Any agreement to export natural gas from Israel’s large Leviathan reservoir to Turkey can only occur following an improvement in political relations between the two countries – relations that have grown increasingly fragile during the Israeli-Gazan conflict – according to an Institute for National Security Studies report.

“An agreement that will provide a solution to the crisis between the two countries is a necessary condition for an agreement on Israeli gas exports to Turkey, and the companies trying to promote it cannot achieve this goal without such a solution,” the report authors wrote.

As the developers of the Leviathan reservoir prepare to select gas export recipients, they must take political constraints under consideration when reviewing Turkey as a possibility, the authors explained.

Called “The Political Feasibility of Natural Gas Export from Israel to Turkey,” the report was published on July 20 by former INSS director and former ambassador to the EU and to Jordan Dr. Oded Eran; Clal Energy CEO and former Israel Natural Gas Lines CEO Dan Vardi; and INSS researcher Itamar Cohen.

Slated to begin producing gas in as early 2017, the Leviathan reservoir is estimated to contain up to 621 b.cu.m., according to revised evaluations published by Netherland, Sewell and Associates (NSAI) earlier this month, which boosted previous estimates of 535 b.cu.m.

Houston-based Noble Energy owns 39.66 percent in Leviathan, while Delek Drilling and Avner Oil Exploration – subsidiaries of the Delek Group – each own 22.67% and Ratio Oil Exploration holds 15%. A June 2013 government decision caps exports from the reservoir to 40%.

“The anti-Israel statements by the leaders of Turkey that doubled also as anti-Semitism over the course of the conflict between Israel and Hamas in July 2014 only emphasized the level of risk in a strategic business deal between Israel and Turkey,” the authors wrote.

“Exchanges and accusations between the leaders of the two countries have made a gas supply agreement from Israel to Turkey an option difficult to realize.”

Looking at Turkey’s natural gas market, the report describes the country’s rising demands for the resource, as well as the nation’s potentially strategic position between the East and the Western market. Turkish consumption of gas has doubled in the past decade to 45.3 b.cu.m. in 2014, with an expected rise to 76 b.cu.m. by 2030, according to the report.

Due to Turkey’s limited natural gas resource supply, the country is particularly dependent on Russian and Iranian gas, the report said. In 2013, Turkey received 58% of its gas – about 30 billion cubic meters – from Russia and about 19% from Iran, as well as 13% from Azerbaijan and smaller amounts from Algeria and Nigeria.

The Russian-Ukrainian crisis has endangered about half of the supply coming from Russia to Turkey, as it must pass through a Ukrainian pipeline, while increased demand in Iran – as well as economic sanctions imposed on the country by the US – has reduced the latter’s capabilities of fulfilling requirements, the authors explained.

Although Turkey’s relationship with its third supplier, Azerbaijan, is politically sound, the amount of gas coming in from the country is relatively small.

In 2011, Turkey and Azerbaijan signed on the establishment of the Trans-Anatolian Pipeline (TANAP) project, which will double the amount of gas coming from Azerbaijan to Turkey beginning in 2018, the report noted. Meanwhile, in May 2012, Turkey signed an agreement to deploy pipelines from Kurdistan to Turkey.

Not only does Turkey need to increase its domestic gas flow, but the country also “aims to become a significant player in the energy market in the region,” by potentially serving as a “geographical bridge” between the East and West, the authors stressed. The TANAP project will allow Turkey for the first time to provide such a bridge to Europe, the report added.

As far as Israel’s gas is concerned, the Turkish firm Turcas Energy announced in April of this year that it was in talks with subsidiary Enerjisa, a 50-50 joint venture between Turcas and the Sabanci Group, about building a 600-kilometer pipeline from Leviathan to Kayhan, Turkey. If Israel elected to move forward with export to Turkey, the country could supply about 18 to 20 b.cu.m.

annually for about 15 to 25 years, the report estimated.

“It is reasonable to assume that large companies like Turcas and Sabanci would not dare to execute strategic projects without the consent of Erdogan,” the authors wrote.

While acknowledging that there will not necessarily be a direct link between an agreement on exporting gas from Leviathan to Turkey and “the crisis in relations between Israel and Turkey,” the authors stressed that Turkey would not likely be ready to proceed in the current environment.

Without a political reconciliation between the two countries, advancing an export agreement would be difficult, the authors concluded.

“A complex question is whether Israel should insist that an agreement with Turkey will say that gas flow will not stop for political reasons,” the report said.

Involvement of a third party, such as a US or German organization, in a framework agreement could help provide financial security, the authors wrote.

Some such organizations could include the US Overseas Private Investment Cooperation, the Export-Import Bank of the US and the German Euler Hermes company.

The authors suggested seeking out the participation of the World Bank and its International Finance Corporation or Multilateral Investment Guarantee Agency, which in addition to boosting financial security, would ensure “that the project would be implemented in each stage.”

Asked by The Jerusalem Post if the 10 additional days of Israeli-Gazan conflict since the report’s publication have changed their evaluations at all, the lead author, Eran, said that the situation has only grown more dismal.

The operation in Gaza, he explained, has distanced Turkey and Israel further, “making it even less likely that they can reach an agreement, which is needed as an umbrella to the commercial agreement.”

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