Jerusalem, 13 November 2018
Mehul Srivastava
Netanyahu seizes on natural gas to turn Egypt and Jordan into economic partners
When Yuval Steinitz was doing his military service in the Israeli army, Egypt was an enemy and Israel lived in fear of having its oil supplies choked off by Arab rivals. But in recent years, as Israel’s energy minister, Mr Steinitz, 56, found himself in hush-hush meetings with Egyptian officials.
On the agenda: Israel’s gas conundrum. Since the late 1990s, it has discovered huge natural gas reserves off its coast. The initial finds allowed the tiny nation to wean itself off some energy imports, but additional discoveries — which could fuel Israel for 50 years, according to some estimates — have unlocked the potential for exports. “This was unthinkable just a decade or two ago,” Mr Steinitz told the Financial Times.
His problem is getting the gas out of an often hostile neighbourhood. Israel’s long-term goal is to fuel energy-hungry nations in Europe. But in the meantime Mr Steinitz has helped smooth a lucrative place holder agreement with Egypt — which has had a peace treaty with Israel since 1979.
The deal announced this year will allow Israel’s Delek Group to begin exporting as much as $15bn in natural gas to Egypt by early 2019, taking it from the Tamar and Leviathan fields that hold the vast majority of Israel’s proven reserves. “There will be significant exports,” Mr Steinitz said.
The agreement has become the centrepiece of Israel’s ambitious plans to turn itself into a Mediterranean energy player and has been bolstered more recently by follow-on deals.
In parallel, a separate export pipeline is being constructed to Jordan, which has had a peace treaty with Jerusalem since 1994. It is raising hopes that Egypt, Israel and Jordan will eventually become part of a single natural gas grid.
For Israeli prime minister Benjamin Netanyahu, gas offers a chance to advance his foreign policy goal of turning former Arab foes into economic partners, while creating long-term relationships between ministers and executives.
He wants to be on better terms with Arab countries that share Jerusalem’s concerns about Iranian regional aggression, and says he need not wait for a political solution to the Israeli-Palestinian conflict. Last month, after unveiling a secret visit to Oman, the prime minister told reporters the Arab world was “hungry” for Israeli innovation and trade.
But his energy ambitions are stirring opposition in other sections of Israeli society and abroad.
Residents who live near rambling northern beaches inside nature reserves are demanding that the gas infrastructure be placed further out at sea.
Security hawks have demanded that Israel keep the gas for its own use, which would stretch the supplies for at least 50 years, if not more. In September, thousands of environmentalists protested near the Israeli parliament, but by January, a $3bn platform being built in Texas will arrive 10km off Israel’s coast to begin the first phase of extraction intended for exports.
Equally sensitive is the public reception in Arab nations to doing business with Israel. Mr Steinitz’s meetings with Egyptian officials were mostly kept quiet, if not exactly secret, because Israel is still viewed with great suspicion there, despite a 1979 peace treaty.
In Jordan protests have broken out at the pipeline’s construction site and elsewhere over the fact that the deal normalises relations with Israel. Just last month, Jordan refused to renew a small part of its peace treaty, reportedly over its disapproval of Israeli actions towards the Palestinians.
But Jordan remains less troublesome than other local options. An underwater pipeline running to Turkey past Lebanon and Syria would have been politically complicated and fraught with the risk of sabotage.
Israel’s regulatory framework for energy is also problematic. The country needed billions of dollars of foreign funding to develop its gasfields because local companies did not have the expertise, said Charles Ellinas, a non-resident senior fellow with the Atlantic Council’s Global Energy Center. But volatile regulations make overseas investors wary. Mr Steinitz said a new gas framework finalised in 2017 was the final word, but investors remained wary. “You can never be assured that within Israel the gas regulation is stable,” said Mr Ellinas.
Mr Steinitz said there was no need to worry. The possibilities were underlined, he said, by a September deal in which Delek, along with Noble Energy of Houston and an Egyptian company, joined forces to spend $500m on a controlling stake in an idled pipeline between Egypt and Israel, which they will reverse to get gas flowing east.
The pipeline deal was announced after a two-hour meeting between Mr Netanyahu and Egyptian president Abdel Fattah al-Sisi in New York (Mr Steinitz said the two things were not related).
For Yossi Abu, Delek Drilling’s chief executive, the commercial promise of the pipeline deal is more important than its potential political benefits. “Some countries try to create ties by a political project that doesn’t have an economic basis — but that’s just a photo op. Here, the focus is just economics — that’s a win-win,” he said.
Despite Mr Steinitz’s optimism on Egypt, he is championing a more ambitious European plan: a $7bn deep-sea pipeline from Israel to Cyprus and then onwards to Italy. That’s a more natural, long-term fit for Israel — and less likely to be held hostage to regional politics, he said.
“Israel and Cyprus — we are two western-style democracies, members of the OECD, one of us is a member of the EU,” he added, arguing that the pipeline would help Europe reduce its reliance on British and Dutch gasfields. “We can become a reliable replacement for the northern stream, but only if we can build that pipeline.”
