Undecided policies key to gas exports from Israel, Cyprus

Several options remain open for export of natural gas from large deepwater discoveries offshore Israel and Cyprus as operators await important clarifications of policy.

Export schemes under discussion include a marine pipeline to Turkey, a pipeline to an onshore LNG plant in Cyprus, a pipeline to Greece via Cyprus, and floating LNG schemes, according to Amit Mor, chief executive officer of the Israeli consultancy Eco Energy and a former assistant to the minister of energy and infrastructure. Use of gas as a feedstock for exportable methanol or petrochemicals is another possibility.

Mor said a pipeline to Turkey, a project for which his consultancy has done work, can be built for $3 billion and “makes the most economic sense.” But geopolitical risks are high. Banks supporting the project would require guarantees from the Turkish government, he said.

In Israel, Amit said, local opposition to onshore projects influences decisions and makes improbable the construction of onshore liquefaction plants.

“I don’t think it’s viable,” Mor said in an interview with Oil & Gas Journal during a visit to Houston.

All export options await a decision by the Israeli government about how much gas to make available to foreign markets. Export policy will influence development by groups led by Noble Energy Corp. of giant Leviathan gas field, the nearby Aphrodite strike in Cypriot waters, and other discoveries in the area. From Leviathan, Noble plans to produce 750 MMcfd of gas for Israeli use and 850 MMcfd for export in the first phase of development (OGJ Online, Dec. 7 2012).

Allocation controversial

Allocation of Israeli gas reserves between exports and domestic use is controversial. A year ago, a committee chaired by Energy and Water Ministry Director General Shaul Tzemach recommended an export-domestic split of 50-50. After a round of public objection, a change in government, and a second Tzemach committee recommendation, the Israeli cabinet lowered the export share to 40%, including nearby sales to Jordan and the Palestinian Authority.

Concerns have arisen that exportable volumes much below half current reserves estimates might not support LNG investment. Soon after the cabinet the cabinet approved the lower export allocation, Woodside Petroleum of Australia, waiting to farm into the Leviathan development, showed interest in an LNG plant at Vassilikos, for which Noble Energy and partner Delek Drilling had entered a memorandum of understanding with the government of Cyprus. The government hopes to make Cyprus an energy hub based on Aphrodite and Leviathan gas.

Woodside earlier had agreed to buy a 9.66% Leviathan interest from Noble for consideration estimated to total $802 million. Addressing the Leviathan project in a recent presentation, Noble said Woodside would represent “a strategic partner with LNG expertise” and said finalization of the definitive agreement awaited export rule approvals.

That wait continues. Opponents challenged the second Tzechmach recommendation in court, arguing the decision should have been made by Israel’s parliament. A Sept. 17 hearing on the question in the High Court of Justice was postponed until Oct. 20.

The need for gas

Mor pointed out that concern for domestic gas supply comes naturally to a small country surrounded by adversaries and needing growing amounts of natural gas.

Noble estimates Israel’s compound gas-demand growth rate during 2012-17 at 15%/year. Until early in 2012, the country received 40% of the gas it needed—90% for electricity generation—from Egypt via a marine pipeline between El Arish and Ashkelon. When civil war in Egypt disabled the pipeline, power generators switched to fuel oil and diesel, and electricity prices jumped.

The start-up of deepwater Tamar gas field in April by Noble and partners began replacing the lost Egyptian supply and eased electricity prices. The field’s peak deliverability is about 1 bcfd.

Mor said Tamar illustrates two problems in Israel: the vulnerability of energy facilities and the effects of “not-in-my-back-yard” pressure. The field produces from five wells completed subsea in 1,700 m of water about 90 km off Israel’s northern coast.

“The whole nation is dependent on this one chain of supply of gas,” he said.

Opposition hampered its start-up. Connecting Tamar by pipeline to new treatment facilities near Haifa would have been logical, Mor said. But controversy precluded onshore construction where the pipeline distance would have been least. The project group instead laid 150 km of dual 16-in. pipelines between the field and a platform built near mature Mari-B gas field so Tamar gas could flow to existing onshore facilities at Ashdod.

Mor estimates the longer route added $1.5 billion to the cost of Tamar development and delayed start-up by a year.

Related Articles

OTC: Total suggests Shanghai as Asian natural gas hub

05/07/2014 Shanghai, China, would be a natural geographic and market position for a natural gas hub in Asia, according to Laurent Maurel, Total senior vice-pr...

OTC: Robust US energy policy needed to strengthen economy, lawmaker says

05/07/2014 Anticipated energy demand worldwide by 2050 will be such that industry will need to produce similar levels of oil and natural gas compared with tod...

EIA forecasts higher summer gasoline prices

05/07/2014 According to the US Energy Information Administration’s most recent Short-Term Energy Outlook (STEO), regular gasoline retail prices are projected ...

Encana to acquire Eagle Ford acreage for $3.1 billion

05/07/2014 Encana Oil & Gas Inc., a wholly owned subsidiary of Encana Corp., has reached an agreement with Freeport-McMoRan Oil & Gas LCC, a subsidiar...

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected