The political roadblocks of Israel exporting gas have little to do with Arab/Israel conflict

Reuters reports:

A group of energy companies that discovered large amounts of natural gas off Israel's Mediterranean coast said they were in talks to export the gas to Europe via a pipeline to Turkey.

They are also studying options to export gas to Jordan, Egypt and the Palestinian Authority, Avner Oil & Gas said on Tuesday.

"The partners are negotiating with various officials," Avner, one of the partners in the project, said.

A spokesman for Delek Group, the parent company for Avner and for Delek Drilling, said the group - led by Noble Energy - was already in advanced talks with companies in Turkey, Jordan, Egypt and the Palestinian Authority about buying Israeli gas and building pipelines.

As always, there are some hitches. World Bulletin reports:

An Egyptian energy official has dismissed reports saying that the country is in talks with Israeli energy companies for gas imports and possible pipeline projects.

On Tuesday, Avner Oil & Gas, leading a group of energy companies that discovered large amounts of natural gas off Israel's Mediterranean coast, said that they were in talks to export the gas to Egypt, Jordan and the Palestinian territories. The talks, the company said, also covered the possibility of building pipelines to help export the gas to Europe.

However, Taher Abdel-Rahim, chairman of the Egyptian Gas Holding Company (EGAS), which runs Egypt's gas pipeline network, dismissed the claims.

"We have not made such negotiations and will not go into talks in the meantime with any international companies about such proposals," Abdel-Rahim said.

Abdel-Rahim said such deals cannot be completed without the knowledge of his company.

But the real issue isn't the Arab/Israeli conflict - so far I have not seen any pushback from Jordan or the PA about buying Israeli gas - but from political issues in other parts of the Mediterranean:

What form should those exports take? One early idea was a pipeline to Turkey. Great. Turkey is nearby; it’s a booming market that is expected to see demand grow from 43.5 bcm in 2012 to around 60 bcm in 2020; and it favors diversity of sources. Moreover, at present, its only completed agreement to cover the extra 16-17 bcm/y of gas it needs to import (and, since domestic production is minimal, its increase in demand is tantamount to an increase in imports), is for 6 bcm to come from Azerbaijan, starting in 2018-19.

But that’s a political minefield. The foreign ministry likes the idea because it would help improve ties with an important neighbor. But it still has no clear answer to the question as to whether maritime boundary issues first must be settled–or even a full solution of their 40-year Cyprus dispute.

The reason is that waters to the east of Cyprus (if not actually Lebanese or Syrian), may be Cypriot in international law, but in practice a good part of any route taken by a pipeline from Israel to Turkey to the east of Cyprus would have to pass through waters controlled not by the Government of Cyprus but by the self-proclaimed breakaway state which calls itself the Turkish Republic of Northern Cyprus.

As for a possible line to the west of Cyprus, that would need to pass through waters that are even more diplomatically murky. The problem here is that Greece, Turkey and Cyprus have yet to state, let alone agree, just what they consider their respective Exclusive Economic Zones to be in this area. Judging by maps produced by Turkish and Greek analysts, any formal claims would be fundamentally incompatible, with Turkey likely to argue that its EEZ would have a common boundary with Egypt’s EEZ; Cyprus would looking to support prospective Greek claims that Greece and Cyprus share a common EEZ boundary. Perhaps it is just as well that neither Athens nor Ankara seem to wish to oppress this point at present. After all , they’ve been arguing over their maritime boundaries in the Aegean for half a century, with no solution in sight.

Some Turkish sources have suggested the simplest solution would be to lay a subsea line from the Israeli and Cypriot fields to southern Cyprus, then run an overland pipe to northern Cyprus, followed by a subsea line across to Turkey. In terms of cost, and engineering, they are almost certainly right. It’s just that laying a pipe from southern Cyprus to the north is politically improbable, and perhaps impossible, in the absence of a solution to the underlying Cyprus problem.

As for various occasional suggestions that Cyprus and Israel might want to look at a pipeline to Greece, this not only poses similar problems, unless a route can be found through Egypt’s EEZ, but it’s also extremely complex, requiring state of the art technology to lay pipes at depths as great as 3000 metres. It thus can be ruled out on grounds of cost, unless, of course, Greece itself finds gas at some convenient intermediate location.

The writer concludes that the only way to make this work is to build a liquefied natural gas plant, one that Israel and Cyprus could both use. LNG can be shipped anywhere. But that has problems as well:

So it looks to be LNG. That’s certainly the goal of the memorandum of understanding signed with the government of Cyprus on June 26 by the Delek Group and Noble Energy, the companies currently developing the major offshore gasfields discovered so far in both Israeli and Cypriot waters. The MoU aims to put in place the basic terms of a formal agreement to develop a joint two-train LNG plant at Vasilikos on the southern coast of Cyprus, with operations to start in 2018-19.

Can Noble and its partners pull this off? No government has yet approved the construction of an LNG plant primarily designed to serve its own resources but to be located in another country. This may be the first time it happens. There are still options for Israel to go it alone, but that would require building an LNG plant in Israel itself, which, given its limited Mediterranean coastline, would be likely to cause serious environmental protests; or to develop floating LNG, already criticized for constituting an obvious target for missile attack from Hezbollah forces in Lebanon.

Maybe it makes sense for Israel to build its own LNG plant just so it can not have to worry about any future political issues with Cyprus. It certainly would seem to be the most flexible solution giving Israel the most freedom to sell to whom it wants without worrying about the conduits being attacked.

Even so, it is funny to see that that from the perspective of building a pipeline from Israel to Turkey and Europe, the existing political minefield seems to be more intractable than any issues Israel has with its Arab neighbors!