Israel to “break free” the EU’s dependence on energy from the east

Mar 01, 2011 12:00 AM

by Kyriaki Papachristoforou -- Southern Europe and Middle East analyst

In December 2010, a US based company, Noble Energy, confirmed the existence of 16 tcf of natural gas, in the offshore Leviathan field 130 km west of Haifa in Israel, sparking intense discussions on how to best exploit the newly found natural resources.
The new discovery comes in addition to the verification of the existence of 8.3 tcf of natural gas in the Tamar field in 2009, inside Israel’s exclusive maritime economic zone.

Israel, having demarcated her maritime borders with Cyprus in early December 2010, is now in the process of building the infrastructure for drilling natural gas inside the Tamar field in 2012. It is estimated that the amounts of natural gas contained in the Tamar field can cover the country’s energy needs for at least two decades.
So far, Israel is in a compromised position regarding energy supplies because the state depends 95 % on imports. According to the United States Geological Survey, the gas finds offshore Israel “belong to the massive Levant Basin Province field that might contain a total of 122 tcf”; an estimation that could bring major changes in the Energy sector of several regional countries.

Consequently, Israel is strongly interested in becoming a gas export country herself expressing her interest to collaborate with Europe in order to export the newly founded natural gas.
In the first-ever official visit of an Israeli Prime Minister to Greece in August 2010, the Israeli Prime Minister Benjamin Netanyahu, discussed the prospects of constructing an underwater trans-Mediterranean pipeline with his Greek counterpart, George Papandreou. The idea is to transfer Israel’s natural gas to the European Union via Cyprus and Greece.

Meanwhile, Cyprus has licensed Noble Energy to proceed with the first exploration on hydrocarbons by early 2012 in Block 12 of her exclusive maritime economic zone.
According to Cypriot government’s estimations there are promising signs for significant deposits. It is assessed that the particular block might contain up to 10 tcf of gas deposits.

The current state of play
Energy security constitutes a pivotal issue in the agendas of European Union’s leaders. The European Union accounts for one fifth of the world’s energy use, while being the world’s largest energy importer with her natural resources imports reaching 60 % (Energy 2020, a strategy for competitive, sustainable, and secure energy, European Commission 2010).
According to Eurostat, the total energy dependence rate (EDR) of gas increased from 61, 5 % in 2008 to 64, 3 % in 2009 and the demand for energy imports is expected to rise in the next two decades given Europe’s natural resources scarcity (Eurostat, Statistics in focus - 43/2010). Although EU’s energy suppliers differ according to the type of energy being imported, Russia remains the main supplier of the EU in natural gas, crude oil, feedstocks and coal.

Russia currently provides the European Union with natural gas and oil through Druzhba, Russia’s largest pipeline, on two routes; the first runs north, connecting Siberia to Germany via Belarus and Poland, while the second runs south through Belarus, Ukraine, Slovakia, Czech Republic and Hungary.
The great dependence on Russian natural resources became unpleasantly evident in 2006, when the gas crisis occurred between Russia and Ukraine, leaving thousands of European Union citizens without heating, hot water and transport in the midst of a heavy cold winter. Ever since, Europeans live with the fear of the recurrence of such crisis. Although Europe has not relived the regrettable times of 2006, in the political backstage the Russian-Ukraine dispute is being repeated each year over gas price, supply and unpaid debts between the two countries.

In the meantime, the European Union has agreed to the construction of three other gas routes, two of which will again transfer natural gas from Russia.
First, Nord Stream Pipeline is planned to transfer gas from Russia -- via the Baltic Sea -- to Germany, which will then transport it to Denmark, the Netherlands, Belgium, the UK and France. The construction of the line started in April 2010 and it is estimated that the first gas will flow by the end of 2012.

Second, South Stream Pipeline will connect Russia to EU via Black Sea running through Bulgaria, Greece, Serbia, Hungary, Croatia, Slovenia, Italy and reach Austria. While the final agreements between the constructing countries and companies have yet to be signed, the project is expected to be operational in 2015.
Finally, Nabucco Stream is the third project under way, being however, the most problematic. The pipeline is projected to run through Turkey, Bulgaria, Romania, Hungary and end in Austria, with possible main suppliers Iraq, Azerbaijan, Turkmenistan and Egypt. However, the route creates rivalry with the South Stream. The project is still lacking final agreements of the stakeholders and if built, it will be ready to function by the end of 2015.

‘Abducting’ Europe from Russian energy strings. Should the EU seize Israel’s proposition?
The European Union’s Communication on ‘Energy 2020, a strategy for competitive, sustainable and secure energy’, published in 2010 sets out the goals of a coherent energy market, while strengthening collaboration on the issue with neighbouring countries.
Therefore, Israel’s suggestion for energy partnership should be taken into serious account by European policymakers.

Potential cooperation with Israel could bring greater diversification of natural gas suppliers for the EU with many subsequent effects. Such collaboration can lessen the EU’s energy vulnerability and the intrinsic dependency on Russian supplies, diminishing fears of gas flow disruptions in the continent.
Furthermore, by opening widely the natural gas market, the competition could generate decrease in gas price favouring ultimately European consumers. The inflowing of additional third parties in the EU’s energy market is essential in order to secure instant flow of energy and benefit the European Economy in the long-term -- let alone the direct creation of new jobs and opportunities.

Additionally, an alliance of such nature would also strengthen EU-Israel relations and give new stimulus in political, economic, social matters between the two parties. Besides, Israel allies with the European Union under the ‘Union for the Mediterranean’, which is the southern regional cooperation branch of the European Neighbourhood Policy (ENP).
The goal of this partnership is to promote bilateral and regional relations enhancing peace, security and prosperity for the Mediterranean region.

To the point, there is no similar stream connecting the European Union to the African continent. If the two sides would come to agreement it is certain that there would be a great economic boost in the south-eastern part of the European Union, while greater regional stability could be achieved.
It would be a major opening towards North Africa and a milestone for the ENP. A potential pipeline running from Israel via Cyprus and Greece could then continue on to countries such as Italy, France covering the needs of southern Europe. The proximity of Cyprus to Israel is also catalytic in reducing transit fees.

Israel could play the role of the modern White bull ‘abducting’ Europe from Russia’s energy dependency. The European Union should no longer rely solely on Russia’s supplies but pursuit alternative strategies to fortify her economy and enhance her Energy backbone.
If this project becomes a reality then the European Union will add a strong asset in her energy supply network and unleash the Union’s current Energy sector stiffness.

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