Ariel Ezrahi: Energy Adviser to Quartet Representative on Gaza, Israeli Gas
Natural Gas Europe had the pleasure to speak with Ariel Ezrahi, the energy adviser to Quartet Representative Tony Blair. We discussed the Gaza Marine field, the Israeli interest and the possible benefits for the Palestinians in Gaza. According to Ezrahi, the field has a logic of its own. During the interview, he argues that the discovery of Israeli fields is a positive factor for the development of the Gaza Marine field, as “now it is universally accepted that Israel is not eyeing the Palestinian resources, as it has sufficient resources of its own.”
According to Ezrahi, allowing the gas from Gaza being sold to Jordan would also increase the probability of shipping Israeli resources to Amman, for both geopolitical and technical reasons. “I just want to stress that we have a rare window of opportunity now for regional cooperation in the energy sphere, which entails gas sales, but also gas infrastructure. This is a very rare opportunity, because in a few years time everything can change” he concludes.
In your presentation, you spoke about the Gaza Marine field. If you had to tell me the three hurdles for the development of this field, what would be the main difficulties hindering the whole process?
Historically?
No - how to move forward. And why is there so much resistance?
I would not call them hurdles, but I would call them steps that need to be taken. And I would refer to three, probably two, points. One is commercial. You need to have a willing seller, and you need to have a willing buyer. I think that progress has been made in that domain.
Are you referring to Jordan’s interest in buying gas from Gaza?
Yes, Jordan, but also Palestinian IPPs.
What about the second step?
The second is political will, which is crucial, as was mentioned during the conference. This is crucial, because of the context offshore Gaza.
What kind of political will are you referring to? Political will in Palestinian territories or political will in Israel?
Israel holds the key to this. Israel controls the area. The maritime area is also under Israeli control. So Israel controls the area. I think that from the Palestinian Authority perspective, for them it is a no-brainer to develop the field. They would get an income from the development. But of course, there is also work for the Palestinians to do - they need to continue to embark on the regulatory reform if they want to attract investments. For example, the Gaza Marine licence was granted before you had any hydrocarbon law. So they have things to do as well. The scope is regional. There is not enough gas to export to Europe from the field.
In economic terms, it looks that this field is even more appealing than small fields off the coast of Israel.
That’s correct.
In my understanding, the field is in shallow waters, whereas the other fields are deepwater fields, which clearly requires more expertise and more capital. Is it right?
Yes, the Gaza Marine field is considered a good field in that sense (at around 603 meters deep). It does not have the quantities that you have in fields like Tamar or Leviathan, but it is considered a very good field. It is only 36 kilometres offshore. It is relatively straightforward, the structure is similar to the one of Israeli fields in the area. So it is considered one that, once you have the steps in place, than it makes a lot of sense to develop it and to do that.
You have already touched upon this, but I will ask you once more. Do you see a regional approach to gas from Gaza or would you see also room for export?
I think that, because it is a small field, and there is significant demand locally in the Palestinian territories, but also in Jordan, I don’t see any potential beyond the region.
And do you see positive externalities for Israel as well? Can we say that it is in Israeli interest to develop the field?
Absolutely, for a number of reasons. But let’s take a step back. The positive consequences for the Palestinians are obvious: it is a source of revenues. It is not only a matter of royalties, but we have to remember that the Palestinian Investment Fund is a shareholder of the field. On the Israeli side, it is obvious too. If we have an interconnectivity, if we have interconnected pipelines, you are connecting Gaza to gas, you are connecting West Bank to gas, you are connecting Jordan to gas, you are connecting Egypt to gas. You basically have a system that, like with electricity, you have more demand here and you pass gas here. You have more demand there and you pass gas there. That is how we see it, like in normal places, like in Europe. This region is lagging behind. Even if the gas does not go to Israeli consumers, but to Jordan or to Palestinian IPPs [Independent Power Producers] in the West Bank, still nonetheless, as a system, this would enhance stability for the Israeli gas network as well. That is number one. Then there is a second advantage for Israel, which is political, because also the Israelis recognise that stability in the Palestinian territories is good for Israel too. If you can deal with the energy crisis that you have in Gaza, that would be in Israeli interest. For example, in Gaza, you are not able to supply the adequate amount of water by pumping or desalinating because of the high energy costs. This has an impact because there are joint structures - water aquifers which then can collapse. This impacts Israel. So I think there is a huge benefit because of the nexus, because of the proximity.
