Israeli Gas Export Options Blurred
By Theodore Tsakiris
The Israeli government�s delay in implementing the Zemach Committee�s recommendations on gas exports has increased friction amongst the Leviathan partners over the optimal export option for their gas.
The committee suggested in its final report to the Israeli cabinet published on 29 August that Israel could export by 2037 up to 500 bcm of its existing and prospective gas resources. It also proposed a quota system that would allow for the export of up to 75% of the annual production from major fields with an estimated capacity above 200 bcm, and there is some flexibility to allow the trading of quotas amongst companies (MEES, 7 September).
Israel�s offshore gas transits to the mainland via a single underwater pipeline that links the existing Yam Tethys fields with a single entry point just north of Ashdod. For security of supply an alternative connection in the north which is closer to the recent large discoveries would be prudent, but Israel is unwilling to channel public funds to such a project. As a result the Tamar gas field partners (Noble, Delek Group and Isramco) and Leviathan partners (Noble, Delek and Ratio Oil Exploration) have leverage over the state on their demands for a pro-export regulatory framework in exchange for funding the pipeline�s construction.
�It is impossible to talk about a northern gas terminal if there is no project to supply the gas; in other words, Leviathan. It is impossible to talk about developing the Leviathan field without an export horizon. The key is the Zemach Committee recommendations. I am sure that the government and the prime minister will approve these recommendations as quickly as possible, and there will be no delay, heaven forbid, because the approval is a milestone,� said Gydeon Tadmor, the CEO of Delek subsidiary Avner Oil and Gas, at the 28 October Israel Energy and Business Convention 2012.
But the Zemach Committee�s recommendations are not expected to be implemented quickly, especially ahead of Israel�s 22 January election, and with conservationists disputing its findings (MEES 2 November).� Tension has increased amongst Leviathan partners over the optimal export option for their gas, even though all consortium members are aware that there is unlikely to be any gas unless they can attract a major international company �with top experience as an LNG developer,� Mr Tadmor noted.
At the recent conference, Mr Tadmor was the only vocal proponent of exporting gas via the proposed Vasilikos LNG facility in Cyprus. Yigal Landau, the General Manager of Ratio Oil Exploration, asserted that �the [gas export] facility should be based in Israel. Israel must have a backup. It cannot be dependent only on Cyprus.� Lawson Freeman, Noble�s VP for the Mediterranean Sea, did not express a preference for Leviathan�s two principal export alternatives via either Cyprus or Israel. But he noted that all export options are being �meticulously studied.�
From a geopolitical point of view a combined 20 bcm/year liquefaction terminal on EU soil would upgrade Israel�s regional standing and would also make the most economic sense given Leviathan�s proximity to Cyprus� Aphrodite field and the island of Cyprus itself. From a military point of view though, Israel�s generals appear to have no doubts over the necessity of putting the export facility firmly within Israeli sovereignty. MEES understands that the senior representative of Israel�s National Security Council in the Zemach Committee, Avriel Bar-Yosef, has vetoed the Vasilikos option on security grounds. It is uncertain whether Prime Minister Benjamin Netanyahu shares his views, and what impact any changes in the Knesset will have on the export question.
Gas may be exported from Tamar in 2018 using a floating LNG plant, but beyond that the way forward is unclear. The best chance for Cyprus to receive major quantities of Israeli gas for liquefaction would be if the Pelagic consortium strikes gas on the Ishai block, which is an extension of Cyprus� Aphrodite field. Exploratory drilling started on 2 November and will continue for another 85 days. However, the discovery of more Aphrodite-size fields in the recently awarded Cypriot Blocks (MEES, 2 November) may �leave little room for Israeli gas at the proposed Vasilikos facility if Israel continues to dither on exports. Meanwhile, the failure of the Israeli Land Development-led consortium to discover gas in the Sara and Myrah license areas was a setback for the Israeli gas sector, and further muddies the way forward on Israel�s export options.
Copyright MEES 2012.
