Jordanian parliament member announces pause in gas negotiations with Israel

Experts: Delay does not constitute a setback for Israel.

By
January 4, 2015 09:52
Protests against the gas deal in Amman.

Protests against the gas deal in Amman.. (photo credit: DAVID SCHENKER)

 
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Although a Jordanian parliament member announced the suspension of gas import negotiations with Israel this weekend, experts close to the issue maintain that a future deal between the neighboring countries is far from over.

“The discussions regarding the Israeli gas-importing agreement are currently suspended,” Jordanian media reports quoted MP Jamal Gammoh, head of the Lower House Energy Committee, as saying on Saturday.

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Gammoh was referring to the a letter of intent signed on September 3 by the Leviathan reservoir partners to supply about 45 billion cubic meters of natural gas to Jordan’s National Electric Power Company (NEPCO) over a 15-year period. While the agreement has generated upheaval among certain parliament members and activists since its initial signing, political analysts remain confident that any momentary delay does not signify the end of the deal.

According to the Jordanian media reports, the reason behind Gammoh’s statement is the ongoing upheaval between Israel’s Antitrust Authority and the Leviathan natural gas reservoir’s main stakeholders.

On December 23, Israel Antitrust Authority commissioner David Gilo announced that he would be reconsidering the status of the Delek Group and Noble Energy – the two main investors in the Tamar and Leviathan basins – in the latter, larger reservoir.

Although Tamar has been providing Israel with a domestic gas supply since March 2013, the neighboring Leviathan basin has yet to be developed. Nonetheless, a number of preliminary agreements and negotiations have taken place with Israel’s neighbors, regarding export destinations for the gas in the basin.

Once developed, the 621 b.cu.m.



Leviathan reservoir is slated to serve both export and domestic purposes, as the Israeli government settled on a 40% export cap of the resource in June 2013. The smaller, 282-b.

cu.m. Tamar basin is predominantly supplying Israel with gas, though some regional supply agreements have also been discussed for this basin.

If the non-binding letter of intent does eventually progress into a fullfledged deal, the parties plan to deliver the gas across the land border to Jordan. Sales volumes would likely begin at a rate of 9 million cubic meters of gas daily.

At Leviathan, Houston-based Noble Energy owns 39.66% in Leviathan, while Delek Drilling and Avner Oil Exploration – subsidiaries of the Delek Group – each own 22.67% and Ratio Oil Exploration holds 15%.

At the end of November, Delek Drilling reported that the Leviathan gas reservoir was expected to begin flowing by the beginning of 2018.

The development would occur in two phases, with the first phase supplying gas to the domestic market and to the region, through the establishment of a floating production storage and offloading (FPSO) facility, at a cost of $6 billion - $7b.

The second stage would mainly involve the export of gas, for which the project partners were still exploring a number of possibilities and methods, Delek Drilling said at the time.

Following Gilo’s announcement at the Antitrust Authority two weeks ago, the reservoir’s fate remains uncertain, however.

Gilo decided that a proposed consent decree regarding the entry of the Delek Group and Noble Energy into Leviathan would not be submitted to the Antitrust Tribunal for approval as had been agreed upon earlier this year. The proposed decree would have allowed the companies to sell their shares in two smaller reservoirs, to remain in Leviathan without receiving the status of cartel.

Knesset members from across the political spectrum have applauded Gilo’s step, yet foreign investors have warned of their increasing reluctance to participate in Israel’s hydrocarbon industry as a result.

The letter of intent signed with Jordan in September is one of several preliminary deals that the Leviathan and Tamar partners have signed with private and public entities in the region – including another with Jordanian Dead Sea facilities, two with British and Spanish operators of Egyptian liquefied natural gas facilities and one with a future Palestinian power plant in Jenin.

The preliminary agreement with Jordan’s NEPCO has remained geopolitically controversial particularly within the kingdom’s parliament, generating heavy opposition among political officials.

Both the Delek Group and Noble Energy declined to provide a comment regarding Gammoh’s statement.

In response to the latest developments, Dr. Amit Mor, CEO of the Eco Energy consulting firm, stressed that “it is important to wait for an official government announcement. The project is important from economic and geopolitical perspectives.”

Kirk Sowell, the Amman-based principal of Uticensis Risk Services, a Middle East-focused political risk firm, maintained that despite the delay, the deal between NEPCO and the companies will pan out in the end.

“I fully expect this to go through, assuming it doesn’t implode on the Israeli side,” Sowell told the Post on Sunday. “The Jordanian side – they need the deal.”

Jordanian Prime Minister Dr.

Abdulla Ensour’s government has taken the position that the approval of such a deal does not need parliamentary approval to pass, Sowell explained. Although on December 10 parliament voted on a non-binding resolution against the deal – and about 20 threatened to resign over the deal – several days later a new coalition of parliamentarians formed in support of the government, he continued.

“My assessment is that maybe one or two would resign, but there are not going to be 20 resignations,” Sowell said.

The outcome of the gas import deal with Israel will have a significant impact on the state budget, and “ultimately, if the palace puts enough pressure on parliament they can’t really refuse anything,” he added.

Regardless of the internal Israeli turmoil regarding the fate of Leviathan, many parliamentarians and activists have expressed their dissatisfaction with advancing negotiations on the subject. For example, just two weeks ago, Jordanian MP Hind al-Fayaz called the potential agreement “dealings with Satan,” noting that she would prefer to “set herself on fire” than partake in such an arrangement.

Nonetheless, Sowell stressed that the King Abdullah is not alone in his desire to move forward with the agreement, as there are some East Bank Jordanians who support the deal.

Right now, during a time when Jordan is coping with pilot Muaz Yossef al-Kassaba’s recent capture by ISIS in Syria, the government cannot focus its attention on moving forward with an Israeli gas deal regardless of Israel’s antitrust uncertainty, Sowell said.

“My assessment is that this is going to pass – it has to be massaged and handled in a proper manner,” Sowell said. “It’s not going to pass while this airman is in captivity because this is a very sensitive issue here.”

Negotiating with Israel while trying to bring a captured pilot home from the grasp of Islamic State would not be optimal, he explained.

“They can’t deal with anything absolutely essential right now until Kassaba is freed,” Sowell added.

The gas import deal, he said, will likely receive parliamentary backing in the end, but simply “may require some more time.”

Like Sowell, David Schenker, the director of The Washington Institute’s Arab politics program, said that Gammoh’s announcement this weekend “does not constitute a setback.”

As members of the public and parliamentarians alike have been publicly expressing their disapproval for the deal for the past several months, Schenker said it comes as “no surprise that the Lower House would weigh in on this in such an emphatic manner.”

Although “at the most basic level the Kingdom needs this deal,” due to the enormous energy deficits the country is facing, Israel’s internal troubles gives Jordan an opportunity to pause the deal temporarily, Schenker explained.

“This is a nice little gift to the king – the Israeli internal squabbling,” he said. “It provides a non-offensive rationale for suspending the negotiations.”

“Why would Jordan negotiate right now with these companies when their legal status is unclear? Anybody right now suspend negotiations,” Schenker added.

In the meantime, according to Schenker, King Abdullah must focus his attention right now to other burning issues, such as the pilot captured by Islamic State, as well as the refugee situation and internal talks about developing nuclear energy.

Any pause in talks at the moment “will provide a useful respite and alleviate some of the pressure” on a critical Arab ally to Israel, he added.

“If I’m Israel, this is not a huge problem or a concern that these talks have been suspended,” he said. “This type of economic progress is a huge deal and it’s not necessarily going to be linear progress.”

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