Jordan is a key player in Israel's energy equation in the region as it could either make or break the Jordan-Israeli gas sales and purchase agreement that is vital to Israel's success as a regional energy player, according to the director of hydrocarbons at the Paris-based Mediterranean Energy Observatory (OME).
In September 2016, U.S.' Noble Energy, the operator of Israel's Leviathan gas field, signed a gas sales and purchase agreement with Jordan's National Electric Power Company Ltd. (NEPCO) to sell approximately three billion cubic meters of natural gas over a 15-year term.
"If Jordan cancels the gas deal signed with Israel following Israel's brutality in the Gaza Strip, there is no place for its gas to go, therefore, Israel can suffer huge losses in terms of energy income," Director Sohbet Karbuz told Anadolu Agency in an exclusive interview.
The deal in September 2016 was agreed despite widespread disapproval in Jordan for the purchase of Israel's energy. The past two years saw a number of popular demonstrations in Jordan's capital Amman against the proposed import of gas from the Jewish state.
Karbuz explained that Jordan is the most important market that these companies rely on to recover the billions of dollars of investments that these companies have made.
Jordan is essential for return of gas investments
Karbuz argued that If Jordan dismisses the gas sales deal, it would put the companies that are developing the Leviathan field into a corner.
The companies that invested billions for the offshore fields faced regulatory problems in recent years. The gross contract revenues are estimated to be in the region of $10 billion.
U.S.' Noble Energy operates the Leviathan field with a 39.66 percent working interest. Other Israeli owners include, Delek Drilling, Avner Oil Exploration and Ratio Oil Exploration.
Price risks in the agreement
Speaking to Anadolu Agency before the agreement in 2016, Jawad al-Anani, Jordanian deputy prime minister for economic affairs at the time, described Israeli natural gas as "one of the less expensive alternatives we are studying".
Noble announced soon after the agreement that the natural gas would include industry-typical take-or-pay commitments with a firm floor price. Pricing was also to be indexed to Brent oil, which at the time was at $45 per barrel level. Since then, International Benchmark Brent crude oil prices increased almost by 80 percent to $79 this week.
Such notable oil price increases could raise questions as to the economic feasibility of the agreement.
Energy relations as a diplomatic tool
According to Karbuz, the strength of Israel's energy relations in the region with Egypt, Jordan, Greece, Cyprus, and India have been effective in showing that these governments are using more "diplomatic language" in response to the brutality in Gaza.
"Negotiations are underway to sell Israeli gas on the Egyptian domestic market and Egyptian President Abdel Fattah el-Sisi is pragmatic with Israel despite the recent events," Karbuz said.
He also said the parties involved in East-Med pipeline showed a muted response to Israel's strategy in dealing with Palestinian protestors.
"Israel is in a business alliance with Greece and Cyprus for the East-Med undersea pipeline that aims to transport natural gas from East Mediterranean to Europe. This economic relationship has been effective in the diplomatic tone of the response to the situation in Gaza from Greece and Cyprus."
"On the other hand, we know that after Indian Prime Minister Narendra Modi's last visit to Israel, a consortium including Indian companies has received an exploration and production block. Thus, we can see that India has also reduced its voice against Israeli actions after these investments," he stressed.
SOURCE via SyndiGate.info
