Op-Ed: An Alternative Approach for Israel's Energy Exports
Published: Tuesday, March 18, 2014 7:16 AM
The decisions Israel makes on how to export gas to
Europe from the Leviathan field will have a positive geopolitical impact
on Israel if conducted in a manner that takes into account the complex
geopolitics of the region.
George Papadopoulos
The
writer is a senior consultant at the Hudson Institute think tank in
Washington, DC and the initiator of the first conference on US-
Israel-Greece-Cyprus geopolitical developments.
Since April 2013, Israel has transformed
itself from a country almost completely dependent on foreign energy, to
one that is energy self sufficient. The offshore Tamar gas field is
already operating at full production capacity and is supplying Israel’s
domestic requirements. Adjacent to this field is the largest natural gas
discovery of the past decade, the giant 19 trillion cubic feet (tcf)
leviathan field which has been earmarked for exports. In recent months,
Israel has signed export
agreements with her regional Arab neighbors, the Palestinians and
Jordanians, to supply natural gas which will transform Israel into a net
exporter of energy for the first time in its history.
The
founding fathers of Israel are surely pleased with how events have
unfolded for the young Jewish State. As Israel fought numerous wars
against energy rich Arab neighbors, the “oil weapon” was systematically
used against it and the U.S. on countless occasions especially after the
Yom Kippur War. Ironically, it was during peace times that Israel’s
treaty partner, Egypt, decided to cut all gas flows to Israel. By fate’s
caprice and what is now acknowledged were Moses’ excellent navigational
skills, Israel will not only be a larger natural gas producer than her
Arab neighbors in the eastern Mediterranean for the foreseeable future,
but also a net exporter to them. While these developments are an
unprecedented political and commercial success for Israel and the
operators developing the offshore gas fields, the Palestinian and
Jordanian
markets are small, and
pipeline exports to both do not constitute the same political risk as
Israel’s far larger and more dangerous neighbor to the north, Turkey.
The
decisions Israel makes along with the operators developing the
Leviathan field on how to export energy to Europe will have a profound
and positive geopolitical impact on Israel if conducted in a prudent
manner that takes into account the complex geopolitics of the region.
Recently,
there have been commercially driven proposals to construct a pipeline
from Israel’s giant leviathan field to Turkey as the cheapest and
fastest way to export Leviathan’s energy to both Turkey and Europe.
While this may be true from a pipeline cost standpoint, the question
that Israel and Europe should be asking is, is this route in both
Israel’s and Europe’s interest? The answer is no. The idea is bereft of
the political realities in the region and does not take into account the
potentially devastating impact this option can have on Israel’s
strategic relations with EU member Cyprus, and by extension, all of
Europe.
In a speech to the British Parliament on the importance of
assuring dependable supplies of energy at reasonable prices for the
British Admiralty, in 1913 Winston Churchill famously said: “On no one
quality, on no one process, on no one country, on no one route and on no
one field must we be dependent. Safety and certainty in oil lie in
variety and variety alone”. In response to the third potential gas
crisis between Ukraine and Russia since 2006, and by extension, Europe,
Israeli and European statesmen should take heed of Churchill’s words and
look towards Israel and Cyprus’ energy to diversify both supplies and
routes from Russian state owned monopoly, Gazprom, and Turkey as a
transit country for Europe’s
market.
Historically,
Europe imports approximately two-thirds of its natural gas demand from
three sources: Russia, North Africa/Qatar, and the North Sea. In 2013,
as a result of political instability in North Africa, Qatari preference
to ship LNG to the premium Asian markets where prices fetch double what
they do in Europe, and depleting indigenous production in the North Sea,
this permitted Russia to obtain an unprecedented 30% of the 538bcm
European market share, and an increase of 16% year-over-year when
including Turkey.
Imports to Germany and Italy spiked 20% and 60%
respectively. Declining Norwegian production and exports to Europe via
the North Sea, which had achieved a larger percentage of the European market
than Gazprom in 2012, fell 5% in 2013. Consequently, this permitted
Russia to supply approximately 30% more gas than Norway did in 2013 to
Europe. Perhaps more worrisome is that declining European production is a
long-term phenomenon. Declining indigenous European gas production can
be most identified with the depleting reserves in the North Sea.
