at the Kurdistan Regional Government’s Ministry of Natural Resources.

The KRG will double gas exports to 20 billion cubic meters a year by the early 2020s, the official said in an e-mailed statement on Friday. He was clarifying remarks made on Thursday by Bewar Al-Khinsi, economic security adviser at the KRG’s Kurdistan Protection Agency, who had said gas exports will start by the end of 2016.

Edison completes seismic mapping of its Mediterranean deep water concession | Energy Egypt, Al Borsa News

JANUARY 15, 2016 / ENERGY EGYPT

Edison has completed the seismic mapping for its concession (Note: North Port Fouad) adjacent to Eni’s supergiant Zohr field, according to an Oil Ministry senior official. The source expects a major discovery in this specific area and an increased number of new discoveries in the Mediterranean in general.

The source added that the Zohr field recently discovered by Italian oil company Eni boosted Egypt’s ability to provide for the future natural gas needs of the domestic market, and that this discovery stimulated foreign companies to direct their investments to exploration of the Mediterranean Sea deep water for natural gas.

The official also pointed out that the gross domestic output of natural gas will rise to about 5.3 billion cubic feet per day by 2017 when production commences from the from the Zohr field.

(Source: Al Borsa News)
SOURCE

All the pipes to be used in TANAP already delivered | News.Az

Fri 15 January 2016 

Works on Trans-Anatolian gas pipeline – TANAP, which will transport gas from "Shah Deniz-2" field in Azerbaijan sector of the Caspian Sea to Europe via Turkey, are continuing apace. All of the 850 kilometers of pipes to be used in the project have already been handed over.

20 percent of the transferred 850-kilometer pipes, was produced in China, while the rest in Turkey.

Within the Project, two exit stations, connected by a network of natural gas recovery, will be installed in Eskisehir and Thrace within the borders of Turkey. TANAP length (19 km through the Marmara Sea) will be 850 kilometers, AzerTag reports.

TANAP will run from the Turkish border with Georgia, beginning in the Turkish village of Türkgözü in the Posof district of Ardahan, will run through 21 provinces, until it ends at the Greek border in the İpsala district of Edirne. it is planned to supply 6 billion cubic meters of gas to Turkey and 10 billion cubic meters — to Europe. By 2023, TANAP's capacity will rise to 23 bcm per year and then to 31 bcm by 2026.

Since the beginning of 2020, TANAP will take gas from the South Caucasus Pipeline to Greece, Albania and to Europe via Italy, by joining the TAP pipeline.

TANAP shareholders share in the project is as follows: "South" Corridor "Closed Joint Stock Company (JSC) - 58 percent," Botas "- 30 percent and BP - 12 per cent.
News.Az
SOURCE

Με το αργό στα $30 τι θα γίνει με τα ελληνικά κοιτάσματα; | Capital.gr

2nd Licensing Round, western Greece, 20 blocks

Του Χάρη Φλουδόπουλου, 15/1/2016

Χθες μία ακόμη έκθεση του γνωστού οίκου Wood Mackenzie, που έχει ιδιαίτερη εξειδίκευση στον ενεργειακό τομέα, ήρθε να επιβεβαιώσει τη δεινή θέση στην οποία έχει περιέλθει ο κλάδος της έρευνας και παραγωγής υδρογονανθράκων εξαιτίας της πτώσης των τιμών του αργού. Η μελέτη παρακολούθησε την πορεία πολυάριθμων project έρευνας και παραγωγής από την έναρξη της κατάρρευσης των τιμών του μαύρου χρυσού το 2014.

Το εντυπωσιακό συμπέρασμα που προκύπτει είναι ότι ο λογαριασμός της κρίσης απαριθμεί σε 68 μεγάλα project που έχουν ανασταλεί και περιέχουν συνολικά 27 δισ. βαρέλια πετρελαίου που έμειναν θαμμένα κάτω από τη γη εξαιτίας των χαμηλών τιμών του πετρελαίου. Και όπως επισημαίνει η Wood Mackenzie όσο οι τιμές συνεχίζουν να πέφτουν, τόσο οι επενδυτικές δαπάνες θα περιορίζονται και η λίστα με τα "παγωμένα" έργα θα μεγαλώνει.

Μόνο τον περασμένο Ιούνιο τα project που αποφασίστηκε από τις εταιρείες να "παγώσουν", αντιστοιχούν σε παραγωγή 1 εκατομμυρίου βαρελιών την ημέρα, σύμφωνα πάντα με τους υπολογισμούς της εξαιρετικά ενδιαφέρουσας μελέτης, που επισημαίνει ότι η τελική επενδυτική απόφαση για την πλειονότητα των έργων μετατέθηκε για το 2017 ή και αργότερα.

Τώρα ως προς τη σύνθεση της λίστας, από τα συνολικά 68 αδρανή έργα πάνω από τα μισά αφορούν σε βαθιά νερά (deepwater projects), στα οποία είτε δεν είχε επιτευχθεί ικανοποιητική μείωση του κόστους ανάπτυξης ώστε να καταστούν βιώσιμα είτε είχαν ήδη ξοδευτεί σημαντικά ποσά προκαταβολικά με αποτέλεσμα ήδη το budget να έχει ξεφύγει με τις τρέχουσες τιμές του αργού. Σε κάθε περίπτωση τα deepwater έργα που έχουν σταματήσει είναι ως επί το πλείστον καινούρια έργα ανάπτυξης και δεν αφορούν σε περιοχές που βρίσκονται ήδη σε εκμετάλλευση.

Ελληνικός προβληματισμός

Η κατάσταση όπως έχει διαμορφωθεί – χθες το αμερικανικό αργό έδινε μάχη να διατηρηθεί πάνω από τα 30 δολάρια κλείνοντας στα 30,72$ - προκαλεί έντονο προβληματισμό και στην ελληνική αγορά, η οποία εμφανίζεται εξαιτίας των καθυστερήσεων (των προηγούμενων αλλά και της σημερινής κυβέρνησης) να έχει χάσει το momentum. Θυμίζουμε ότι οι διαγωνισμοί που βρίσκονται σε εκκρεμότητα για τα οικόπεδα της Δ. Ελλάδας αλλά και για τα 20 θαλάσσια οικόπεδα της Δ. Ελλάδας ξεκίνησαν με τις τιμές στα 70 και στα 100 δολάρια, αντίστοιχα (καλοκαίρι και φθινόπωρο του 2014).

Οι χαμηλές τιμές σημαίνουν ότι το ρίσκο για τις εταιρείες που θα θελήσουν να συμμετάσχουν μεγαλώνει ακόμη περισσότερο, ενώ ακόμη και για τις περιοχές που έχουν παραχωρηθεί και βρίσκονται σε εξέλιξη έρευνες, είναι πλέον εξαιρετικά δύσκολο έως απίθανο να βρεθεί κάποιος νέος συνεταίρος που θα θελήσει να συμμετάσχει στα επενδυτικά κόστη. Αυτό φάνηκε και με την αποχώρηση της Petroceltic από την κοινοπραξία με τα ΕΛΠΕ στην περιοχή του Πατραϊκού.

Πλέον οι αντικειμενικές συνθήκες που επικρατούν στην αγορά καθιστούν εξαιρετικά δύσκολη έως αδύνατη την ανάπτυξη νέων έργων ενώ ακόμη και επενδυτικά έργα που βρίσκονται σε εξέλιξη, όπως της Energean στον Πρίνο αντιμετωπίζουν σοβαρά ζητήματα. Θυμίζουμε ότι όπως είχε αποκαλύψει πρόσφατα η εταιρεία, εάν οι τιμές του πετρελαίου πέσουν στα 30 δολάρια, τότε απλώς θα καλύπτονται τα έξοδα της εταιρείας, υπό τον όρο ότι θα ολοκληρωθεί το μεγάλο επενδυτικό πρόγραμμα ύψους 200 εκατ. ευρώ που τρέχει για αύξηση της παραγωγής στα 4-5 χιλιάδες βαρέλια.

