The Likelihood of a Leviathan-Turkey Pipeline
The Leviathan partners, Noble Energy and Delek are reportedly in talks for the construction of a pipeline running from the giant Israeli field to the Turkish coast. The Turkish companies taking part of the talks are Calik, Turcas, Enka and Zorlu. The pipeline would cost an approximative amount of USD 2 billion. The undersea pipeline from Israel’s Leviathan to Southern Turkey would be therefore a less costly endeavor than building and onshore LNG terminal, a project that would not only require larger amounts of funds but also require an adequate coastal site. The pipeline to Turkey would provide somewhere between 8 t 10 bcm of gas per year costing USD 7 - USD 9 million BTU.
Turkey is strategically located as a gateway to Europe and is also in need for gas. Israel and Turkey have recently resumed diplomatic ties after their relationship deteriorated following the flotilla incident in 2010. Israel’s US-brokered apology in March 2013 paved the way for possible energy partnerships. Such a deal would allow Turkey to diversify its sources of supply and enter a very lucrative agreement that would boost the country’s economy. The US are still supportive of an Israeli-Turkish entente and are advising Turkey to loosen its strict stance towards Israel.
Such a deal would allow the Leviathan partners to sell natural gas to a consortium of Turkish companies. A third party would be responsible of the technicalities of building a pipeline in an attempt to move aside geopolitical volatilities. Although such a pipeline would be commercially attractive and technically relatively simple, geopolitics still stand in the way. Cyprus is still working on its plan to build an onshore LNG in the southern part of the island and is also considering other options such as laying a gas pipeline to LNG facilities in Egypt. The onshore Vasiliko LNG project requires large amounts of funds and is currently pending further discoveries in Cyprus’ EEZ and/or the participation of Israel.
Cypriot officials do not dismiss the possibility of allowing a Turkish pipeline to transport Eastern Mediterranean gas to Europe in conjunction of the LNG facility in Cyprus. However, the prerequisite is clear: no pipeline to Turkey will cross Cyprus’ waters unless an accord ending the 40 year division in Cyprus is achieved. Previous talks failed to find a solution to the Cyprus problem but new hopes came to light now that a new consideration came into play: the gas factor.
It is believed that the hydrocarbon riches in the Eastern Mediterranean basin could play an important role in altering the historical equation. If the various players can achieve an agreement that would benefit them all and maximize the offshore deposits of natural gas, all possibilities are open, as confirmed by both the Cypriot minister of energy and the Cypriot President.
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean. Email Karen on ayat_karen@hotmail.com. Follow her on Twitter: @karenayat