A note on Turkey-Israel Gas Pipeline Project
first phase of the Leviathan field development involves an initial investment
of $4 billion to produce 12 bcm of gas per year for Israel’s domestic customers
and nearby markets in Jordan and Palestine. Currently the Leviathan partners
are working towards raising the necessary funds for development of the field. A
second phase to expand production to 21 bcm at a cost of $2.5 billion will
depend on potential export deals with other market. Talks are already underway
with potential buyers in those markets. This means that the production from the
second phase is enough to fill a pipeline to Europe.
options are considered to export gas to Europe by pipeline:
is via an undersea pipeline from the Leviathan field to Turkey's southern
Mediterranean coast. An initial cost estimate of the pipeline is $2 billion by
the Turkish companies dealing with the project. Once the pipeline reaches
Turkey gas can either be sold to Turkish market or be sent to Europe (either by
connecting to the BOTAS pipelines or to TANAP).
other project is building a pipeline (the East Mediterranean Gas Pipeline) that
would transport gas from the Leviathan and Aphrodite fields to Cyprus
itself and Greece. Then, it would link up to Italy. A study conducted by
IGI-Poseidon for the European Commission estimated the cost at $5.7 billion. The
project is already included in the list of European projects of common
interests. Senior government officials of Israel, Cyprus and Greece will hold
talks in the near future with the EC to promote this project. Additional gas
discoveries in Israeli and Cypriot waters will make this project attractive.
projects have advantages and disadvantages, as well as numerous political,
technical, financial, commercial challenges. This is why it would be incorrect
to say one pipeline is more feasible than the other just by looking at the
construction cost. Having said that one should not forget that in pipeline
business politics often comes before economics.
the Israel-Turkey pipeline. It has to cross the unilaterally declared Exclusive
Economic Zone of GKRY. The pipeline project has to fulfil the Submarine
Pipelines Regulations of GKRY. This means a license to be granted for laying,
construction, operation of the pipeline from the relevant GKRY authority;
conformity with the Geological Surveys Law of GKRY and the Convention for the
Protection of the Mediterranean Sea against Pollution and Related Protocols; and
an environmental approval. GKRY may reject the application or terminate the license
for many reasons, including national security and/or public interest. It may
impose terms and conditions into the license. This means that any political
friction with Turkey may have impact on the destiny of the pipeline. This is
why resolving the Cyprus problem has utmost importance. However, one should
also not forget that although resolving the Cyprus problem is a necessary, it
is not a sufficient condition for the future of the pipeline.
especially from that angle, constructing the Israeli-Turkey pipeline would
require long term commitments and guarantees. No private company or a
consortium of private companies would be willing to assume all those risks
alone. This is why the involvement of a state-owned company seems to be best
bet for its possible realization.
pipeline should be commercially viable in order to be realized. This means the gas
it will carry has to find a market and be competitively priced. I have big
doubts that Turkey or Europe will need additional gas, say 10 bcm, in the
future, and that the terms of gas sales through those two pipelines, including
the price, can be competitive in the Turkish or in European market. Besides,
neither the East-Med pipeline project nor Israel-Turkey pipeline project can
compete with Russian gas in the Turkish and European markets.
reaction of Russia to both pipelines will likely depend on the future of the
Nord Stream-2 and Turk Stream pipeline projects. If the second string of Turk
Stream goes ahead, Russia may try to prevent their realization. However, if
Russia somehow gets involved in Cypriot or Israeli gas sector things would look