Πάντως εάν για τον Πρίνο που υπάρχουν έτοιμες υποδομές και οι επενδύσεις αφορούν σε περαιτέρω αξιοποίηση εν λειτουργία κοιτάσματος, οι επενδύσεις παραμένουν βιώσιμες, δε συμβαίνει το ίδιο με νέες περιοχές. Ακόμη και στο Κατάκολο όπου υπάρχει επιβεβαιωμένο κοίτασμα και το ρίσκο αποτυχίας μιας γεώτρησης είναι μηδενικό, το οριακό κόστος για να είναι βιώσιμη η επένδυση υπολογίζεται πάνω από τα 35 δολάρια καθώς θα πρέπει να κατασκευαστούν νέες υποδομές με μεγάλα κόστη. Γίνεται αντιληπτό ότι για τις άλλες υπό εξερεύνηση περιοχές (Ιωάννινα, Πατραϊκός και οικόπεδα Δ. Ελλάδας) τα πράγματα είναι ακόμη πιο δύσκολα.

Για να μην πάμε στον ανοιχτό διαγωνισμό για τα 20 θαλάσσια οικόπεδα, ο οποίος με τις τρέχουσες τιμές και με την προοπτική την επόμενη διετία το πετρέλαιο να παραμένει σύμφωνα με τα πιο αισιόδοξα σενάρια στην περιοχή των 50 -60 δολαρίων, θα πρέπει να θεωρείται ουσιαστικά νεκρός: όταν έργα πολύ πιο ώριμα με σαφώς μικρότερο ρίσκο και κόστη αναστέλλονται για μετά το 2017, το όνειρο των ελληνικών κοιτασμάτων, μάλλον θα πρέπει να περιμένει ακόμη πιο πολύ…

SOURCE

Weekly Overview on Eastern Mediterranean Natural Gas Matters | Natural Gas Europe

January 15th, 2016

Cyprus

On a visit to Nicosia on January 11, Vice President of the European Commission, in charge of Energy Union, Maroš Šefčovič, met with Cypriot Minister of Energy Giorgos Lakkotrypis and President Nicos Anastasiades to discuss the role the eastern Mediterranean could play in diversifying Europe’s sources of supply.

At the meeting, Šefčovič stressed the importance of Cyprus in regards to the EU, pointing out that natural gas could reach Europe from the Eastern Mediterranean if future exploration activities prove successful. He also said that the discoveries made thus far in the Levant basin (offshore Israel) are promising.

Europe’s annual consumption of 400-500 mn m3 could partly be met by gas from the eastern Mediterranean, but that would depend on the size of the discoveries, and the export strategy of the countries involved, the politician added.

Cyprus has seen a renewed interest in its gas in recent times. Earlier this month, Italy’s ENI announced it was renewing its presence in Cyprus through the extension of its exploration agreement with the Government of Cyprus. Cypriot Minister of Energy Yiorgos Lakkotrypis said the agreement allows ENI and its South Korean partner KOGAS to explore Blocks 2, 3 and 9 of the island’s EEZ until 2018, with drilling expected to commence in 2017.

The renewal comes on the back of ENI’s giant find in Egyptian waters, the Zohr field, discovered in August 2015 and estimated to hold up to 30 trillion ft3 of natural gas. ENI is currently gathering geological data to assess the likely presence of recoverable amounts of natural gas in the three blocks.

France’s Total also renewed its exploration agreement for a licence offshore Cyprus for another two years in December 2015.

Israel

The partners in Israel’s Leviathan offshore field--Noble Energy, Delek Drilling, Avner, and Isramco Negev--said January 7 that they were engaged in talks to supply natural gas from the field to a number of Israeli companies, including electricity producers and industrial companies. Production from the Leviathan, Israel's largest offshore field, is expected to begin sometime between 2018 and 2020.

The way has been cleared for Israeli exports in the political sphere: After months of domestic political debates, Israeli Prime Minister Benjamin Netanyahu last month approved the natural gas framework that would pave the way for the development of the giant field. The plan is controversial and was approved via the application of Clause 52 of the Antitrust Law, stripping the competition regulator of its overseeing authority over the sector and granting the economy minister the exclusive power to override decisions by the Antitrust Authority chief on issues with sensitive strategic or diplomatic implications.

Israel is eyeing the Jordanian and Egyptian markets as first destinations for its natural gas. Gas could reach distant markets via Egypt’s underused export facilities at Idku and Damietta. Recent tensions between the two countries following an arbitration ruling by the International Chamber of Commerce. As a result of the ruling, the Egyptian companies Egyptian Natural Gas Holding Company (Egas) and Egyptian General Petroleum Corporation (EGPC) must compensate Israeli Electric Corporation (IEC) and Eastern Mediterranean Gas (EMG) $1.7 bn and $288 mn respectively. The resultant tensions have halted gas talks between Israel and Egypt. A diplomatic effort is now being implemented by Israel to resolve the dispute. The Egyptian companies have said they will appeal the arbitration decision.

Egypt

The situation remains the same in Egypt this week in relation to natural gas.

Eni’s giant discovery of the Zohr field offshore Egypt brought the promise of the end of the country’s energy troubles. Egypt has been struggling to meet the natural gas domestic demand and eyeing the regional market for relief. Once a net exporter of natural gas, namely to Jordan and Israel, Egypt’s growing domestic consumption and its flat production has put a strain on the country’s ability to meet its needs. Eni is committed to fast track the development of Zohr. Appraisal drilling will confirm the quantities and first gas is expected in 2018.

Egypt is expected to play a crucial role in the region in 2016, as a route for neighbouring gas and as an important natural gas producer. The country is aiming to achieve self-sufficiency by 2020 and re-enter the LNG export market by 2022. In the meantime, Egypt will still be looking to import gas from Cyprus, and possibly Israel, if the relationship between the two countries normalises.

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

Russian plane incident puts Turkey in a Difficult position on energy | Natural Gas Europe

January 14th, 2016 

With the downing of the Russian war plane on October 24, 2015, Turkey found itself in an unenviable position on the energy front, more particularly natural gas. Not only is the country’s ability to meet its daily energy needs on a precariously thin line but the options to replace Russian gas in the short term are virtually non-existent.

In the meantime, with the plane incident now receding in memory, and gas shipments from Russia still continuing unimpeded, Turkey has lapsed into complacency on energy supply for daily needs. But complacency may turn into a rude awakening. The specter of a debilitating energy shortage in Turkey, while appearing unlikely at present, remains a serious risk.

The Turkish Stream project aimed to bring Russian gas to Thrace, Turkey and onward to Europe across the Black Sea is now frozen – at least officially. But this is the least of Turkey’s concerns.

The critical connection

A look at the gas scene in the country says it all. Turkey’s energy needs are heavily dependent on imports. According to 2014 statistics, some 99% of its natural gas consumption is met by imports, with 27bn m³/year, or 55%, coming from Russia. The volume of Russian gas for 2015 is expected to be higher. Russian gas is delivered through the 14bn m³/yr West Route over the Balkans, and the 16bn m³/yr Blue Stream across the Black Sea. The gas purchase contracts on these two routes will terminate in 2021 and 2025, respectively.

Of gas consumed in Turkey, 48% is used for electricity generation, 25% in the industry, and 20% for residential needs including heating and cooking. According to 2013 data, the share of natural gas in installed power capacity is 36%. Gas is used in all 81 provinces, in half of the homes.

What that means is that, should the Russian gas stop coming, some 20% of electricity generation in the country will be cut off, and the industry and residents will be widely affected. Industry will be partly paralyzed. The area most affected will be Istanbul and the Marmara region, where the power generators and industry are concentrated.

Gas storage capacity is woefully inadequate. The facility near Silivri, off Istanbul, has a withdrawal capacity of 25mn m³/day, not enough to meet even a single day’s of imported Russian gas. The facility at Tuz Gölü, in the interior, will come into operation at the end of 2017. Another facility is planned at Mersin, on the Mediterranean coast.

The Nabucco project, which was dropped in late 2011 in favor of the TransAnatolian Pipeline (Tanap) project, had a proposed provision for reverse gas flow from Europe to met Turkey’s needs in case of emergency. Tanap has no such provision.

New gas sources

The assurances given and suggestions made by Turkish authorities that the country’s gas needs will be met, or shortages mitigated, if Russian gas is cut off, are far from comforting.

One solution that has been brought up, to expedite Tanap (due onstream 2018) and increase Turkey’s share from 6bn m³/year, is hardly convincing. Tanap’s throughput is committed to customers, and accelerating production will be at the expense of project optimization. No significant relief in the short term can be expected from Tanap.

