As a formerly tense relationship between Israel and Turkey begins to thaw, experts in the country’s natural gas field are viewing the upgraded situation as a potential gateway for export of the underwater natural resource to the northern neighbor.
“The upgrading of the Israeli-Turkish bilateral relations, following the Erdogan- Netanyahu talk of March 22, may pave the way for enhancing the discussions regarding an Israeli-Turkish natural gas export scheme,” Amit Mor, CEO of the Herzliya- based firm EcoEnergy, which specializes in strategic and financial consulting in the energy field, said on Sunday.
With an estimated 250 billion cubic meters of gas in the Tamar field scheduled to begin flowing in the next few months, and approximately double that from the Leviathan field a few years down the line, officials are debating how exactly to allocate the natural resource.
The government has yet to vote on the conclusions of the Zemach Committee, a team headed by Energy and Water Ministry director-general Shaul Zemach, which last year recommended the export of no more than 500 billion cu.m. of natural gas.
Whatever quantity of gas for- export the government chooses, improved relations between Israel and its Turkish neighbor, however, could provide an ideal and financially lucrative portal for absorbing large chunks of the resource, experts agreed.
From economic, geopolitical and strategic standpoints, Turkey could serve as Israel’s best customer, Mor explained.
“It appears that the most economic option is exporting gas through a pipeline from Israel via the Eastern Mediterranean to Ceyhan, Turkey, to supply the growing needs of the Turkish market for natural gas,” he said.
In 2012 alone, Turkish consumption of natural gas was 45 billion cu.m. per year, a number that is expected to grow by 50 percent by the end of the decade, according to Mor.
At the moment, Turkey receives about 70% of its gas from the Russian superpower Gazprom, as well as from Azerbaijan through the Baku Pipeline to Central Turkey and from Iran.
“Turkey wishes to lower its growing dependence on Russian gas and many in the private sector would like to purchase Israeli gas,” Mor said. “Even before Friday’s conversation between Netanyahu and Erdogan, there were high officials and ministers in Erdogan’s cabinet who favored importing Israeli gas.”
Turkey, Mor noted, is also striving to become a “major energy transit country” by constructing various pipelines to export foreign natural gas to Europe.
One such project on the drawing boards is the $15 billion Nabucco Pipeline, which would stretch from Turkey to Bulgaria to Romania to Hungary to Austria, from which gas could flow to the rest of Europe, Mor explained.
A second possibility is the Trans Adriatic Pipeline, a multi-billion-dollar project that would stretch from Turkey through Greece and Albania to Italy. While no final investment decision has occurred in either of these or other projects, Mor said he suspected that the Nabucco plan would go through first.
“Not only can gas from Israel serve to supply the growing needs for gas to the Turkish market, in the long run it can be exported to Europe,” he added.
Prof. Brenda Shaffer, an expert on energy policy in the School of Political Science at the University of Haifa, agreed with Mor that Turkey could serve as a potential gas customer, but she disagreed that it could serve as a transit point to other European countries.
“The Turkish market is indeed an option. Turkey’s electricity market is one of the fastest growing in the world,” Shaffer said. Gas exported by Israel to Turkey, however, should not be “transiting the Turkish market,” but should instead be aiming only for the Turkish market itself, as the current pipes cannot accommodate additional volumes of gas and there are insufficient markets to justify new infrastructure for that purpose, she added.
Shaffer also disagreed that private Turkish companies would be the ideal recipients of Israeli natural gas and instead said that the imports would occur entirely through the Turkish national pipeline company Botash, as well as relevant ministries and the Prime Minister’s Office.
Small companies may be promoting the idea of importing the gas, but they do not have the capacity to do so independently at this stage, she said. As far as Israel supplying gas to European markets via Turkey goes, finding investments for the extra pipelines that would be required in addition to the TAP or Nabucco projects would not be plausible, according to Shaffer.
“There’s an extreme reduction in gas demand in the market in southern Europe and it doesn’t seem logical that they could support additional dedicated pipelines,” Shaffer said. “And the existing pipeline transmission system in Turkey as it stands cannot accommodate additional volumes.”
While Israel does not have unlimited supplies of natural gas, it is important to establish more than one export outlet, Mor stressed. Such options could include a Floating Liquefied Natural Gas (F-LNG) production facility at sea, or using a LNG facility that is planned for Vassilikos, Cyprus. Because Israel’s natural gas quantities are not enormous on a global scale, it is unlikely that the country would explore both the Cypriot and Turkish options simultaneously, Mor said. Meanwhile, the countries of Cyprus and Turkey continue to remain at political odds. In Shaffer’s opinion, Cyprus is not a viable option for Israeli natural gas export regardless.
“I never thought that export via Cyprus was a viable option,” Shaffer said, noting that neither Israel nor Cyprus has enough gas to speak of to justify an expensive LNG plant construction process.
“At this stage, there is not enough gas for Israel to think of multiple export options,” she said. “If there are more discoveries, there could be a different picture.”
Israel will need to maintain at least 400 to 450 billion cu.m. for its own domestic needs in order to have gas at home for the next 25 years, according to EcoEnergy analyses. Not only will this gas be used in most power plants for electricity generation, the gas will also serve to operate most vehicles by 2030 – whether by providing electricity for electric cars, generating Compressed Natural Gas (CNG) fuel, creating diesel from natural gas, or producing ethanol fuel mixes, Mor said. All in all, gas needed for vehicle operations will amount to about 3 to 4 billion cu.m. per year, he added.
Despite Israel’s overall gas supply limitations and the arguments of environmental groups and government bodies to keep as much as possible at home, Mor stressed that export is crucial to future exploration and gas finds in the Mediterranean.
That being said, Mor agreed that “it is economically and strategically necessary to save gas for domestic consumption,” as well as to establish a national sovereign fund from gas royalties that can accumulate $80-100 billion by 2040. Such funds, he noted, could provide a crucial “savings account” for the country’s children and grandchildren in times of war, natural disaster and other emergencies, he said.