Turkey still best bet for Israeli gas exports

Sa'ar 5 and drilling platform

Former US diplomat Matthew Bryza believes Israel should make every effort to overcome hurdles to exporting gas to Turkey.

The prime ministers announcement that Israel was interested in exporting gas to Turkey was a signal of strong and very major intentions to promote such an export deal. Now, with the gas framework almost signed, we can return to advancing that venture, said Turcas Director Matthew Bryza in an interview with Globes.

Bryza, who is also a senior fellow at the Atlantic Council, was a high-ranking diplomat in the US Department of State and a former ambassador to Azerbaijan. From a financial and strategic viewpoint, exporting gas to Turkey is the best option for the development of the Leviathan reservoir.

When Prime Minister Benjamin Netanyahu was questioned at the Economics Affairs Committee about the governments next steps if the option of exporting gas to Egypt is eliminated, he said Israel was advancing the possibility of exporting it to Turkey and exploring other options. He said his personal representative has been in touch with a senior Turkish official, and the two have discussed the notion.

Netanyahu did not speak for the sake of it, said Bryza. Before Operation Protective Edge, which saw political ties between Israel and Turkey deteriorate, and before the mess began with the antitrust authority, there were talks about exporting gas to Turkey. The Middle East expert said Turkey needed the gas more than ever.

The gas supply from Russia is irregular; and, only yesterday Iran announced it would cut its supply by 50% because it needed the gas for its domestic needs.

The gas consumption of the Turkish market is seven times greater than the Israeli market, and it is expected to rapidly rise and double itself within the next 20 years. Turkey has no natural gas assets of its own and is forced to import gas from Iran, Russia, and Azerbaijan, for which it pays a high price.

According to market estimates, Turkey pays Iran some $15 per BTU, Russia close to $12, and Azerbaijan receives $10 per BTU.

Turkey will outbid Egypt

We need energy and we are willing to pay for it, said Bryza. The Israeli gas that Turkey buys from Israel will be purchased at a lower rate than its other suppliers, but still higher than the price Israel would receive from Egypt. He believes that if a 20-year export deal is signed in which Israel would commit to selling 8-10 BCM per year then, it will provide an answer to Turkeys demands.

Bryza believes Iran would not thwart a deal between Turkey and Israel. No one will ask Iran if it is acceptable or not, and, regardless, Iran needs to sell gas more than Turkey needs to receive it.

If the deal is secured, Israel will export the gas to Turkey using an underwater pipeline from Leviathan, through Cypriot water, until the southern-most point in Turkey 485 kilometers from the reservoir. Beyond the technical difficulties of building a pipeline in relatively-deep water, the biggest hurdle remains the Cypriot governments rejection of the notion, partly because of the tense relations between Cyprus and Turkey which captured the northern part of the island in 1974.

Bryza acknowledged those barriers but said that he believed the political disputes were reaching a resolution. Mediators between the sides believe that by the upcoming fall there will be a national referendum on the matter in Cyprus. The resolution of the conflict will help promote the pipeline, and Cyprus would be very interested in such a pipeline. That pipeline could pump gas towards the island; when the Aphrodite reservoir is developed, the pipe could be reversed and gas could flow from Cyprus to Turkey.

The gas framework provides the Leviathan partners four years to develop the reservoir, but many insiders in Israel claim that, at current oil and gas prices, they partners will not be able to secure the $6-7 billion needed for development.

It will be challenging, but it is feasible if the partners act fast. Noble has proven with Tamar that it is capable of developing a reservoir quickly. And again, now is the time to fully invest in promoting the export of gas to Turkey it will lead to the development of the reservoir.

Erdogan spokesperson sends clear message to Netanyahu

Despite the supposedly improving relations between Israel and Turkey, Israel must still meet the three conditions we have set for the gas export deal to be implemented. So far, it has only answered one, said the Turkish presidential spokesperson Ibrahim Kalin in response to Netanyahus remarks, the Turkish media reported.

Israel may have apologized for the Mavi Marmara incident, but it has yet to pay the compensation Turkey demanded or to lift the siege on the Gaza Strip, he added.

Even after the political disagreements are resolved, additional obstacles block the course to exporting gas to Turkey and Iran is one of them.

Iran may have cut its gas supply to Turkey, but it is also relentlessly working on increasing its abilities as a supplier to others, including to Turkey. Last month Iran unveiled its new commercial and regulatory demands to gas companies; last week it offered 23 land and sea licenses. Iranian sources believe gas from the first reservoir will begin flowing by next year.

Another barrier to overcome was yet another recent development Turkey has found a gas supplier with a relatively-low price. Ankara signed an import deal with Kurdistan, under which it would pay $7-8 per BTU.

Published by Globes [online], Israel business news - www.globes-online.com - on December 12, 2015

Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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Sa'ar 5 and drilling platform
Sa'ar 5 and drilling platform
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