Qatari gas is another possible solution/ Right after the plane incident, the government approached Qatar, and a provisional agreement was signed. But Qatari gas can only come after four or five years and the relief provided will be limited. The North Field, which feeds Qatar’s gas exports, has been on plateau since 2012 and new development on the field is frozen. The back-up Barzan project at a green-field site is not onstream yet.

Besides, the Qatari gas will come as LNG, and Turkey does not have sufficient storage and regasification capacity to handle new imports. Building new LNG facilities will take time and require major investment.

Another suggested source is gas from the Kurdistan Regional Government (KRG) in northern Iraq. The “Kurdish gas,” as it is called, is also four or five years away and will probably come at a rate of 10bn m³/year. Other than a cooperative agreement signed in 2013, there is no commercial agreement or commitment on gas sales to Turkey, and the Turkey-Iraq border area is riven with violence.

Separate from security concerns, in today’s low gas prices the investment needed for development and monetization of “Kurdish gas” resources will be hard to come by. Any development will also require the consent of the Iraq central government – a thorny issue. Turkey-Iraq relations are strained.

The Israeli gas in the eastern Mediterranean could have been a good alternative for Turkey; but the Davos and “Mavi Marmara” incidents have blocked progress on this front. Stung with the prospect of a gas shortage, the Turkish government is now trying to normalize relations with Israel. Despite denials by the authorities, Israeli gas is no doubt in the government’s mind.

Relations between Turkey and the Cyprus government are even shakier. In addition to the Northern Cyprus question, there is also a territorial dispute over an exclusive economic zone, in the area to the south of Cyprus where the Aphrodite field is [Note: One-sided claim by Turkey with no legal basis under UNCLOS]. It is also the area through which a pipeline carrying Israel’s gas to Turkey would normally pass.

The irony of the conundrum in the east Mediterranean gas scene is that, Turkey, with its relative proximity to the gas fields, its geographical location for gas transit to the EU, and with its burgeoning energy consumption – 7% growth/year – is the economically logical landing-point for east Mediterrnean gas.

The discovery of the Zohr gas field, the largest so far in the region, by the Italian major Eni in the Egyptian waters in August 2015, has effectively removed Egypt as an export outlet for the Israeli and Cyprus gas, making Turkey even a more attractive market for such gas. On a fast track-development, Zohr will come onstream in 2017-18, and the production will be used initialy for Egypt’s own use.

But considering Zohr’s resources – 850bn m³ gas-in-place and likely to go up – Egypt will probably become a gas exporter again, to compete with Israel and Cyprus. Zohr gas will probably be sold as LNG using Egypt’s export terminals at Idku and Damietta on the Mediterranean coast.

It remains to be seen how the negotiations between Turkey and Israel will transpire. Cyprus should be included in the negotiations. All parties need to consider that, with shared goals, and given good will and vision, the solution of energy problems can lead to better geopolitical relations too. The Israeli and Cyprus gas projects should ideally be integrated, with first gas in 4-5 years and export volumes reaching a potential 10-15bn m³/yr.

The foregoing discussion makes it clear that the suggestions made by the Turkish government for replacing the Russan gas, while feasible, are nonetheless unrealistic in the short term.

Cool-headed decision by Russia

The plane incident caused a deep division in Turkish-Russian relations. Russia, however, decided not to cut the gas flow. Russia obviously did not want to give up a lucrative gas export market, especially in today’s low oil-price environment. Turkey is Gazprom’s largest customer after Germany. Russia also did not want to be seen as an unreliable gas supplier in the world market.

Turkey could also appeal to international arbitration and seek compensation for failure to fulfill contractual obligation.

The Russian government must have also taken into consideration that the Turkey-Russia trade balance is decidedly in Russia’s favour. According to one report, since 1990, but in particular after 2003 when Blue Stream became operational, Turkey had a consistent trade deficit vis-a-vis Russia. The deficit in 2004 alone was $10bn.

Russia may also have wanted to revive the now-frozen Turkish Stream. In fact, there are signs that the project may be put back on track. Should the project be shelved for good, Turkey will forego some benefits from this project, but by losing a gas export route to reach central and southeastern Europe, Russia’s loss will be greater.

The unsettling geopolitical fact for Turkey is that, Russia’s future behavior cannot be predicted. Should relations between Turkey and Russia further deteriorate, Russia’s president Vladimir Putin may well put economic considerations aside and turn off the gas valve to Turkey as a punitive measure. That will cripple part of the industry in Turkey, and millions of Turkish people will suffer. On top of that, the country is trying to deal with more than 2 million refugees.

Turkey’s president Tayyip Erdogan has tried to patch up relations with Putin after the plane incident but this met with no reciprocity from Putin. In sombre reality, Turkey’s energy security is at risk.

Separate from the natural gas issue, Russia has put into effect boycott of Turkish imports and businesses and discouraged Russian tourism to Turkey. According to one report, the boycott will cost Turkey between $8.5bn and $12bn/yr.

So, gas flow or not, Turkey is in no-win situation. The Russian plane incident has been a bitter reminder for Turkish energy planners of the need to diversify foreign energy sources and routes. Turkey has long enjoyed, as it should have, good trade exchange with its neighbor Russia, and it was natural that energy was one of the components in such relation. The mistake was to put so many of the eggs in one basket.

Ferruh Demirmen is an independent petroleum consultant based in Houston, Texas. He previously worked at Royal Dutch Shell as corporate advisor in production geology, including technology and new business opportunities, for Europe, Southeast Asia and South America.
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Eastern Mediterranean Gas: Challenges and Opportunities | Rigzone

Israel’s Growing Natural Gas Sector, Source: Library of Congress Cartography

by Delia Morris & Athanasios Pitatzis | Thursday, January 14, 2016

The Eastern Mediterranean region provides a rare bright spot for the sanctioning of gas projects, including fast-track developments.

With commodity prices in free fall, there would seem to be very few bright spots around the world for the sanctioning of upstream oil and gas projects over the next one to two-year period. In terms of activity levels, however, the Eastern Mediterranean region is shaping up to be one of the hottest areas of the globe – with prospects for fast-track developments, instead of project deferrals or cancellations, which have become all too commonplace during the current global commodity price downcycle.

Eni, BP to Fast-Track Gas Developments in Egypt

The August 2015 Eni S.p.A. discovery at Zohr, a deepwater find located in offshore Egypt, could potentially hold 30 trillion cubic feet (Tcf) of natural gas, sufficient to meet burgeoning Egyptian demand for 10 years, but is also significant enough to help dictate gas export flows between countries in the region and also between the region and the rest of Europe.

The Zohr find is the largest natural gas discovery ever made in the Mediterranean Sea and the underexplored area is considered to be highly prospective, according to some sources. Eni plans to fast-track the development of Zohr with first gas expected in 2017 from six wells. The company also plans to drill 18 additional wells in the area by 2019.

BP plc announced in November 2015 that it had signed a Heads of Agreement (HoA) with Egyptian authorities to accelerate the development of its Atoll natural gas discovery, a deepwater find in the North Damietta Offshore Concession in the East Nile Delta, and is estimated to hold 1.5 Tcf of natural gas and 31 million barrels of condensate. The company plans two phases of development, with the first consisting of two development wells tied back to existing infrastructure and first production slated for 2018.

Egypt is hoping to lure back to the sector Western oil and gas companies that had become discouraged from investing in the country because of political instability since the Arab Spring and the fact it had become a net importer of gas (which necessitated the diversion of exports, which had offered international oil companies higher netbacks). In October, Egypt announced that it had awarded four new offshore exploration licenses and planned to hold another bidding round for offshore gas exploration in the first half of 2016.

Israel Gives Go-Ahead for Leviathan

In November 2015, Israel gave the all-clear to the second largest natural gas find in the Mediterranean, after its future development was held in limbo by the country’s anti-competition authorities. The Leviathan field, located in deepwater offshore Israel, was discovered in 2010 and is estimated to hold up to 22 Tcf of natural gas reserves. A consortium led by Noble Energy Inc. and Delek Group is expected to make a final investment decision (FID) in 2016, with first gas expected in 2019 or 2020. In November 2015, Noble and Delek signed a letter of intent with Egypt’s Dolphinus Holdings to supply up to 4 billion cubic meters of gas per year for 10 to 15 years.

Combined with the Tamar field located offshore in Israeli waters (a discovery made by Noble and Delek in 2009 that is estimated to hold approximately 10 Tcf of natural gas reserves), Leviathan was thought to be capable of both supplying the Israeli domestic gas market plus possibly providing export capacity to send gas to Egypt, which is still facing a domestic gas shortage. Earlier in the year, Delek and Noble signed a 7-year deal to sell to Dolphius in Egypt at least $1.2 billion of gas from Tamar.

