Russian Gazprom Nears Takeover of Mediterranean Gas Pipeline Project
The gas industry and stocks were all aflutter over the Italian oil company Eni’s sensational announcement Sunday, Aug. 30 of the discovery off the coast of Egypt of a deep-water block holding 30 trillion cubic feet of gas, over an area of 100 sq. km. This made the Zohr field one of the largest in the world.
However, energy experts speaking to DEBK Weekly voiced some skepticism. They pointed out that the initial tests for determining quantities had not been completed and, moreover, a part of the Shorouk block believed to hold the gas falls partly within the exclusive economic waters of Israel.
There was no official word in Israel about the discovery, although domestic energy stocks plummeted in response to speculative market players, rather than serious investors. In any case, Israeli Prime Minister Binyamin Netanyahu has no intention of risking his warm ties with Egyptian President Abdel-Fatteh El-Sisi by picking a bone over the new find’s locations.
But most of all, his critics were soon silenced. After happily hailing the Egyptian find as a death warrant for Israeli’s hopes of substantial exports from its main Leviathan gas well, they fell silent. All the experts agreed with Eni that, when fully developed by around 2025, the entire Zohr field’s output would be needed to satisfy Egypt’s growing domestic needs. None would be left over for export or offer Israel any competition.
And, even in the interim decade, Egypt will be heavily dependent on outside sources for its gas.
Will Italy join new consortium for gas development and pipeline?
And indeed, Egyptian Petroleum Minister Sherif Ismail told Reuters Wednesday, Sept. 2 that the discovery of the Zohr natural gas field off Egypt would not undermine private-sector negotiations about buying gas from Israel. "Any negotiations between private companies in Egypt and in the eastern Mediterranean, and by this I mean Israel and Cyprus, will not stop. These negotiations and initial agreements are ongoing," the minister said.
His statement caused a major upturn of energy stocks on the Tel Aviv Stock Exchange, after sharp drops Tuesday.
Thursday, Aug. 27, three days before the Eni announcement, Netanyahu met Italian Prime Minister Matteo Renzi in Florence. Their conversation touched on the Egyptian discovery, but was taken up largely by the deepening involvement of former Italian Prime Minister Silvio Berlusconi, a good friend of the Israeli prime minister, in Middle East and European energy markets.
The two prime ministers then got down to discussing whether Italy was interested in joining a potential new international consortium for investing around $7-10 billion in developing Israel’s gas fields – the largest being, Leviathan – and the construction of an underwater gas pipe network for exports
Italy, Russia, Turkey and the pipeline project
This network would carry Israeli, Cypriot and Egyptian gas from the eastern Mediterranean fields to Turkey, across a maximum distance of 750 km from Ashkelon in southern Israel to the Turkish port of Ceyhan.
In the last DEBKA Weekly issue 667 of Aug, 28, we reported Russia’s keen interest. (Putin again Touts Gazprom for Running Israel’s Offshore Gas Exports)
Our Moscow sources confirm that the Russian President Vladimir Putin is not just offering to put up the funding for the Israel-Turkish pipeline project, but also Russian military assistance for securing the gas fields and rigs against sabotage by Syria or Hizballah, especially in the event of the pipeline passing through or alongside their exclusive economic zone waters.
That security was a pressing Israeli concern was demonstrated in a naval exercise Wednesday, Sept. 2, when an elite navy squad drilled the boarding of the Leviathan oil rig in an operation to eject “terrorists” who had “captured” it.
A week after Netanyahu’s visit to Florence, another avenue opened up to confirm Israel’s prospects for selling its gas. Turkey’s Foreign Minister Feridun Sinirlioglu arrived in Israel quietly for a two-day visit.
He came to see if the potential gas pipeline project was moving along. He also carried tidings.
Gas fuels historic Cyprus reunification after Ankara gives way
To be profitable, the potential gas pipeline from Leviathan to Turkey would have to link up with the Aphrodite gas field in Cyprus. Ankara consistently objected to this hook-up, claiming the gas was the property of the self-proclaimed Turkish Republic of Northern Cyprus and demanded that its independence be recognized.
For 41 years, no other nation other than Turkey extended recognition to the Turkish sector of the island.
DEBKA Weekly now reports exclusively that the lucrative prospects of gas trade have oiled the wheels of a breakthrough towards a changed Turkish attitude and prospects for the island’s reunification.
This was clinched on Sept. 1, say our sources, at a historic meeting between the President of Cyprus, Nicos Anastasiades and his opposite number, Turkish Cypriot President Mustafa Akinci.
We can reveal that they reached a mutual understanding as the basis for reunifying the long divided island. Akinci would cede his sector’s claim to full independence and settle for the status of an autonomous region of the Cypriot Republic. In return, the Turkish province would receive a share in the revenues yielded by the Cypriot gas field.
The Turkish Cypriot leader offered to “persuade Ankara” to give up its independence claim.
And so, the Turkish foreign minister, a former ambassador to Israel, was able to inform Jerusalem that his government had consented to the settlement of the long Cypriot feud.
With this hurdle out to the way, the path has been cleared for attaching Cyprus to the projected Israeli-Turkish underwater pipeline.
The future partners are still short of an investor to put up the funding for the project. No Western energy company has shown any interest. This leaves Putin and Gazprom as the solo players willing and able to step into this role.