Israel-Turkish Pipeline Hinges on Cyprus Issue Solution
During a meeting of Israel’s Energy Minister Yuval Steinitz and his Turkish counterpart Berat Albaryrak at the World Energy Council in Istanbul on October 13, Tel Aviv and Ankara agreed to examine the feasibility of the pipeline.
“The ratification of the bilateral relations between Israel and Turkey possibly makes this project politically viable. The question right now whether it is economically viable. This is a very challenging project both geopolitically and economically,” Amit Mor, CEO & Founder at ECO Energy Financial & Strategic Consulting in Israel, told New Europe on the sidelines of a conference by IENE in Athens. He reminded that Russian gas monopoly Gazprom recently agreed to a major gas price reduction to Turkey and that liquefied natural gas (LNG) prices have also dropped.
“Gazprom will do its best to secure its market in Turkey and beyond so to combat any possible additional penetration to the Turkish market of additional Azeri gas or Iranian gas or possibly Kurdish gas or East Mediterranean gas,” Mor said.
Asked if there is room for Cyprus gas in the Israel-Turkey pipeline, the Israeli expert said that eventually if this project becomes commercially viable, “the Israeli government will make it clear that a condition or part of the umbrella agreement is that in due time Cypriot gas might be mobilised via such a pipeline”.
In order to avoid war-torn Syria, a pipeline from Israel to Cyprus would have to go through Cyprus’s waters, which means that the problem of the division of Cyprus must be resolved.
Greek and Turkish Cypriot leaders will reportedly meet in Switzerland for negotiations on November 7-11.
Cyprus Natural Hydrocarbons Company CEO Charles Ellinas told New Europe in Athens on the sidelines of the IENE conference that a pipeline between Israel and Turkey has a chance to be built because Ankara is looking for diversification of supplies despite Gazprom’s price discount to Turkey.
Ellinas said the Israel-Turkey pipeline has a good chance of being built for two reasons: Firstly, unless Russia builds two legs of the Turkish Stream pipeline, Russia would not be able to get more gas to Turkey. “But the Turkish market is not sufficient to justify another leg. Some has to go to Europe,” he said. Secondly, gas prices from Azerbaijan and Iran are still high.
Ellinas said that if the Cyprus problem is resolved, the Israel-Turkey “pipeline would be a good idea”. He cautioned, however, that the demand for Turkey is limited. “Sending it from there to Europe is prohibitive,” he said. “By the time it gets to Europe it will be too expensive.”
Mor said the first phase of the Israel-Turkey pipeline would be to satisfy the Turkish market. At the second phase, if there is room at the European market and if it is economically and geopolitically viable, they may consider extending the pipeline to Europe, he added.
Mor reminded that stakeholders in Israel’s Leviathan reservoir have reached an export agreement with Jordan. He also said that Israel eyes agreements with small markets like the Palestinian Authority for the export of gas to West Bank and possibly to Gaza.
Regarding Israeli exports to Greece and onto Europe, he said that it’s “still a pipe dream but we should all continue to follow up. Once there is much more gas discovered in the region and pricing looks different, possibly in the longer run … these projects may materialise”.
Meanwhile, Ellinas said the most viable solution for gas exports from Cyprus is a floating LNG for Europe and other markets. He reminded that BP has contracted to buy all of the LNG from the ENI-operated Coral floating LNG project off Mozambique. “If they succeed, it implies that even with the current global market prices, Coral FLNG is viable for Asia, not necessarily for Europe. So that opens possibilities,” Ellinas said.