Timing is of the Essence

The development of Leviathan, plus the expansion of Tamar, along with the development of Aphrodite (discovered by Noble Energy in 2011 in Block 12, offshore Cyprus and could hold up to 7 Tcf of natural gas reserves) would potentially have established an Eastern Mediterranean gas resource and infrastructure system. With expected first gas from Leviathan expected in 2019 or 2020 (versus 2017 for Zohr), it appears that Israel may have missed its moment to evolve as Egypt’s largest natural gas supplier. Additionally, in the absence of a large integrated export gas infrastructure system with a beachhead in Israel, the prospects for Aphrodite’s development look increasingly at risk.

Contracted Rigs in the Eastern Mediterranean (2006-2015); SOURCE: RigLogix

Contracted Rigs

As the Mediterranean region is an emerging basin, operators tend not to maintain rigs in the area, and instead bring them in from other basins. As a result, utilization rates have generally been on the high-side. Over the last ten years, an average of about six floater rigs (drillships and semisubmersibles) have been contracted to work each month in the Eastern Mediterranean (Israel, Cyprus, Greece, Egypt and Libya), according to RigLogix. During the 2006-2015 period, 2012 had the greatest number of rigs working in the area – with an average of 8 per month.

Delia Morris has over 12 years of experience in the upstream oil & gas industry, working in roles as an M&A advisor, strategy consultant and equity analyst.
Athanasios Pitatzis is an Industrial/Petroleum Engineer and a member of the Greek Energy Forum and specializes in the development of oil & gas markets in Southeast Europe and the Mediterranean.
SOURCE

Israeli Gas: Too Soon to Declare Victory | German Marshall Fund

January 14, 2016 - Nikos Tsafos

Israeli gas might not be developed for years to come without at least partial resolution of a number of challenges, including uncertainty about export markets and high risks for potential buyers.

To facilitate the development of Israeli gas, the government should promote an honest and open national public conversation about gas and should replace problem making with problem solving.

A robust national public conversation will help manage expectations about future benefits of the development of Israeli gas and deepen the foundations for project development.

To enable the development of Israeli gas, the Israeli government should work to address risks that worry investors, attract new commercial partners and consider public investment.

The only obstacle to Israel’s capitalizing on its gas bonanza is government interference, according to the dominant narrative in the country; if only the authorities approve a new framework for the gas sector, an economic and geopolitical windfall will follow.[1] This narrative has some truth to it. Hitherto the government has done more to hamper development than to enable it. But the assumption that billions of dollars of investment will follow once the Israeli government gives the green light, and the inevitable appeals have been exhausted, is wishful thinking. The resolution of the antitrust stand-off will heal a self-inflicted wound but will do little to address the other challenges holding back Israeli gas. Only when these are addressed can Israel begin to sell its surplus gas in foreign markets and, even then, the benefits will be fewer than advertised. Israel needs a reality check on what it will take for its gas to reach export markets and what to expect when, and if, it does.

Gas Development Takes Time

Developing major gas projects is a very demanding and lengthy process. In Qatar, it took 25 years after the discovery of the North field for the first liquefied natural gas (LNG) to be exported (from 1971 to 1996). The Gorgon field in Australia, which will soon come online, was discovered in 1981. The fields supplying the Sakhalin-2 LNG project in Russia were discovered in the mid-1980s, and the first LNG was exported from there in 2009. It took a similar length of time for the Snøhvit field in Norway to be developed (discovered in 1984, first LNG produced in 2007). Gas flowed within seven years of discovery at Pluto LNG in Australia, one of the fastest such projects to be developed. A typical best-case scenario is a decade from discovery to exports. Some world-class discoveries such as the Natuna D field in Indonesia (discovered in 1968), the Prudhoe Bay field in Alaska (1968), or the Shtokman field in Russia (1988) have still not found a path to market. Some may never be developed at all.

The reason for these delays is that gas development is capital intensive and has a long payback period for their investors. As such, project sponsors work diligently to map and address every possible risk. During this process, the development concept might change as proposed pipelines turn into LNG facilities or vice versa; new partners come in and old partners leave; governments change the rules to give the project a boost or to improve their own take; and markets and costs change, prompting project sponsors to revise their plans repeatedly.

This long development cycle is frustrating. Project sponsors want to recoup their original investments; host governments want to deliver the benefits that they have promised to their voters, who, in turn, are eager to see these materialize; and possible buyers, financiers, builders, and service providers all await their share of the promised gains. Meanwhile, there is a chorus claiming that gas must be developed as soon as possible, before a “window of opportunity” closes. After some time, fatigue creeps in as the participants lose faith in the process and the public turns cynical.

Projects succeed when they have capable and committed partners, who engage stakeholders at the local, national, and international level, and who take advantage of a favorable political, commercial, and financial environment to move ahead. Often this process takes years and even decades to complete. Slow progress can be particularly frustrating for Israel given its experience with Mari B and Tamar, which were developed relatively quickly. These fields were geared to supplying the local market and so did not face many of the risks that come with export projects.

Challenges in Developing Israeli Gas

Gas in Israel has its share of advantages and disadvantages. Leviathan and Tamar are large fields, bringing economies of scale. The gas is dry and of high quality, so processing is relatively inexpensive. As the gas is fairly close to national and regional markets, infrastructure costs associated with development should not be prohibitive.

But, for the moment, there is no obvious outlet for all this gas. There are several options but no clear winner. A pipeline to Turkey would tie the gas into a single market where there is considerable competition and that could be affected by changing political relations between Israel, Cyprus, and Turkey. A pipeline to Southeast Europe would be very costly and face competition from the Caspian region and other sources. Any pipeline geared to currently expected production levels would not offer economies of scale if there were additional discoveries; a whole new pipeline would then be required. A liquefaction facility onshore Israel would face obstacles in securing construction permits and would be a major terrorist target. A liquefaction facility onshore Cyprus could be a solution, but this would be the first time in the world when gas produced in one country would be exported as LNG from another. A floating LNG facility at either Tamar or Leviathan would probably be too small for the gas available and vulnerable to attack. In any event, floating LNG is a breakthrough technology without any functioning projects as yet. The market in Egypt for imported gas is limited, while gas for re-export needs a change in commercial structure to be viable and is exposed to changes in the political relationship between the two countries. Finally, exports to Jordan, if they materialize, would be insufficient to absorb Israel’s available gas,

In short, project sponsors are constantly weighing several development paths, trying to find a balance between risk and reward with which they are comfortable. In doing so, they face two additional challenges. First, any option must be durable, which means it needs to survive the changes in politics, economics, and markets that are likely to occur over the next 15 to 20 years. Shocks can come from many sources: Israeli politics could lead to changes in taxation or the amount of gas that is permitted to be exported, despite assurances of regulatory “stability.” Changes in regional politics could threaten the sustainability of exports, as they did with Egyptian exports to Israel. Non-state actors may threaten or attack gas infrastructure, raising the risk premium and thus the cost of development. All these risks need to be managed at a time of lower oil and gas prices worldwide.

The second challenge is specific to Tamar and Leviathan. The project sponsors are upstream companies that focus on exploration and production rather than the mid and downstream aspects of the gas business. In practice, this means that they prefer others to shoulder the risks of building infrastructure and marketing gas while they themselves sell gas at or near the wellhead for a predictable price. This structure, however, shifts many of the risks from the producer to the buyer, who, by guaranteeing a price, bears a disproportionate risk relative to the reward.

Given these challenges, what can stakeholders do to facilitate the development of Israeli gas? First, the public conversation in Israel about gas needs to be upgraded, and secondly, problem-solving should replace problem-making. Only when challenges are acknowledged and addressed head-on can available Israeli gas find its way to new markets.

Upgrade the Conversation

In Israel, the antitrust issue has been handled with little informed public debate and scant attention to institutions and processes.[2] From an investor’s perspective, an apparent resolution through the use of political force is no resolution at all, because of its precariousness. The Knesset may change the law in the future despite the Israeli government’s commitment to “stabilization.” Indeed, any “stability” commitment contradicts the principle of parliamentary sovereignty. Stability comes from engagement with stakeholders and from public understanding and support, which can only emerge from a frank and open national conversation about natural gas.

