Jerusalem Brokerage analyst Gal Reiter says that Turkey's need to diversify its energy sources and Israel's ability to supply significant quantities of natural gas from the Leviathan reservoir were a significant consideration in the progress of the reconciliation process between Turkey and Israel, following a six-year estrangement since the Mavi Marmara affair. At the same time, she wrote, "It is important to emphasize that the supply of gas to Turkey is liable to take time, and depends on regional geopolitical influences, among other things."
In Reiter's opinion, the development with Turkey is positive, but a more positive development will be progress in the main milestones the signing of two important agreements in the near future with Israel Corporation (TASE: ILCO) and with Jordan. "If these two agreements are signed, financing will be obtained for developing the reservoir, and a final investment decision on the reservoir according to the timetable set by the partnerships can then be taken immediately."
Apax Capital Markets head of research Oz Levi says that the distance between reconciliation with Turkey and a binding natural gas contract between the countries is enormous, but the investors are inclined to fan expectations on the subject, following which disappointments usually come. "The most significant factor in a gas agreement between countries is a supportive geopolitical environment. Therefore, despite the efforts to re-normalize relations with Turkey and the economic and the great economic advantage it involves for both parties, a binding agreement between them is a pipe dream, particularly in view of the fact that Russia will work to prevent a gas pipeline to Europe by any means possible," he wrote.
It is known that Turkey has tried to import gas from northern Iraq, and very much wishes to diversify its gas sources and reduce its dependence on the Russians, but Russia's active involvement in Syria is preventing this. "Russia is zealously maintaining its monopoly status as a gas supplier to Europe, and in our view, it will continue to zealously maintain this strategic asset with its usual fanaticism. A more likely agreement is with Jordan, but the entire annual potential demand in the neighboring kingdom is only 3 BCM," Levi points out.
"I would recommend that the gas companies rethink the matter, and realize that the substantial demand lies in the conversion of highly polluting Israel Electric Corporation (IEC) (TASE: ELEC.B22) coal-fired power stations and public transportation in Israel to gas, not in will-o'-the-wisp overseas agreements," Levi concluded.
Published by Globes [online], Israel business news - www.globes-online.com - on June 22, 2016
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