Energy prices are correlated to food prices. Do you think that domestic gas production would translate into lower food prices too?
Yes, of course. You need energy for water, and water for agriculture. Gaza is an important case study in that regard, because the costs are so high that trade is affected too, for example, exporting agricultural products. But the way to do that is to have cost efficient energy supplies, which then enables you to have cost efficient water supplies, which then feeds into that. And this is also for other fields of the economy - industry and so on.
Do you think that the discovery of Israeli fields increase or decrease the probability of the development of the Gaza Marine field?
I see it as a positive factor. You could argue that pre-2009, so before the Tamar field was discovered, people argued that Israel would seek to use the gas from the Gaza Marine field for its own purposes. I think that now it is universally accepted that Israel is not eyeing the Palestinian resources, as it has sufficient resources of its own and it recognizes it belongs to the Palestinians. It does not need to have any claims on Palestinian gas. Israel has said that - including the Prime Minister. On the contrary, I think there are synergies there. So if Israel exports to Jordan, for example, and the Palestinians export some of their gas to Jordan, they can use the same infrastructure.. In addition to that, if Israel builds, enhances and expands its gas transmission network in the North, once again, that could be used for Palestinian supplies as well.
We know that in the streets of Jordan and Egypt, Israeli gas is not really well seen. Do you think that shipping gas from Gaza might be a form of political cleansing, geopolitical softener?
Definitely.
This might even lead to selling gas from Israel using the same pipeline, and in a sense Jordan and Egypt might end up buying Israeli gas thinking it is gas from Gaza.
Look. I think two things. First of all, I think there is no doubt that the Palestinian gas is interesting not because of the quantities, but because of the geopolitical implications. This means that if the parties do things in a wise manner, and look at it from the point of view that everyone is trying to benefit - this could be the same case for the Gaza Marine as well. If in the Jordanian streets, people were not content about buying Israeli gas, but then the Jordanians can say: well, we are buying Israeli gas, but we are also buying Palestinian gas, this is not a way of tricking the people. I don’t think you can trick the people. That said, this whole process would be a way to alleviate the tensions. From the Israeli perspective, this is important as this would make it easier for Israel to sell its gas to the neighbours.
The last question about the recent announcement about Shell’s intention to acquire BG. Do you think that it changes in any way the prospects of the Gaza field? In other words, is it a game changer?
I think the field has a logic of its own. It makes economic sense. I am not a prophet, and I don’t know what Shell will do, but it has been said publicly that it wants to dispose of some assets. I don’t know if that would include the Gaza Marine. It is impossible to know right now. Maybe, some very senior officials in Shell know what their plans are, but I certainly don’t know. At the end of the day, as I said, the field has a logic of its own. In the hypothetical situation Shell decided to sell it, the field would still make sense. If the economics is there, if there is a willing seller and a willing buyer, and the politics is right, I think that is the key thing. Let's not forget that CCC is a major interest holder in the field with strong Palestinian roots and the key players in the Gaza Power Plant. They too have a major interest in the field's development
Perfect for me. Do you have anything to add?
I just want to stress that we have a rare window of opportunity now for regional cooperation in the energy sphere, which entails gas sales, but also gas infrastructure. This is a very rare opportunity, because in a few years time everything can change. We have failed states around us like Syria, we have groups like ISIS, that are destabilising the region. Exactly at this time, the moderate regimes - whether on the Palestinian side, the Egyptian side, the Jordanian side - can work together. Obviously, there should be progress on the political front as well, but there is certainly a lot that can be done in the energy field. And we know that energy can have important geopolitical ramifications.
Sergio Matalucci
Sergio Matalucci is an Associate Partner at Natural Gas Europe. Follow him on Twitter: @SergioMatalucci