This public conversation should consist of four elements. First, the authorities should reset the tone on antitrust issues and more candidly explain to the population the challenges of creating competitive conditions in a small national market. Ensuring competition in a market with limited buyers and/or sellers is difficult, as is balancing domestic needs with exports.[3] The investment climate is at least as important as the ownership of resources, the main focus of the anti-trust narrative until now. The country should seek to attract investors rather than dissuading them by restricting the amount of gas that can be exported. New investment could itself create more competition in the small Israeli market. Multiplying supply sources will not in itself create more effective competition when there is one big buyer — Israel Electric Corporation (IEC). Markets can only develop through multiple buyers and sellers.

There are many tools to address antitrust concerns. The state can investigate accusations of market abuse and impose remedies. It can oblige companies to compete against each other by marketing gas individually rather than jointly.[4] In short, there is a sensible middle way to create competition in this nascent market without claiming that there is a major antitrust threat or invoking “national security” to override legitimate concerns about how the gas market functions.

Secondly, it would be better for Israeli leaders to talk about the country’s improved energy security rather than dwell on the notion of insecurity. The improvement in Israel’s security of supply in just a few years has been remarkable. When Egyptian gas was cut off, IEC had to turn to oil to make up most of the difference, leading to a doubling of fuel costs within two years and an 11 percent increase in CO2 emissions.[5] Now, as domestically produced gas has entered the system, the economic and environmental benefits are clear. Greater use of natural gas in sectors such as transport and agriculture could deliver additional benefits. The system is still too reliant on a single gas field, Tamar, but that dependence will diminish when Leviathan and smaller fields come online. It is important to explain the benefits that have accrued so far in order to win public understanding and support for the difficult task of managing the sector fairly and efficiently.

Thirdly, the official narrative should move away from the supposed “window of opportunity” for developing Israeli gas before competing suppliers such as Iran, for example, reach the market. A sense of urgency can be useful in streamlining decisions, but experience shows that there is no such window in practice. Opportunities come and go; some options are more attractive than others at different times. Sometimes it pays to move quickly, and at other times it is best to wait. Many companies rushed to develop LNG facilities for imports into the United States because of an impending gas shortage, just a few years before shale gas took off. Gas is a long-term business and there is no single window of opportunity that should obsess the Israeli public.

Fourthly, the public conversation should stop advertising the “geopolitical benefits” that Israel is supposed to reap by developing its gas. Close energy relations rarely translate into closer political relations, as Israel’s own experience with Egypt shows. As with Egypt, energy relations follow political relations: they can reinforce ties when relations are cordial and get in the way when relations deteriorate. Energy provides less political leverage than is often claimed. If energy dependence led to political dependence, Russia would have far fewer problems in Ukraine.[6] If the Israeli public is sold a set of presumed geopolitical benefits, disappointment and recriminations are likely to follow.

Solving Problems

A robust public conversation should help manage expectations and deepen the foundations for project development. But there are three more areas that require attention.

First, new commercial partners may be needed to enable gas development to move forward. The entry of BG Group into Block 12 in Cyprus, for example, may help to resolve the risk-reward conundrum that has held back potential exports from Cyprus to Egypt.[7] To encourage new partners to invest in discovered fields, the sovereign’s main role is to provide an attractive investment environment. Noble Energy cited the changes in taxing gas exports proposed in March 2014 as having “a detrimental effect on [its] ability to reach commercial terms with Woodside,”[8] which was negotiating its entry into the Leviathan field at the time.

Israel faces one additional hurdle: companies might hesitate to invest for fear of damaging their relations with other Middle Eastern producers. The Israeli government could reduce this risk by inviting and encouraging Egyptian firms to buy Israeli gas and even participating directly in its development as co-investors. Such a prospect would provide political cover and might convince other companies to look at investing in Israel differently.

Secondly, the Israeli government should address certain risks that worry investors. Force majeure is a major concern. Israel has a compensation mechanism for critical infrastructure in case of damages caused by acts of war and terror, but the amount of financial recovery through the fund is not guaranteed.[9] Such uncertainty raises risks and costs. Export sustainability is another risk. Companies seek assurances that Israel will not go back on its commitment to export gas if circumstances change, for example if the regime changes in a destination market or if there are outbreaks of violence there. When the United States faced a similar concern from investors about LNG exports, the Department of Energy issued clarifications to reassure investors that it would not regulate exports in a way that affected prices.[10] For its part, Israel could provide assurances about its commitment to maintain exports under most foreseeable circumstances and about the implications of any future suspension of exports.

The Israeli authorities might even consider an extension of its compensation mechanism to cover, in part, some of the lost revenue arising from specific events such as regime change in destination markets or war. Such moves would reassure investors who are considering investment in Israel’s gas industry.

Thirdly, public finance will probably be needed to develop the gas sector fully.[11] State support has proved essential to reassure investors in projects that are far less risky than Israeli gas. The Israeli authorities could explore additional options, including investment guarantees and direct investment in the gas fields or the enabling infrastructure. Properly formulated, such initiatives could align the interests of the sovereign with those of project sponsors and communicate the state’s support for the development of the gas sector.

Unexploited Israeli gas might stay in the ground for years to come without at least partial resolution of this rather long list of challenges. The authorities should make it a priority to create a propitious climate for the development of the country’s gas resources. Large-scale projects only succeed if the major stakeholders work tirelessly to resolve issues holding back development. An honest public dialogue that is reasoned rather than hyperbolic would do much to improve the climate. All parties need to address the tangible issues that delay development and aim for solutions that promote the interests of both the state and private parties. It is only when such changes take place that Israel can hope to realize the true potential of its newfound wealth.

[1] For example, see Steven Scheer, “How Israel turned a gas bonanza into an antitrust headache,” Reuters, October 1, 2015, http://uk.reuters.com/article/2015/10/01/uk-israel-economy-natgas-insigh...

[2] See Michael Leigh, “More straight talk needed on offshore energy,” Times of Israel, July 30, 2015, http://blogs.timesofisrael.com/more-straight-talk-needed-on-offshore-ene...

[3] For example, see enalytica, “How LNG Affects Local Markets? Lessons for Alaska from Western Australia,” January 2015, http://enalytica.com/#/research/2015-01-exports-vs-domestic

[4] Nikos Tsafos, “A simpler way to market competition,” The Jerusalem Post, January 19, 2015, http://www.jpost.com/Opinion/A-simpler-way-to-market-competition-388269

[5] Israel Electric Corporation, “Investor Presentation as of June 30, 2015 – North America Investor Meetings,” https://www.iec.co.il/en/ir/pages/investorpre.aspx; International Energy Agency, CO2 Emissions From Fuel Combustion Highlights 2015, http://www.iea.org/publications/freepublications/publication/co2-emissio...

[6] Nikos Tsafos, “Ukraine and the Limits of Gas Diplomacy,” National Interest, March 7, 2013, http://nationalinterest.org/commentary/ukraine-the-limits-gas-diplomacy-...

[7] Nikos Tsafos, “Cypriot Gas After BG’s Entry,” LinkedIn Pulse, November 23, 2015, https://www.linkedin.com/pulse/cypriot-gas-after-bgs-entry-nikos-tsafos

[8] Noble Energy, 10K 2014, p. 6

[9] Noble Energy notes that “In Israel … we insure against acts of war and terrorism in addition to providing insurance coverage for normal operating hazards facing our business. Additionally, as being part of critical national infrastructure, the Israel offshore and onshore assets are included in a special property coverage afforded under the Israeli government’s Property Tax and Compensation Fund Law; however, the amount of financial recovery through the fund is not guaranteed.” Noble Energy, 10K 2014, p. 78

[10] King & Spalding Client Note, “U.S. Department of Energy (DOE) Clarifies its Position on Modification or Revocation of DOE Liquefied Natural Gas Export Authorizations,” November 4, 2013, http://www.kslaw.com/imageserver/kspublic/library/publication/ca110413.pdf

[11] See Anastasios Giamouridis and Nikos Tsafos, “Financing Gas Projects in the Eastern Mediterranean,” The German Marshall Fund of the United States, July 2015, http://www.gmfus.org/publications/financing-gas-projects-eastern-mediter...- See more at: http://www.gmfus.org/publications/israeli-gas-too-soon-declare-victory#sthash.EEZrwpKD.dpuf 
Download the PDF here

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Emerson to Automate Carbon Holding’s Tahrir Petrochemicals Complex in $150 million Contract | Energy Egypt

David Farr, CEO, EMERSON

JANUARY 14, 2016 / ENERGY EGYPT

Emerson Automation and reliability programs for world’s largest naphtha cracker plant will support efficient, high-availability production of plastics and related materials for local and export markets.

