The Next Two Weeks Will Determine Whether Israel Will Enter the Energy Game
Will Israel’s nonchalance turn off Woodside?
Israel is not against gas exports in principle. The main debate dividing the country has been centered around the quantities of gas to export (and hence the amounts of gas to preserve for domestic uses). The cabinet has yet to decide on those ratios as it is scheduled to meet and review the recommendation of the Tzemach committee.
Earlier this month, hundreds of Israelis protested outside the home of Energy Minister Sylvan Shalom against the Tzemach's recommendation to preserve 47% of the gas and export the rest. They requested a transparent process made public for all Israelis to ensure the natural resources will benefit the country as a whole.
To date, Israel has discovered 950 billion cubic meters of offshore gas, worth about $340 billion at today's prices. Shalom told Israel Radio on Tuesday 11 June that the cabinet will increase the amount of gas that will be kept at home (Reuters). It is suspected that the percentage will be above the 50% recommended by the Tzemach.
The amounts to be exported are not the only challenge. Israel has to opt for its export routes and markets. If the export quotas spurred internal agitation, the routes and destinations that Israel will choose will have a major incidence on the region and the rest of the world.
While Cyprus moves ahead with its plans to build an LNG terminal in the hope it will turn the debt crippled island into an energy hub that would welcome and process Israeli and Lebanese gas, energy-hungry Turkey contemplates another scenario.
A pipeline that would export gas from the Leviathan field in Israel to Europe through Turkey is now a little more likely than before since the Obama-brokered Israeli apology to Turkey for the deaths of nine Turkish activists aboard a flotilla bound for Gaza in 2010.
However, such a pipeline would have to pass through Cyprus to avoid, for obvious reasons, the waters of Syria and Lebanon. The problem of the division of the island is another obstacle to an Israeli-Turkish collaboration. Israel could build its own LNG terminal using the expertise of the Australian firm Woodside but Israel has not yet reached the stage of studying such an undertaking.
Although patience is a virtue, will Israel pay the price of its nonchalance? LNG prices are high at the moment. Asian markets maintain their attractiveness for this reason. The current demand for LNG is higher than the supply but things are likely to change when the US enters the market.
The Cypriots for instance have realised that the window of opportunity is about to close and have accelerated the process of building the LNG terminal before a possible drop in the price of LNG. Charles Ellinas told Natural Gas Europe that a joint venture between Noble and CNHC (Cyprus National Hydrocarbons Company) would enable the island to be in a position to export its gas by 2020.
Apart from a price drop, by 'taking it easy' Israel could lose Woodside’s interest, and for good. The Australian giant has set a June 30 deadline for completing a deal signed with the Israelis back in February to acquire 30% of the Leviathan field. The next two weeks will determine whether Israel will - or not - become a major player in the energy game.
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.
Follow Karen on Twitter: @karenayat