oil gas israel egypt

Energy Geopolitics in the Eastern Mediterranean Jordan, Israel, Egypt, PA

Source: NYTIMES.COM, reuters.com, image source: startrics.com

Natural gas is both a geopolitical tool and a target in Israel, where a newfound bonanza of resources has the potential to improve ties with energy-hungry Egypt, Jordan and even the Palestinian Authority.

Noble Energy, the Houston-based company that runs the Tamar platform and is developing another field nearby, has struck a series of deals in recent months to sell gas from Israel to its neighbors, an export strategy encouraged by the Obama administration to help ease tensions in the region. Both Jordan and the Palestinian Authority have signed preliminary agreements in recent months, while Noble is in talks to supply larger amounts of gas to Egypt.

According to Reuters:

(Reuters) – British gas company BG  is in advanced talks that could boost supplies to power-hungry Egypt by allowing rival BP  to use its pipelines, the head of BG Egypt told Reuters.

A deal could enable BG to raise production at its Egyptian operations, which account for about one-fifth of its global gas output but have been hit hard by the turmoil that followed the overthrow of Egyptian president Hosni Mubarak in 2011.

The companies are in talks to link their gas developments off Egypt’s north coast by routing around 350 million cubic feet of gas a day from two undeveloped BP fields into BG’s under-used WDDM offshore pipeline network.

The corporate connection is crucial. As the main negotiator and broker, Noble is giving cover to leaders who could otherwise face political blowback for buying gas supplies in deals directly with the Israeli government.

Noble Energy, which has a taste for risky exploration in unlikely places like the Falkland Islands and Nicaragua, started exploring here in the late 1990s. The platform was built in Corpus Christi, Tex., and transported by boat to its present site.

Noble, which completed the development of Tamar last year for $3.5 billion, says that it has found more than 800 billion cubic meters of gas off Israel. The finds would be enough to satisfy current Israeli demand for about a century, greatly easing the country’s need for imported fuels.

Noble is acutely aware of its surroundings. Half of Israel’s electric power now comes from the natural gas that flows through Tamar, making the platform and an onshore processing plant a tempting focus for rockets from Hamas or more distant enemies. Security makes up about half the personnel on the Tamar platform.

While Israel’s gas consumption is growing fast, the domestic market isn’t large enough to full tap Tamar’s potential,, much less develop a much larger field called Leviathan. So Noble and its Israeli partners have focused on Egypt and Jordan as the nearest, cheapest-to-reach places to export.

The Obama administration has quietly pushed the strategy. As United States officials see it, the energy ties could further cement the fragile peace between Israel and its neighbors, and perhaps offer Europe another gas source to lessen its dependence on Russia.

While Jordan’s relations with Israel have been tense lately, the country has been a receptive customer because it badly needs gas for its growing energy needs. Since 2011, Jordan, like Israel, has had its gas supply disrupted, as militants in Sinai repeatedly attack a major gas pipeline from Egypt.

Secretary of State Hillary Rodham Clinton talked to King Abdullah of Jordan about Israeli gas in 2011. Amos J. Hochstein, a top energy diplomat at the State Department, approached Noble Energy in early 2012 about making a deal with the Jordanians, according to American officials with knowledge of the meeting. Formal negotiations, involving company executives as well as Israeli, Jordanian and American officials, began that year at the Royal Court in Amman.

But the talks dragged on for two years with negotiators shuttling between hotels on Jordan’s Dead Sea coast and the Hilton Hotel at London’s Paddington Station. In a volatile region, King Abdullah risked drawing the fire of domestic critics if he bought fuel from Israel.

Noble helped break the impasse by striking a separate deal with two Jordanian mineral companies, Arab Potash and Jordan Bromine. The companies will buy about $500 million of gas over 15 years from Tamar.

The private contract paved the way for the Jordanian government, which wanted a deal that would legally be with the American company, rather than Israel. Seven months later, Noble signed a preliminary agreement to sell gas from Leviathan to Jordan for electric power, worth an estimated $12 billion.

Jordan is one of the latest deals for Leviathan. In January, Noble and its Israeli partners reached an agreement to supply a power plant under construction in the West Bank by a Palestinian group.

The most likely anchor customer for Tamar field is Egypt, a huge and growing market. Today, two gas export facilities on the Mediterranean are sitting largely idle. The Egyptian government is blocking exports in order to meet high domestic demand and stave off power blackouts.

This year, Noble reached nonbinding agreements with the owners of both of these facilities — BG, the large British producer, and a joint venture of Italy’s ENI and Spain’s Gas Natural Fenosa — to supply their facilities from Tamar and Leviathan. As part of the deals, the gas would also probably flow to the domestic market in Egypt.

“Egypt has a very severe energy and power crisis right now and they are really desperate for Israeli gas,” said Leslie Palti-Guzman, an energy and geopolitical analyst at Eurasia Group, the New York-based political risk consultancy. “But there is also a lot of opposition from public opinion.”

Noble and its partners are also looking for alternatives. They have commissioned designs for a floating liquefied natural gas facility, which would allow them to move gas to the global markets.

And domestic businesses are taking advantage of the new gas. One Israeli company, Dorad Energy, recently built a $1.3 billion gas-fired generating plant near Ashkelon. On a typical day, the plant meets about 10 percent of Israel’s power demand. The company is planning to add another next door.

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