Emerson and Carbon Holdings, the privately owned Egyptian petrochemical firm, today announced that Emerson Process Management has been selected to provide automation and reliability technologies and services for Carbon Holdings’ Tahrir Petrochemicals Project at Ain Sokhna, Egypt. Emerson’s initial scope of work is estimated at $150 million.

When completed, the approximately $6.9 billion Tahrir project will be the largest petrochemical plant in Egypt and the largest naphtha cracker plant in the world. It will produce 1.5 million metric tons per year of ethylene that will then be further processed into polyethylene. Other major products will include propylene, polypropylene, hexene, butadiene, benzene, and styrene. Construction and operation of the Tahrir Petrochemicals complex is expected to generate thousands of direct and indirect permanent and construction jobs in Egypt.

As Main Automation Contractor, Emerson will apply best practice technologies and services to help ensure the facility is completed on time and within budget. Engineering services include designing the plant for optimum availability, and Emerson will also provide a robust reliability program that includes consulting services, equipment health monitoring, and a reliability service center for ongoing local support and expertise.

The announcement was made at Emerson’s Middle East headquarters in Dubai where David Farr, chairman and CEO of Emerson, met with Basil El-Baz, chairman and CEO of Carbon Holdings, for the signing of a memorandum of understanding regarding the contract award.

“Investments of this size require us to select partners that have a long history of handling large, complex projects and the expertise to produce a reliable plant with dependable output,” said Carbon Holdings’ El-Baz. “We chose Emerson for its proven ability to deliver a successful automation project that results in an efficient, high-availability operation.”

Designed to serve both local and export markets, the Tahrir Petrochemicals complex will be constructed in Egypt’s Suez Special Economic Development Zone, with raw materials received and products shipped from the Gulf of Suez. Financing for the mega-project is expected to come from the export credit agencies of the United States, Korea, Italy and the Overseas Private Investment Corporation, as well as direct investors. Under the memorandum of understanding, Emerson will also make a preferred equity investment in Tahrir Petrochemicals.

“We are excited to help Carbon Holdings realize its vision of creating a world-class petrochemical complex that can be a catalyst for economic development in Egypt,” said Farr. “With Emerson’s technologies, experience, and expertise, Carbon Holdings has positioned itself for top quartile performance – not only in project execution, but ongoing operations as well.”

About Emerson Process Management
Emerson Process Management, an Emerson business, is a leader in helping businesses automate their production, processing and distribution in the chemical, oil and gas, refining, pulp and paper, power, water and wastewater treatment, mining and metals, food and beverage, life sciences and other industries. The company combines superior products and technology with industry-specific engineering, consulting, project management and maintenance services. Its brands include PlantWeb™, Syncade™, DeltaV™, Fisher®, Micro Motion®, Rosemount®, Daniel™, Ovation™, and AMS Suite.

About Emerson
Emerson, based in St. Louis, Missouri (USA), is a global leader in bringing technology and engineering together to provide innovative solutions for customers in industrial,

commercial, and consumer markets around the world. The company is comprised of five business segments: Process Management, Industrial Automation, Network Power, Climate Technologies, and Commercial & Residential Solutions. Sales in fiscal 2015 were $22.3 billion.

About Carbon Holdings
Carbon Holdings Limited is a privately owned, non-governmental petrochemicals company domiciled in Egypt and was formed for the purpose of making long-term controlling investments in the downstream oil and gas sector (in particular the fast-growing chemical and petrochemical sector) with the objective of becoming a leading owner and operator of integrated petrochemical plants with a primary focus on Egypt. The Company seeks to develop and acquire a diverse portfolio of value-added assets in the Middle East and North Africa (MENA) region that span across the petrochemicals value chain in order to optimise economies of scale. The Carbon Holdings teams’ collective experiences put Carbon Holdings in an ideal position to take advantage of attractive global development and acquisition opportunities that provide a unique value-add to project shareholders. Among the Carbon Holdings’ team are key personnel who have successfully led growth in strategy and M&A for some of the largest multinational petrochemical conglomerates; and others who have been involved in assessing the feasibility of some of the largest global projects undertaken in the last 40 years (from a technical, financial, and execution standpoint). Carbon Holdings projects have succeeded in securing attractive debt funding from local banks, regional banks, international banks and Export Credit Agencies; and equity financing from strategic and regional investors.

(Emerson Press Release)
SOURCE

Greece Approved Construction of Pipeline TAP | Prensa Latina

Athens, Jan 14 (Prensa Latina) 

The Ministers of Environment and Energy of Greece signed here a decree giving green light to the construction of the pipeline Trans Adriatic Pipeline (TAP) in 13 national regions.

The project includes the installation of pipelines throughout the north to connect in the east with the line from Turkey and in the west with Albania, which last summer began working on the infrastructure.

Greece expects the TAP stimulates the economy and employment, considering the creation of up to 10,000 direct jobs, both during construction and subsequent operation stage.

The pipeline, that should be operational in 2019, will supply European markets with gas from Azerbaijan and its goal is to reduce dependence on Russia by diversifying energy sources and routes.

The strengthening of the geopolitical role of Greece as an energy supplier will be further increased by the construction of a floating liquefied natural gas (LNG) in Alexandropoli, explained sources consulted by Prensa Latina.

This project, approved by the European Commission, which already has a plan of action, will supply gas to the national grid, will connect to the TAP and with the IGB pipeline from Bulgaria to supply Serbia and Romania.

An international forum on natural gas is scheduled for January 22 in Athens, where special attention will be paid to these regional projects.

hr/ycf/ro/acm
Modificado el ( jueves, 14 de enero de 2016 )
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Cash-Strapped Iraqi Kurds to Start Gas Exports to Turkey in 2016 | Bloomberg

Khalid Al Ansary Bruce Stanley, January 13, 2016

• Pipeline to start shipping natural gas to Turkey by year end
• Kurdish gas to give Turkey alternative to imports from Russia

Iraq’s Kurds will start building their first natural gas pipeline next month to export the fuel to Turkey, a project that would bring the self-governed region closer to economic independence.

The link will transport gas from the Khor Mor and Chamchamal fields in northern Iraq’s Kurdish enclave, first to Turkey and later to Europe, Bewar Al-Khinsi, an economic adviser to the Kurdistan Regional Government, said in a phone interview. The KRG will begin shipping 10 billion cubic meters a year by the end of 2016 and double the volume to 20 billion by 2020, he said.

“The pipeline will be a source of revenue for the KRG and a step to help Turkey overcome a gas crisis that may arise” as a result of Turkey’s soured relations with Russia, an important gas supplier to the Turks, he said.

The KRG is struggling to pay its bills, including money owed to foreign energy companies including DNO ASA and Genel Energy Plc. A 35 percent collapse last year in the price of Brent crude is adding to strain on KRG finances at a time when the regional government must also pay the cost of fighting against Islamic State militants that control parts of northern Iraq. The country’s Kurds have long chafed against control by Arab-led governments in Baghdad, and gas exports would enhance their financial self-sufficiency.

Kurdish Reserves

The Kurdish region could hold as much as 200 trillion cubic feet of natural gas reserves, or about 3 percent of the world’s total deposits, according to the website of the KRG Ministry of Natural Resources. It also holds 45 billion barrels of crude oil reserves -- equivalent to almost a third of the deposits in the rest of Iraq, according to BP Plc data. Turkey offers the sole route to market the expanding Kurdish oil industry.

Turkey will help pay for the 831-kilometer network, which will run parallel to an existing oil pipeline, and Ankara-based Botas Boru Hatlari Ile Petrol Tasima AS will build it, Al-Khinsi said. The 181-kilometer section inside Kurdish territory will cost an estimated $750 million, he said. The project is the result of an agreement that the KRG and Turkey reached in 2013 to build two pipelines, one for oil and another for gas.

Dana Gas PJSC, a United Arab Emirates-based energy company operating in Kurdish Iraq, holds a 40 percent stake in both the Khor Mor and Chamchamal fields through its Pearl Petroleum Co. venture, according to Dana Gas’s website. All gas produced in the Kurdish region is currently sold locally, and the company wants eventually to sell fuel to Turkey and Europe, Dana Gas Chief Executive Officer Patrick Allman-Ward said Tuesday in Abu Dhabi.

