Memorandum 144 | The Institute For National Security Studies | Tel Aviv University
Oded Eran, Dan Vardi, and Itamar Cohen
In its June 23, 2013 meeting, the government of Israel approved the export of some 40 percent of the country’s natural gas reserves and the retention
of 540 billion cubic meters (BCM) for local consumption. In October 2013, Israel’s High Court of Justice rejected petitions seeking to limit the
government’s exclusive right to set these goals.
The Tamar natural gas field, operating since 2013, does not have reserves large enough for export. On January 5, 2014, the companies comprising the consortium producing the gas from Tamar signed an agreement with the Palestinian Authority to supply 4.75 BCM over the next 18 years; on February 19, 2014, an agreement was signed to supply 1.8 BCM to two companies operating on the Jordanian side of the Dead Sea; and on September 3, 2014, Noble Energy, the American company that is part of the consortium operating Tamar and owning the Leviathan field agreed to enter negotiations with Jordan’s electric company on a sale of 3 BCM annually over 15 years. However, these quantities are relatively small. Furthermore, these decisions did not arouse any opposition because of the agreements’ political significance.
Exports to other destinations are feasible only from the much larger Leviathan gas field, which is slated to go into production in 2017 or 2018. Technological, economic and political aspects are already giving rise to questions about prioritizing export targets. The issue is highly complex, and whatever decision is finally made, it will be rife with both risks and opportunities.
On April 10, 2014, at a conference hosted by the Delek Group, a senior partner in the consortium that won the franchise to develop Leviathan, participants were shown a map of the field’s export potential. If this map reflects strategic decisions by the consortium, most of the export targets – Egypt, Jordan, the PA and Turkey – are concentrated in the Mediterranean.1
All of the export targets in the region, as well as more distant export targets that depend on facilities located in neighboring countries (Turkey as a country that facilitates exports to Western Europe or the liquefaction installations in Egypt), entail political and security risks. At the same time, transporting natural gas also opens up economic opportunities and possibilities for creating
a regional infrastructure map. Such a map would antedate a political map but could enhance regional stability as it would promote shared economic interests.
Without expressing an opinion on Delek’s list of potential export target and whether it does or does not exhaust the political and economic interests, not only of the consortium but also of the State of Israel, we would like to examine the feasibility of Israeli natural gas export to Turkey. It is a complex, even fascinating topic. The presentation given in the Delek conference did not relate to the possibility of Israel exporting gas to Europe or to Turkey as a conduit for exports elsewhere. It may be logical to think only in terms of local markets, because the amounts available to the ompanies that will eventually export the gas are not sufficient to play a major role in the larger markets of Europe, South Asia and East Asia. A press release issued by the partners of the Leviathan reserves on July 13, 2014 stated that at present, the total amount contained in the Leviathan field is estimated at more than 600 BCM, with 80 percent of that designated for export (the Leviathan partners are obligated to retain up to 135 BCM over the next 15 years for the Israeli gas delivery system).2 Because supply contracts in the gas business run over 15-25 years, the average annual quantity available for export would be in the 20-30 BCM range (this quantity could grow if further gas reserves are discovered in the field). The length of supply contracts also makes it difficult to provide meaningful forecasts. On the one hand, it is hard to ignore the tendency to project current economic and political circumstances onto future processes and trends; on the other hand, there are no sophisticated tools for making decisions using financial and political implications with a high degree of certainty.
Strategic exporters to Turkey must take into account the political future of that country and the future of its internal and international politics. That the source of the natural gas in this case is Israel and that the consortium exporting it has a significant Israeli presence require a particularly thorough examination. The analysis below deals mainly with the political feasibility of an agreement with Turkey, based in part on the assumption that in the decision making process, the economic aspect is relatively simple while the risks are fundamentally political. The anti-Israel statements, bordering on anti-Semitic canards, made by Turkish leaders during the July 2014 conflict between Israel and Hamas in the Gaza Strip only emphasize the risk involved in a strategic economic deal between Israel and Turkey, even if what is discussed is a contract vital to Turkey’s own economy. The harsh exchanges and mutual accusations between the leaders of the two countries may complicate the implementation of any agreement on the supply of Israeli natural gas to Turkey.