Currently, the largest gas field in Europe, the giant Groningen natural
gas field, was initially drilled in 1952. In February 2014, the Dutch
government noted that it will cut production from this field by 25% in
2014.
Brussels has expedited plans to create additional energy
corridors to Europe. In the summer of 2013, the “Southern Energy
Corridor” was decided upon which will channel energy from the Caspian
Sea to Europe through Turkey and Greece. Europe’s predominant dependence
on supply and route from Russia and Turkey is a harbinger of
instability and increases energy risk for the European market. If
history is a guide to understanding the present and charting the future,
both Israel and Europe should be weary of depending on Turkey to be the
primary transit state of Leviathan’s riches to Europe.
The recent
crisis between Ukraine and Russia belies the notion that “peace
pipelines” can be constructed to improve relations between neighbors. At
a time of heightened energy vulnerability in Europe, is it wise for
both Europe and Israel to depend on Turkey to channel the only
autonomous western energy reserves in the entire region to energy hungry
Europe while relations between Turkey and Europe and Israel are at an
all-time low? If Turkey’s secular minority and western-oriented
opposition were able to retake the country from the iron grip of the
Islamists the answer may be yes. However, as Turkey continues to abandon
the kemalist enterprise, and eviscerates the remnants of the secular
republic modern day Turkey was founded on, Turkey will become as
unpredictable a transit route as Russia has been as a supplier to
Europe. This is a risk that neither Europe nor Israel can afford.
Turkey’s ability to cut Israeli gas to Europe can become a calculated
provocation that stokes unrest for Israel and particularly susceptible
European countries which are already vulnerable to politically-driven
natural gas blackmail by Russia.
Fortunately for Israel, and
Europe, there are more politically suitable export options to Europe
from Leviathan than the pipeline route to Turkey. Israel and Europe have
an opportunity to mitigate the risks listed above by supporting and
promoting further energy cooperation between Cyprus and Israel for
the construction of the proposed LNG facility at Vassilikos that will have the capacity to accommodate Leviathan’s gas. The construction
of this facility can also leverage Cyprus’ strong ties with Lebanon to
help facilitate a binding resolution to the long lasting maritime
dispute between Israel and Lebanon by also inviting Lebanon to export
its gas to this facility. This will virtually transform the eastern
Mediterranean into an integrated energy zone.
Gas can then be
exported from this facility to Turkey’s regassification terminals as an
incentive to promote the reunification of Cyprus and repair relations
with Israel. A pipeline to Turkey can then be constructed when political
circumstances permit, not before. This would include full normalization
of relations with both Israel and Cyprus. This option would in effect
export Israeli, Cypriot, and potentially Lebanese gas to the Turkish and
European market without the risk premium involved that the pipeline
option would currently have. Under present circumstances, for the
pipeline to be constructed from Leviathan to Turkey, it would have to
cross Cyprus’ exclusive economic zone. This is political infeasible for
the medium , and potentially long-term. Cyprus has stated that it will
not permit a pipeline to Turkey through its exclusive economic zone
without a political settlement to the Cyprus problem.
Israel’s
strategic relations with Cyprus, and by extension Europe, are rapidly
improving while relations with Turkey are at an all-time nadir. Israel
is geographically part of the predominantly Muslim Middle East, but this
does not mean it has to be vulnerable to extremism and isolation
forever. By exporting to Turkey, Israel will be forever connected with
the Middle East’s problems. Even as Israel addresses the political and
security challenges it faces, Israel has to work on economic
interconnectivity in parallel. Regional economic cooperation between
Israel and Cyprus should be the guiding principle that anchors Israel
economically to Europe.
The physical connectivity—transport,
communications, and energy infrastructure—by exporting leviathan’s gas
to Vassilikos will link Cyprus and Israel and Europe. Utilized wisely
the abundant gas from leviathan can drive employment and investment,
while generating billions in public revenue. Israel can shape its own
destiny firmly a part of the West by deciding to export to Europe
through its European allies, or endure its destiny to be chosen for it,
by opting to subject its national treasure to what has now become a
regional menace.
Link to article:
http://www.israelnationalnews.com/Articles/Article.aspx/14693