SOURCE

Bank of Israel: Gas exports may not be viable | Globes

13/01/2016, Hedy Cohen

The fall in global market prices and rise in LNG transport costs makes gas exports less worthwhile says the Bank of Israel.



"The fall in gas prices in the global market raises material questions about the viability of exports," Bank of Israel macroeconomics and policy division head Adi Brender wrote in a letter of response to MK Yael Cohen Paran (Zionist Union). Cohen Paran asked for the Bank of Israel's calculations of the state proceeds from natural gas.

"As a rule, when the export price falls in the present, and the assumption is that the future value of the gas and/or the cost of importing it and/or the expected return from the proceeds and the risk premium do not change, exports at the present time become less worthwhile," Brender stated. His letter was sent last month, and energy prices have since fallen even further.

According to Brender, however, the fall in global market prices was also accompanied by a significant rise in the transportation costs for liquefied natural gas (LNG), an element "important in calculating the viability of exports," he wrote.

In his answer to Paran Cohen's question about Europe's willingness to buy Israeli gas at a relatively high price at a time when the price there was declining, Brender answered that the Bank of Israel had not taken that into account.

"As we understand it, at the current stage, what is involved is export contracts through companies operating in Egypt, and the price is determined with them, not directly with the European market," he answered. "Our calculations therefore focus directly on the potential prices in contracts with these companies, while deducting the cost of transportation to Egypt."

The gas companies have signed a letter of intent with two European companies having liquefaction facilities in Egypt. As revealed by "Globes," the Leviathan partnership plans to sign binding contracts with British Gas, one of the companies, in the next two weeks.

Lower oil prices raise Israeli GDP

The plunging oil price also has a positive effect on the both the global and Israeli economies. According to Bank Hapoalim (TASE: POLI) chief economic advisor Prof. Leo Leiderman, lower oil prices reduce inflation, have a positive impact on economic activity, and improve the balance of payments.

"At the same time, there are now fewer incentives to invest in oil substitutes, such as natural gas," Leiderman argued at an energy conference last month. He added that the most significant effect of the oil prices slide was a reduction in the dollar value of Israel's energy imports. While the country spent $12.7 billion on imported energy in 2014, these expenses totaled $7.5 billion in 2015.

"This is a dramatic decrease," Leiderman stated. "The fall in prices, combined with the transition to natural gas, translates to 2% of GDP. This is a real bonanza. It boosts global wealth."

According to the Central Bureau of Statistics, the balance of payments current account, which includes the goods and services account (including defense imports), the income from investments and labor account, and the current overseas transfers account, improved in comparison with the previous year, among other things because of the plunging price of oil. The 2015 surplus totaled $14.3 billion, compared with $11.2 billion in the preceding year. The current account surplus in 2015 amounted to 4.9% of GDP, compared with 3.7% in 2014.

Published by Globes [online], Israel business news - www.globes-online.com - on January 13, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

SOURCE

Turkey hopes to catch up with Azeri gas by 2017: REPORT

January 13th, 2016

Turkish state importer Botas hopes to receive more gas from the Shah Deniz Phase 1 project by the end of 2017 to compensate for lower intake in the past, Zaman newspaper reported on January 12.

Botas pays before delivery from the Shah Deniz consortium, set at 6.6bn m³/yr. Over the past years, Azerbaijan has exported less than this volume owing to a lack of pipeline capacity inside Turkey. A gas compressor station was only installed in Erzurum in 2014.

The report says that the terms of the take or pay clause mean the total debt due to Azerbaijan for gas that Botas did not take – but had agreed to – was TL205.6mn lira ($114.9mn) as of the end of 2012 and TL687 million by the the end of 2013. This had risen further to TL892.9mn by the end of 2014.

The report added that Botas has until 2017 to even out its contractual offtake with its actual offtake.

In the first 11 months of last year Azerbaijan exported 6bn m³ of Shah Deniz gas, about 1.6% more than in the same period in 2014, operator BP told Natural Gas Europe December 25. The year before, exports from the field were 6.5bn m³.

The minimum annual volume of gas, which Turkey has to buy as a part of the agreement, is 5.2bn m³. Turkey has to pay $45/’000m³ for the gas it was contracted to take delivery of, but could not do so owing to the lack of capacity.

SOURCE

Metro Services Inc. Partners With Israel On Gas Energy Project | The Chattanoogan

From left, Mark Kleiner, vice president, Operations, MSI - County Mayor Jim Coppinger - Scott Norton, president, MSI and Bill Norton, CEO, MSI

Wednesday, January 13, 2016

Metro Services Inc. met with Hamilton County Mayor Jim Coppinger and the Mayor Andy Berke Wednesday to announce a partnership with Palziv Group and DTO Gas Energy, both headquartered in Israel, to provide Israeli companies with natural gas regulatory development and infrastructure.

Under the guidance of Bill Norton, owner and CEO, MSI has expanded into global markets. “We are committed to meeting the emerging demand for commercially available natural gas in Israel which will drive industrial growth and economic progress,” Mr. Norton said.

Palziv, a multinational foam manufacturer, is the first company selected by the Israeli government to diversify from propane to natural gas. This is a pioneering effort since Israel has never before in its history used natural gas in the private sector. As a result, Israel has no rules or regulations in place to facilitate a smooth transition, said officials.

Metro Services Inc. is honored to have been approached by Palziv and DTO Gas Energy (Israeli Gas Consultants) and Israeli government officials to help them develop rules and regulations for this process, said officials. MSI is working directly with Underwriters Laboratories and fabricating gas equipment that will allow Palziv to run either fuel as needed.

“As a multinational with plants in the US, Canada, Romania and Israel we can fully assert that our business with Metro services has been both rewarding and beneficial for us. We have found a world class supplier in the ‘wilds of Tennessee’” said Meir Langer, CEO of Palziv Group.

From left, Mayor Andy Berke; Eyal Barzilay – CEO, DTO Gas Energy; Shimon Stahl – Head of Engineering, Palziv Ein Hanatziv; Avidor Cohen – Global Maintenance, Palziv Ein Hanatziv; Scott Norton, president, MSI and Bill Norton, CEO, MSI

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Dana Gas to cut costs and jobs by half at Head Office, will continue to invest in Egypt | Energy Egypt

JANUARY 13, 2016 / ENERGY EGYPT

Dana GasAbu Dhabi-listed Dana Gas aims to slash its head office workforce by 40 percent and cut general and administrative costs by half between 2015 and early 2016, its chief executive said on Tuesday.

The energy company will continue to invest in Egypt and sees its production in the country increasing, Patrick Allman-Ward told reporters on the sidelines of a conference in Abu Dhabi.

Dana produces 34,000 barrels per day of oil equivalent in Egypt, Allman-Ward said, adding its Balsam field in the Nile delta came on stream in late 2015.

The company has operations Egypt, the United Arab Emirates and Iraq’s Kurdistan region.

(Source: Reuters)

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Cyprus in the Middle | Foreign Affairs

SAM PEPPLE & MATT BAKER / SAMPLE CARTOGRAPHY

January 12, 2016, By Jonathan Gorvett

Nicosia Holds the Keys to Syria, the Migrant Crisis, and Gas in the Eastern Mediterranean

On a recent December day, people strolling the seaside boardwalk in the Cypriot city of Limassol had their peaceful afternoon suddenly interrupted. Overhead, a brace of British warplanes roared from their base at nearby RAF Akrotiri, flew low over the eastern Mediterranean, and headed for Syria, just 100 miles away.

This was the second time the boardwalk was shaken by warplanes that day. Earlier, onlookers had also witnessed Israeli warplanes flying overhead during exercises. In the harbor beneath them, Russian warships lay at anchor, refueling on their way east. Later, too, a Limassol-based seismic research vessel, chartered by a U.S. company, sent frantic radio messages to say it had been intercepted and then shadowed by a Turkish frigate.

All the (now apparently routine) military activity is a visible reminder that Cyprus, the European Union’s far-flung Levantine outpost, is once again at the heart of a Gordian knot of regional conflicts and conundrums. These range from the Syrian refugee crisis to Israeli oil and gas development; from Turkey’s accession to the European Union to Russia’s growing role in the Middle East. Lebanon and Egypt feature in the mix, too, as do maritime boundary disputes between Greece and Turkey.

