Israel and Jordan plan a USD 15 Billion Deal
A Memorandum of Understanding was signed between the Kingdom of Jordan and Noble Energy representing the Leviathan partners for the export of 45 BCM of gas from Israel to Jordan over 15 years. The USD 15 billion deal will turn Israel into Jordan’s main supplier of natural gas. The Kingdom historically relied on Egypt to satisfy over 95% of its natural gas needs. In 2011, the sabotaging of the Arab Gas Pipeline that used to carry gas from Egypt to Jordan and Israel led to repeated disruptions in the flow of gas. Jordan entered a severe energy crisis that forced the country to adopt several measures: the purchase of expensive fuel products to make up for the shortfalls, the implementation of an energy efficiency plan and the launching of initiatives aimed at developing its indigenous resources. Egypt can no longer be a reliable source of natural gas; it is now undergoing energy problems at home, with a flat production, ongoing export obligations and an increased consumption.
Israel too was historically dependent on Egyptian gas. However, the discovery of substantial amounts of natural gas off Israel’s coast promised Israel’s energy security for decades and its entry into the natural gas markets as an exporter. Gas was indeed discovered in abundance. The Leviathan and the Tamar fields are Israel’s largest discoveries to date and are believed to hold respectively 21 and 10 Tcf of natural gas, enough to satisfy Israel’s natural gas needs for years to come and generate an inflow of revenue estimated by the Israeli Government at 60 billions of Shekel.
After a lengthy debate that divided Israel’s political class, in a June 2013 cabinet decision ratified by the Supreme Court in October of the same year, the country decided to allocate around 40% of its resources for export. Since then, Israel has been struggling to formulate an export strategy. The complicated geopolitics of the region render the task quite difficult. Israel announced it would start by exporting to immediate neighbours, namely Jordan, the Palestinian Authority and Egypt. The partners in Israel’s largest fields also signed letters of intents for the use of Egypt’s unused export terminals to reach export markets.
Starting with regional deals makes sense from a technical and economical perspective. However, such deals between Israel and its Arab neighbours may upset a few. Israeli officials seem optimistic as they express their hope that the sealing of the agreement will strengthen the economic relations between Jordan and Israel. The final signing is expected in 2014 subject to regulatory approvals in both Jordan and Israel.