While keeping this a close secret, Prime Minister Binyamin Netanyahu has been forced to give up his grand plan to pipe gas from Israel’s offshore fields to Turkey for sale in European markets after France and Germany intimated that dealings with Ankara were unacceptable.
Plans to expand the Leviathan gas well have also been put on ice.
Although the search goes on for alternative buyers, the main export markets in Europe for Israel gas, barring the smaller markets of Egypt, Jordan and the Palestinian Authority, have suddenly dried up.
This misfortune for the Israeli economy and its causes are revealed here by debkafile,
1. The key lies in Europe’s drastic change of heart towards Turkey during the years since Israel embarked on its offshore gas project. The Europeans today refuse to have any truck with Turkey and its President Tayyip Erdogan – or depend on him for their energy – in the light of his behavior since crushing the military coup against him in July. The counts against him range widely: from a massive domestic crackdown; the continued rampant influx of Muslim refugees through Turkey into central and Western Europe; his persecution of the Kurdish minority at home and in Syria; his détente with Moscow and, finally Turkey’s alienation from NATO.
France and Germany have let Israel know that they would not buy Israel gas if it was piped through Turkey.
2. The Cypriot segment of the projected Israel-Turkish pipeline has run foul of politics. The pipeline from Israel’s Leviathan field to Turkey was to have run through Cyprus’ economic waters, according to preliminary agreements. But Nicosia has now informed Jerusalem that this will not be possible until the dispute between the Turkish and Greek sectors of the divided island is resolved.
3. A serious technical snag has also cropped up: A preliminary geological survey found the Mediterranean seabed around the Turkish terminal of the planned pipeline to be hilly and strewn with large rocks. Clearing the sub aqua terrain would be much more expensive than calculated initially. Neither Israel nor Turkey is willing to carry the cost.
4. In late September the Jordanian NEPCO signed a $10 billion contract for the purchase of 45 billion BCM of natural gas from Leviathan over 15 years. There are still conditions attached to its implementation, including financing for the expansion of Leviathan.
In view of these prohibitive setbacks, our sources report that the Israel expects to decide by December what to do about the gas pipeline to Turkey.
The smaller sales planned to Egypt are not plain sailing either.
There are no physical obstacles on the sea route for a direct pipeline. However, once again, politics has crept in. Cairo recently informed Jerusalem that a direct line would not be acceptable; the gas would have to be directed through Cyprus, so as not to provide the opposition Muslim Brotherhood with another stick for bludgeoning the El-Sisi government.
All these new impediments have left Israel’s offshore gas bonanza and its development up in the air. Another app. $6 billion is needed to exploit the full potential of the huge Leviathan gas well. But investors are keeping their distance, so long as Israel can’t produce valid sales contracts.
Although Israel has foreign currency reserves estimated at $90 bn, the Netanyahu government is equally reluctant to dip into this sum and invest in Leviathan without a guaranteed return. But this option may not be unavoidable for long.