Egyptian Pipeline Attacked Again in the Sinai
The past week saw the pipeline that transports gas from Egypt to Jordan being subject of a blow up by militants. The attack is the third of its type in less than a month. The pipeline that connected Egypt to Jordan and Israel has been the target of various attacks ever since the start of the Egyptian revolution in 2011 aimed at ending the Hosni Mubarak regime. These acts of rebellion led to severe disruptions in the flow of gas from Egypt to Jordan and to a complete halt of Egyptian natural gas supply to Israel.
Jordan is still receiving substantially reduced amounts of gas from Egypt who blames the reductions on technical problems with the pipeline. The Kingdom suffered severe financial consequences as a result, its energy bill hitting as much as USD 2 billion, and is currently in the process of developing its indigenous resources and constructing an LNG terminal in Aqaba in line with its national energy strategy: diversifying the sources of supply and increasing the reliance on national resources.
Israel on the other hand is less affected by the damage to the pipeline given that it has since discovered enough gas off its shores to keep the natural gas coming for decades to come. Israel’s Leviathan field contains around 19 Tcf of natural gas and is expected to come online sometime in 2017 while its 10 Tcf Tamar field started supplying gas in March 2013. israel embarked in lengthy and detailed debates on whether to save all the gas for national consumption and hence avoid a future case of natural gas dependence/vulnerability or to partly monetize the riches by selling the gas to export markets. Israel’s government took a decision in June 2013, ratified by the Israeli Supreme Court in October 2013, to allocate around 40% of the newly found hydrocarbon riches to exports.
Geopolitcal obstacles standing in the way of exporting gas to distant markets in the short term, Israel expressed its intention to export natural gas to the Palestinian authority and a deal was penned for this purpose. Israel is also flirting with the idea of exporting gas to Egypt (Egypt is suffering from frequent power outages and shortfalls of natural gas due to a growing population and export obligations) and to Jordan who is in need of a reliable supplier of natural gas.
The same pipeline that transported gas from Egypt to Israel would be used in reverse if Israel were to sell gas to the Egyptians. The recent attacks and their recurrence are however a reminder that the whole region is still undergoing fundamental changes and has not reached stability. While Israel’s export strategy to immediate neighbours makes sense from a technical and commercial perspectives, the political angle remains tricky. Having suffered for years from energy vulnerability, it is unlikely that Israel will limit its export options to its immediate surrounding.
Adopting multiple export strategies in parallel to reach out to customers via pipeline or LNG - using for example the future LNG plant in Vasiliko Cyprus or a FLNG that it would build - is likely to be Israel’s approach given the cautioness it has demonstrated since its first steps in the energy industry. In a part of the world segmented by embittered rivalries, it is no doubt interesting to observe how natural gas will add to the game and it will not be long before the details of future moves unfold.
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean. Email Karen on ayat_karen@hotmail.com. Follow her on Twitter: @karenayat