All these issues run through Nicosia, Cyprus’ divided capital, where UN-sponsored talks aimed at reuniting Greek and Turkish Cypriots are now entering year 52. It is, perhaps surprisingly, the success or failure of these seemingly endless talks that is increasingly vital for the resolution of the host of other overlapping and interlinked regional dilemmas.

GAS TROUBLE

The interconnection between the dispute over Cyprus and the region’s other dilemmas was most recently highlighted in late December by reports of a new rapprochement between Turkey and Israel. Under the reported terms of renewed relations (on hold since 2010), the two countries may start looking again at running a natural gas pipeline between them, which would link newly discovered Israeli offshore gas fields to Turkey, a country with a growing demand for energy but without much in the way of hydrocarbons itself.

A quick look at the map, however, demonstrates the problem with such an idea—and why Cyprus may be key to its solution. South of the island, at the extremity of its 200-mile maritime exclusive economic zone (EEZ), lies Cyprus’ undeveloped Aphrodite natural gas field. Just adjacent to this lies the undeveloped Israeli Leviathan field, and farther to the southwest, Egyptian gas fields stretch along that country’s North African coast.

Any undersea link between Israel and Turkey would have to either pass through Lebanese and Syrian waters or cross the Cypriot EEZ. The first alternative is obviously fraught with difficulties. Aside from the ongoing conflict in Syria, Israel and Lebanon have still not agreed to final maritime boundaries. A delimitation treaty between Cyprus, Israel, and Lebanon remains unratified by the Lebanese parliament.

Yet the alternative has major problems, too. Specifically, the Republic of Cyprus and Turkey remain hostile, and the development of a pipeline through the region would also touch on Cyprus’ own plans for exploiting the Aphrodite field.

Ankara does not recognize the government of the Republic of Cyprus, which has been composed almost entirely of Greek Cypriots since intercommunal violence between Greek and Turkish Cypriots broke out on the island in 1964. Instead, Turkey, which invaded Cyprus in 1974, is the only country in the world that recognizes a breakaway state in the northern third of the island—the so-called Turkish Republic of Northern Cyprus (TRNC)—which is composed almost entirely of Turkish Cypriots and covers the territory conquered by the invading Turkish troops. Turkey still maintains some 30,000 soldiers in the north, which is separated from the territory controlled by the Republic of Cyprus by a UN-patrolled buffer zone. Likewise, the Republic of Cyprus refuses to recognize either the TRNC or open relations with Turkey.

One outcome of the dispute has been the lack of any agreement between Cyprus and Turkey on maritime boundaries, with the TRNC also recently claiming offshore rights and a share of Aphrodite and of any other future discoveries. The bickering has hampered oil and gas exploration in much of the eastern Mediterranean, instantly heightening tensions whenever a survey ship leaves port.

In other words, it is highly unlikely that Cyprus, which enjoys international recognition and EU membership, will allow a pipeline to Turkey across its EEZ. At the same time, the country faces a problem in developing its gas resources without Turkey’s apparent partner, Israel.

Cyprus is just too small a market, and too far away from the modest-sized Aphrodite field, to warrant an expensive pipeline. Experts have suggested that a more economically viable alternative would be to combine Aphrodite with the nearby Leviathan field and then send gas from both down a shorter pipeline to Egypt, where it could be converted into liquefied natural gas at two currently unused terminals and then exported.

Cyprus has thus been keen on closer ties with Israel—especially after Israel’s relations with Turkey took a nosedive back in 2010—hence the Israeli jets flying over Limassol.

Despite the apparent alignment of interests, however, the two countries have made little progress sealing a gas deal. Long-running negotiations on an all-important deal that would pool the two gas fields’ resources have dragged on without result. The endless talks had long puzzled Cypriots, yet perhaps the recent announcement of an Israeli-Turkish rapprochement offers a clue to Israeli reluctance to sign on to anything: Tel Aviv has been all too conscious of the effect that dealing with the Greek Cypriots might have on its future relations with Turkey, which has historically been a far more important strategic partner.

EUROPEAN DISUNION

The lack of diplomatic relations between Cyprus and Turkey is also a major spanner in the works when it comes to Turkish-EU relations, which were recently revitalized by the EU’s panicky reaction to the Syrian refugee crisis.

Since Turkey began EU accession negotiations back in 2005, it has gotten almost nowhere. Croatia, which began the process at the same time, joined in 2013. Although there are many factors, one of the principal holdups is that Cyprus has blocked the process.

And so, when EU officials declared that under a new arrangement with Turkey, Ankara would undertake to halt Syrian refugees entering the EU in return for financial aid, a liberalized visa regime, and a reinvigoration of the accession process, it raised Greek Cypriot eyebrows. There have been no indications so far, either, that the Republic of Cyprus, which can still effectively block various parts of the accession process, will allow a new opening to happen. Meanwhile, Ankara has declared that whatever new arrangements are made with Brussels, none of them will apply to its relations with Cyprus, despite its EU membership.

It could be argued that the Turkish accession process is, in any case, something of a pantomime, given fundamental French and German objections to Turkish membership. At any rate, it remains to be seen how the continued Cypriot block will impact the implementation of the Syrian refugee deal.

Hostile nonrecognition between Turkey and Cyprus also figures into a further dispute—that between Greece and Turkey over maritime boundaries in the Aegean and eastern Mediterranean. The borders have never been formalized, which causes considerable tensions as well as mock dogfights between the two countries’ fighter jets and, more recently, complications for Greek and Turkish coast guards seeking to control the flow of refugees and migrants.

Settlement of the boundary between Greece and Turkey involves determining the western limits of Cyprus’ maritime area, as this intersects with those of the other two countries. Currently, whereas Greece recognizes Cyprus’ boundaries, Turkey does not—a reason behind the recent shadowing of the Limassol-based research ship.

NO PROBLEM

Many of the region’s problems, however, could go away if the current UN-sponsored talks on reunifying Cyprus succeed. A settlement, which would have to be agreed upon via an islandwide referendum, would see Turkey recognizing the new, bicommunal Cypriot government, and vice versa—a key to unlocking the closed doors. And so, U.S. Secretary of State John Kerry, French President François Hollande, British Foreign Secretary Philip Hammond, and Chinese Foreign Minister Wang Yi all visited the island in December to give their official support to a deal.

Prospects for an agreement are widely seen as being better now than at any time in the last ten years. This is largely because this time, both the Greek and Turkish Cypriot leaders—Nicos Anastasiades and Mustafa Akinci—are known to be committed to finding a solution, a rarity in Cypriot negotiations. There is even some talk of a referendum in the spring of 2016, although this is likely overly optimistic.

Key to such a referendum succeeding, though, may be Russia, whose foreign minister, Sergey Lavrov, also visited the area in December, back-to-back with Kerry. Russia enjoys both a Christian Orthodox connection to the Greek Cypriots and a historic link to the large, pro-Moscow Greek Cypriot former communist party, AKEL, whose approval of any settlement would be vital.

Further, although Greek Cypriots are in myriad ways anchored to the West and are themselves EU citizens, many also have a highly favorable view of Moscow. Scores of Russians have invested in or settled in the republic, remaining there despite losing out in the 2013 financial crisis. Indeed, a recent poll showed that a majority of Greek Cypriots favor granting Russia some military facilities on the island, with around a third supporting granting Moscow similar bases to those the British warplanes have been using to bomb Syria.

At the same time, of course, Russia’s relations with Turkey have seldom been worse. And the back-to-back visits from Kerry and Lavrov raised another aspect of the current knot of problems: the continuing rivalry between Moscow and the West for regional influence, heightened by recent Russian intervention in Syria.

For its part, the United States has given greater priority to the current talks than on many previous occasions (Vice President Joe Biden has also been a recent visitor to the island). Yet for all the heavy diplomatic guns being lined up behind an agreement, ultimately, it will come down to a referendum of the Turkish and Greek Cypriots.

And there, considerable obstacles remain, with key issues over security and property still to be resolved. Meanwhile, the issue of reunification remains extremely emotional in both communities. The last time the UN held a similar referendum, in 2004, Turkish Cypriots voted for the deal and Greek Cypriots against—by a large margin. This time around, the stakes are even higher, with the future of gas wells to refugees hanging on which box the Cypriots end up ticking

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