Israel gas terminal plan sharpens Mediterranean rift

Nov 02, 2011 12:00 AM

Israel has signed an agreement with an Italian company to build a liquefied natural gas terminal in the Mediterranean off the northern town of Hadera, upping the stakes in a regional dispute over vast undersea gas reserves.
State-owned Israel Natural Gas Lines says the $ 140 mm plant, to be constructed by Italian marine contractor Micoperi, will have the capacity to handle 87.25 bn cf of gas a year when it's completed by the end of 2012.

Israel's discovery of massive gas fields in its exclusive economic zone in the eastern Mediterranean in 2009-10 triggered a chain reaction of disputes across a region that until then had been resource-poor.
Now many regional states are scrapping over some 122 tcf of gas, plus some 4 bn barrels of oil, that the US Geological Survey says lies under the Levant Basin. That encompasses area claimed by Israel, Syria, Lebanon, the Gaza Strip, Egypt and Cyprus.

Lebanon has claimed part of the largest Israeli gas field, Leviathan with reserves of 16 tcf, lies in its territorial waters. It has vowed to prevent Israel from ‘looting’ Lebanese assets.
Israel, still technically at war with its neighbour, has threatened to use force if the Lebanese try to seize the gas.

The gas fields have assumed a greater importance for Israel since the February downfall of Egyptian President Hosni Mubarak during a pro-democracy uprising.
The demise of Mubarak, who upheld Egypt's landmark 1979 peace treaty with Israel, has allowed widespread opposition to Israel among its 80 mm people to come to the fore. That led to Egypt cutting off gas exports to Israel, which accounted for 40 % of the Jewish state's gas requirements. The new regime in Cairo says Mubarak sold Israel the gas at rock-bottom prices and a price increase is expected to be announced soon.

With the need to utilize the newfound gas fields as quickly as possible, Israeli Prime Minister Binyamin Netanyahu's government has ordered energy companies involved in the offshore gas exploration to speed up work and threatened to withdraw operating licenses if they don't.
Infrastructure Minister Uzi Landau said Israel could face a critical shortage as early as the third quarter of 2012. The planned terminal ‘is of the utmost strategic importance for the country's ability to ensure a continuous supply to its power stations and to safeguard its energy security’, he declared.

Of the two main fields found, Tamar, containing 8.5 tcf of gas, is expected to begin production in 2013. The larger Leviathan field, with 16 tcf, isn't due to go onstream until 2017.
The Israelis are planning to expand their navy with more patrol craft to protect the highly vulnerable gas platforms and pipelines. The threat doesn't come only from Lebanon's Iranian-backed Hezbollah organization, but possibly also from the naval forces of former strategic ally Turkey. Ankara threatens to challenge Israeli vessels in the eastern Mediterranean and has also been caught up in Israel's cooperation with the nearby island of Cyprus in its drive to explore for gas fields believed to extend from Israel's continental shelf.

Israel and the Greek Cypriots plan to build joint export pipelines to Europe via Greece, cutting out Turkey, Greece's ancient adversary.
In September, Cyprus began exploring off its southern coast in what's seen as an extension of Israel's Leviathan field. Ankara says it won't allow Cyprus to drill until a reconciliation agreement has been reached.

Market Research
Upcoming Conferences