Expert talks on prospects of Israeli gas export to Europe

Baku, Azerbaijan, July 14

By Leman Zeynalova – Trend:

There are three main challenges for Israeli gas export to Europe through Turkey: high price for Israeli gas, problems with choosing the route and expected decline in Turkey’s gas demand, Charles Ellinas, CEO of Cyprus-based energy consultancy e-CNHC told Trend.

He was commenting on the prospects for constructing a gas pipeline from Israel to Turkey and further to Europe.

“What Turkey and Israel are trying to sign is a framework agreement to allow such a pipeline to be built. To go from there to an actual pipeline, it will require companies to commit to it and invest. And this is where the challenge lies,” said the expert.

He went on to add that by the time Israeli gas arrives to Turkey, it will be too expensive to compete with Russian and Azerbaijani gas, challenging the commerciality of the project. “They will need to find somebody to pay this higher price. Commercial companies are unlikely to undertake such a project,” said Ellinas.

Regarding the route of such a pipeline, the expert noted that the only route is offshore through Cyprus EEZ (exclusive economic zone) in parallel to the boundary between Cyprus and Lebanon.

Cyprus will object, without solution of the Cyprus problem, but will find it difficult to stop it, according to Ellinas.

“The other problem is that Turkey is not short of gas and growth of its gas demand is expected to be slow. So there is no strategic reason to import gas from Israel. As a result, Israeli gas has to be commercially attractive if it is to succeed. In other words, it has to be competitive against Russian gas,” he added.

Further, the expert pointed out that the other export option, from Israel to Cyprus to Greece and then Europe, is also not viable commercially. “It can become viable only if prices in Europe approach $8/mmBTU (1 million British Thermal Unit), something which is not likely to happen,” said Ellinas.

Talking about the competiveness of Israeli gas, he said that the gas quantities are small, about 10 billion cubic meters of gas per year.

“Going from Turkey to Europe it will be even more expensive, needing a price nearer $8/mmBTU. The price of Russian gas to Europe and Turkey is about $5/mmBTU. Price challenges make it very difficult for any East Mediterranean gas to find buyers in Europe,” he added.

Earlier, Israeli Minister of National Infrastructures, Energy and Water Resources Yuval Steinitz said during the 22nd World Petroleum Congress in Istanbul that Turkey and Israel intend to sign an agreement on construction of a gas pipeline to Europe by late 2017.

“We are confident that in the future, Europe will buy gas produced in the Eastern Mediterranean. Currently, intensive talks are underway on building two pipelines. We plan to build one of them to Turkey and further to Europe. Another pipeline is planned to be constructed through South Cyprus and Greece to Italy,” said the minister.

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