Study: Little chance for Mideast gas network with Israel

"Petroleum Economist": It's economically logical to supply Egyptian natural gas to Jordan, Syria, Lebanon, and the PA, but Israel is excluded.

In a survey of the western Arabian natural gas pipeline venture, "Petroleum Economist" says that there is little chance of Israeli participation in the venture, even though there is no economic logical for the pipeline without Israel.

The magazine states that there is economic logic in a venture to supply Egyptian natural to Jordan, Syria, Lebanon, and the Palestinian Authority, but Israel is excluded from the venture, although bypassing it is technically and economically illogical. The magazine adds that the chances are poor for building a regional gas network that links all Middle Eastern countries.

The Middle East has rich natural gas reserves. Several of the most developed economies in the region, including Israel and Lebanon, want to diversify their energy sources. Egypt's natural gas reserves are estimated at 62 trillion cubic feet, and Syria's at 10 trillion. After losing the Jordanian market, Syria is now competing for Lebanon's.

"Petroleum Economist" says that Israel is building its own natural gas pipeline. The Israel Institute of Petroleum and Energy says the first stage of the Arab gas pipeline, a 248-km. section from Egypt to Jordan, was completed in mid-2003. The $220 million pipeline carries 35 billion cubic meters of natural gas a day from El Arish in Sinai to Jordan's port of Aqaba. There are plans to double the pipeline's capacity to 70 billion cubic feet a day by 2008. 16 kilometers of the pipeline is undersea, at a depth of 850 meters.

"Petroleum Economist" says that Israel's place in these pipeline plans is unclear. It adds that Israel is developing its own offshore natural gas reserves and is building its own distribution infrastructure. Theoretically, Israel's pipeline could be linked to the regional network. Last year, the US Overseas Private Investment Corporation (OPIC) approved $250 million in risk insurance for a venture laying the 105-km main section of Israel's gas pipeline.

"Petroleum Economist" says that the venture will exploit recently discovered natural gas reserves. Israel's natural gas reserves are limited, and Israel is aware of the commercial advantages in importing natural gas from Egypt and other countries. Politics trumps economic logic in the Middle East, at least for now. The fact that the Arab gas pipeline bypasses Israel is nothing other than a political gesture by one Arab country against another.

Published by Globes [online], Israel business news - www.globes.co.il - on April 27, 2005

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