SOURCE
When Yuval Steinitz was doing his military service in the Israeli army, Egypt was an enemy and Israel lived in fear of having its oil supplies choked off by Arab rivals. But in recent years, as Israel’s energy minister, Mr Steinitz, 56, found himself in hush-hush meetings with Egyptian officials.
On the agenda: Israel’s gas conundrum. Since the late 1990s, it has discovered huge natural gas reserves off its coast. The initial finds allowed the tiny nation to wean itself off some energy imports, but additional discoveries — which could fuel Israel for 50 years, according to some estimates — have unlocked the potential for exports. “This was unthinkable just a decade or two ago,” Mr Steinitz told the Financial Times.
His problem is getting the gas out of an often hostile neighbourhood. Israel’s long-term goal is to fuel energy-hungry nations in Europe. But in the meantime Mr Steinitz has helped smooth a lucrative place holder agreement with Egypt — which has had a peace treaty with Israel since 1979.
The deal announced this year will allow Israel’s Delek Group to begin exporting as much as $15bn in natural gas to Egypt by early 2019, taking it from the Tamar and Leviathan fields that hold the vast majority of Israel’s proven reserves. “There will be significant exports,” Mr Steinitz said.
The agreement has become the centrepiece of Israel’s ambitious plans to turn itself into a Mediterranean energy player and has been bolstered more recently by follow-on deals.
In parallel, a separate export pipeline is being constructed to Jordan, which has had a peace treaty with Jerusalem since 1994. It is raising hopes that Egypt, Israel and Jordan will eventually become part of a single natural gas grid.
For Israeli prime minister Benjamin Netanyahu, gas offers a chance to advance his foreign policy goal of turning former Arab foes into economic partners, while creating long-term relationships between ministers and executives.
He wants to be on better terms with Arab countries that share Jerusalem’s concerns about Iranian regional aggression, and says he need not wait for a political solution to the Israeli-Palestinian conflict. Last month, after unveiling a secret visit to Oman, the prime minister told reporters the Arab world was “hungry” for Israeli innovation and trade.
But his energy ambitions are stirring opposition in other sections of Israeli society and abroad.
Residents who live near rambling northern beaches inside nature reserves are demanding that the gas infrastructure be placed further out at sea.
Security hawks have demanded that Israel keep the gas for its own use, which would stretch the supplies for at least 50 years, if not more. In September, thousands of environmentalists protested near the Israeli parliament, but by January, a $3bn platform being built in Texas will arrive 10km off Israel’s coast to begin the first phase of extraction intended for exports.
Equally sensitive is the public reception in Arab nations to doing business with Israel. Mr Steinitz’s meetings with Egyptian officials were mostly kept quiet, if not exactly secret, because Israel is still viewed with great suspicion there, despite a 1979 peace treaty.
In Jordan protests have broken out at the pipeline’s construction site and elsewhere over the fact that the deal normalises relations with Israel. Just last month, Jordan refused to renew a small part of its peace treaty, reportedly over its disapproval of Israeli actions towards the Palestinians.
But Jordan remains less troublesome than other local options. An underwater pipeline running to Turkey past Lebanon and Syria would have been politically complicated and fraught with the risk of sabotage.
Israel’s regulatory framework for energy is also problematic. The country needed billions of dollars of foreign funding to develop its gasfields because local companies did not have the expertise, said Charles Ellinas, a non-resident senior fellow with the Atlantic Council’s Global Energy Center. But volatile regulations make overseas investors wary. Mr Steinitz said a new gas framework finalised in 2017 was the final word, but investors remained wary. “You can never be assured that within Israel the gas regulation is stable,” said Mr Ellinas.
Mr Steinitz said there was no need to worry. The possibilities were underlined, he said, by a September deal in which Delek, along with Noble Energy of Houston and an Egyptian company, joined forces to spend $500m on a controlling stake in an idled pipeline between Egypt and Israel, which they will reverse to get gas flowing east.
The pipeline deal was announced after a two-hour meeting between Mr Netanyahu and Egyptian president Abdel Fattah al-Sisi in New York (Mr Steinitz said the two things were not related).
For Yossi Abu, Delek Drilling’s chief executive, the commercial promise of the pipeline deal is more important than its potential political benefits. “Some countries try to create ties by a political project that doesn’t have an economic basis — but that’s just a photo op. Here, the focus is just economics — that’s a win-win,” he said.
Despite Mr Steinitz’s optimism on Egypt, he is championing a more ambitious European plan: a $7bn deep-sea pipeline from Israel to Cyprus and then onwards to Italy. That’s a more natural, long-term fit for Israel — and less likely to be held hostage to regional politics, he said.
“Israel and Cyprus — we are two western-style democracies, members of the OECD, one of us is a member of the EU,” he added, arguing that the pipeline would help Europe reduce its reliance on British and Dutch gasfields. “We can become a reliable replacement for the northern stream, but only if we can build that pipeline.”
SOURCE
