Turkish economist: Natural gas will promote peace

Industry ‘has been driver for normalization of Turkish-Israel relationships,’ says Gürkan Kumbaroglu.

November 22, 2016 01:27
4 minute read.
Israel’s natural gas

Israel’s natural gas. (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)

As natural-gas finds in the eastern Mediterranean continue to surface, the resource has the capability not only to power the region but also to bridge gaps among formerly tense nations, according to a Turkish energy expert.

“[Natural gas] has been a driver for the normalization of Turkish-Israeli relationships,” Prof. Gürkan Kumbaroglu, president of the International Association for Energy Economics and the Turkish Association for Energy Economics, said at a conference in Ramat Gan on Monday. “Energy resources, which have historically been a driver of conflict and clashes, have now become a driver, a motivation, for collaboration, peace and prosperity.”

Kumbaroglu was speaking at the Israel Energy & Business Convention, hosted by the Eco Energy Financial and Strategic Consulting firm, where industry stakeholders, academics and government officials took a look at the energy future of both Israel and the surrounding region. With Israel about to begin developing its large Leviathan reservoir, Kumbaroglu posited that potential natural-gas export opportunities could foster “win-win cooperation between Turkey and Israel as well as Greece.”

“There is this great potential for collaboration with Turkey because Turkey provides the most economic route toward Europe,” he told The Jerusalem Post in a follow-up interview on the sidelines of the conference.

Kumbaroglu, who is also a professor of industrial engineering and chairman of the Energy Policy Research Center at Bogazici University in Istanbul, maintained that natural gas “really pushed forward the normalization” between Israel and Turkey.

“In fact, after the coup attempt on July 15, there has been a change in Turkish energy policy,” he said, referring to the failed attempt to overthrow President Recep Tayyip Erdogan’s government this summer.

“Suddenly, normalization with Russia started as well as normalization with Israel,” Kumbaroglu said. “These are the two countries where there’s a prospect for winwin energy collaboration.”

Although a gas pipeline from Israel to Turkey would need to pass through Cypriot waters, Kumbaroglu said he was optimistic that the decades of conflict between Turkey and Cyprus would be resolved soon. Since 1974, Turkey has occupied the northern portion of the island and does not recognize the existence of the Republic of Cyprus.

“It’s an interesting coincidence that the Turkish part and the Cypriot part in Cyprus are intensively working toward an agreement to be established before the end of the year,” Kumbaroglu said.

With elections coming up next year in Cyprus, the leaders of both sides are determined to formalize an agreement and bring an end to the “Cyprus problem,” he said.

“There has been good progress made,” Kumbaroglu said. “There is also awareness that if an agreement is made between the Turkish and Cypriot parts, Cyprus can turn into an energy hub as well.”

“All of these energy resources could contribute to the wealth of the island,” he added. “This triggers the development of the peace process.”

A pipeline from Israel to Turkey, which would then convey gas to Europe, is just one of the many export options that Israel is considering as development is set to begin on the country’s 613-billion-cubic-meter Leviathan reservoir. Also under consideration is a much longer, deep-sea pipeline to Cyprus, which would connect through another pipeline to Greece and then on to Italy. Export options to Egypt are also being reviewed.

Yossi Abu, CEO of Delek Drilling and Avner Oil Exploration, two Delek Group subsidiaries that hold a stake in the Leviathan and neighboring Tamar reservoirs, described the opportunities as a “regional market,” stressing the huge potential of Turkey in particular.

“We believe that these markets exist,” Abu said. “We see the increased demand in the Turkish market.”

Following the 2015 yearlong freeze in Israel’s gas sector, which occurred due to disputes between the government and the gas companies, Abu assured conference participants that work to begin developing Leviathan was underway. The partners are currently in advanced stages of signing financing agreements and have already invested close to half a billion shekels in the project, he said.

While much of the discussion surrounding Leviathan’s export prospects revolved around the Turkish and Cypriot opportunities, agreements have already been cemented for the more immediate region.

At the end of September, the Leviathan reservoir shareholders signed a $10 billion agreement for the future supply of gas to Jordan’s National Electric Power Company Ltd.

(NEPCO). Meanwhile, in February 2014, the partners in the neighboring Tamar reservoir signed a $500 million deal to supply 1.8 BCM of gas to the Jordan Bromine and Arab Potash companies, over a 15-year period. Gas is already slated to begin flowing from Tamar to these companies in December, Abu said.

Amit Mor, the CEO of the Eco Energy and the host of the conference, encouraged entrepreneurs to “tap the potential” of the region despite the challenges.

“We have to create this market and cope with fantastic challenges in terms of different geopolitical situations,” said Mor, who is also a lecturer at the Interdisciplinary Center Herzliya.

As far as a pipeline from Israel to Turkey is concerned, Kumbaroglu maintained that this is “a feasible option” that could relatively simply enable the transfer of Israeli gas both to Turkey itself and to southeastern Europe. As the most financially viable route to the EU, he stressed that this option could also keep the price of gas attractive.

“Everybody wants Israeli gas because it’s a new source,” Kumbaroglu said. “But the price has to be right. It has to be competitive.”

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