
THE GAS SECTOR
What does the development of Israel's gas fields hold in store for the Near East?
Author: Rovshan IBRAHIMOV Baku
The development of events in power engineering in the Near East points to the fact that a new energy power - Israel - is emerging on the world map. A few years ago this would have been perceived as merely the surrealist imagination of an eccentric fortune-teller. But today it is an accepted reality. Since April this year Israel has been satisfying a part of its gas demands from the Tamar offshore field.
The field was discovered in 2009 and lies 90 km from the city of Haifa. According to calculations it has natural gas supplies of about 240bn cu m. After Tamar, another major gas field called Leviathan was surveyed. Unlike Tamar it is situated further offshore, close to the maritime border with Lebanon, and is believed to be one of the largest gas fields with supplies of 450bn cu m. It is anticipated that natural gas extraction from this field will commence in 2016.
There have been oil and gas fields in Israel before. For example, back in 1955 the small Heletz oilfield was discovered near the town of Sderot. As a consequence, fields such as Zohar, Kidod and Hakanaim were discovered at various times in the Dead Sea area not far from the town of Ashdod, but they were not significantly large and the quality of oil was very poor. More or less large strata of hydrocarbons were found for the first time only after the 2000s. The Meri-Bi gas field near Ashdod, for example, was considered to be average in size with supplies estimated at 30bn cu m. This field was the forerunner of larger supplies, exposure to which was just a question of time.
And when this time came it couldn't have been a better one. Having its own gas changed the situation radically not only within the country but also in the region as a whole. The development of the Tamar field enabled Israel to provide itself with natural gas at precisely the time the disturbances were starting in Egypt. Immediately after the overthrow of Mubarak, Egypt, which was supplying 1.7bn cu m of gas annually, which was up to 43% of the gas consumed in Israel, announced the unilateral termination of its gas contract with that country. For Israel such a development of events created problems because up to 40% of its energy requirements were covered precisely by natural gas. It was clear that the favourable regime of energy cooperation between the two countries might not last for much longer. That said, before the annulment of the contract the gas pipeline had been subjected to attacks on several occasions which meant that Israel had to urgently seek alternative sources of gas. The termination of the contract on gas supplies from Egypt led to power cuts in Israel, and its price rocketed by 25%. It was only thanks to the start of production of its own gas that the situation in the country's energy sector was stabilized.
The development of Israel's offshore natural gas deposits could radically alter the energy geo-politics of the region. First and foremost, Israel will be able to be fully self-sufficient in natural gas for many years hence, thereby reducing its dependence on neighbours for supplies in a region where the state's very existence is being called into question.
Moreover, the development of the field could also impact on relations with neighbouring states. For example, Lebanon has already stated its claims to the Leviathan field, reckoning that it lies within its territorial waters. It would seem that this move does not augur well for Israel, but if you look closer it could have positive consequences for the Jewish state. The point is that Lebanon does not recognize Israel and is demanding that the UN places a demarcation line along the maritime border between the two states. Incidentally, this organization has concluded the demarcation of the land borders of Lebanon and Israel. As a result, Lebanon indirectly recognizes Israel's existence. Furthermore, official Beirut has begun the process of the demarcation of its maritime borders with neighbouring Syria and Cyprus, which also points to that country's intention to join the race for the energy resources of the Mediterranean. In this circumstance the "hunt" for hydrocarbons could take a new turn with a subsequent increase in the number of participants. And in the long term, on the basis of mutual interest, it is possible that a common pipeline could be built from the fields to the shore, bringing both countries to a new level of relations.
As it increases its production of gas and meets its domestic requirements Israel also intends to become an exporter, although the sale of gas to the neighbouring countries does look somewhat problematical at the moment because relations with them are not very friendly, to put it mildly. Of course, a certain amount of natural gas could be exported to Jordan, one of the few Arab countries that has recognized Israel's independence. Jordan imported 2.4bn cu m of gas annually from Egypt. However, explosions on the Pan-Arab gas pipeline and the suspension of gas supplies to that country are causing daily damage to the Jordanian economy of $5m. Jordan currently has no other sources of gas and supplies from Israel would have not only commercial but also political significance for both states. Thus, Israeli could acquire in Jordan if not an ally in the region, then a partner, relations with which would be built on a strategic level.
Apart from Jordan the most promising direction for the export of Israeli gas is the European market. Once the development of the Leviathan field is underway, an underwater line may be built to the Turkish coast to link up with that country's pipeline system. In the long term the export of Israeli gas is also possible via TANAP, which the Azerbaijani government has proposed with the aim of exporting gas from the Shah Deniz [Sah Daniz] field to European markets. Incidentally, this would not be the first instance of cooperation between Azerbaijan and Israel in the energy sphere. Israel gets up to one third of its consumable oil from Azerbaijan. Furthermore, SOCAR's subsidiary Caspian Drilling Company is taking part in drilling at the Israeli Med Ashod field. The significance of this event is that SOCAR is participating for the first time in the development of fields outside Azerbaijan and this experience could have a positive impact on its further development.
Israel's participation in TANAP could become another step for cooperation between the two countries. Besides, the pipeline runs through the territory of Turkey with which Israel has had very cool relations since the events around the seizure of the Turkish vessel Mavi Marmara by the Israeli Navy. The recent apologies by official Tel Aviv have helped to bring the two sides a little closer together. So, the development of new spheres of cooperation would be very apropos for the re-establishment of relations.
It should be pointed out that natural gas has not been a subject of purely economic analysis for some time. When it comes to Israel, its strategic importance is increased several times over. The country has been given an opportunity to ensure its energy security through its own resources. In addition, gas will help to create new stable relations with the countries of the region, enabling that country to strengthen its "service areas" and develop the strategic perception of the region in the light of energy policy. In other words, the development of the Tamar field will have knock-on effects both for Israel itself and the region in general.
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