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Saturday, December 10, 2016

Turkey gives Israel a chance to become a competitor of Gazprom


Reconciliation of Turkey with Israel, revived an old idea for tel Aviv to supply its gas via Turkey to Europe. Meanwhile, Ankara is already developing a similar project with Azerbaijan, and it is possible the revival of the “Turkish stream” on the background of the apology Erdogan to Putin. Ankara is advantageous to make all of these projects. However, what are the chances of Israel in the struggle for European gas market?

Prime Minister Benjamin Netanyahu announced the delivery of Israeli gas to Europe through Turkey, RIA “Novosti”. According to him, the agreement on normalization of relations requires an agreement on transit. “Israeli natural gas can be supplied to Europe via Turkey. Without this agreement it would be impossible. We are talking about huge numbers,” said Netanyahu in a speech in Rome.

“This is such a difficult game that leads to Turkey. In my opinion, it flows through all three of the project – not only Azerbaijani, but also Russian and Israeli”

Israel and Turkey six years ago were strategic partners, but in 2010-m to year relations deteriorated sharply. This happened when Israeli Marines killed ten Turkish support Palestine activists marching to break the blockade of Gaza.

But on Monday, Israel and Turkey announced the normalization of relations after a six-year gap partnership: an agreement to exchange ambassadors, the agreement initialed and soon to be signed, said the Prime Minister Binali Yildirim.

That Israel wants to deliver its gas to Europe, tel Aviv says for several years, claiming that the differences with Turkey is not a hindrance. In recent months, such conversations became more frequent against the background of political controversy between Russia and Turkey and reducing purchases of Russian gas by Turkey (in the first quarter of 2016, the Russian Federation exported to 6.35 billion cubic meters against 7.5 billion in the first quarter of 2015).

However, on Monday it became known about the apology of the President of Turkey in a letter to Vladimir Putin over the downed aircraft su-24 and offering deep condolences to the family of the deceased pilot Oleg Peshkov. Erdogan, in a letter urged Russia to restore friendly relations between the two countries. If the parties go further in this desire, it could easily return to the previous relationship in the gas sphere. Prior to the conflict, Turkey wanted to increase Russian gas deliveries and sign the agreement on the Turkish stream.

On the other hand, even normalization of relations between Russia and Turkey does not exclude the desire of Ankara to work with Israel. But Turkey, like Russia and Israel will remain a risky partner, given the previous experience of cooperation.

Infrastructure

In fact, the political risks of gas transit from Israel to Europe – one of the downsides Netanyahu announced the project. Today countries are friends, and gone tomorrow.

“Islamist Erdogan is not the most desirable partner for tel Aviv. Therefore, this transit project is a very high political risks, which negatively affects its investment attractiveness”, – said the Chairman of the Board of Directors of Engineering company “2K” Ivan Andrievsky.

Political risks created not only by the Turkey. “The pipeline can be build either at the bottom of the Mediterranean sea or on land. In any case, will have to face either Northern Cyprus or Lebanon and Syria – neither one nor the other option does not seem to be reliable and bear additional investment risks”, – said Andrievsky.

With these risks to attract investors. For comparison, the cost of a similar project of construction of TANAP from Azerbaijan to Turkey) is estimated at 10-11 billion dollars, TAP (Turkey in Europe) – at 5.6 billion euros.

The pipeline to Turkey and further to Europe is still a reference to a particular market, first and foremost, the Turkish market and the countries of South-Eastern Europe. In Israel, there is an alternative – the opportunity to export anywhere in the form of LNG.

“Israel is more appropriate to build an LNG terminal to export liquefied natural gas. The cost of the plant can be comparable to or less than the construction costs of the pipeline. Moreover, along the Mediterranean shores, many LNG terminals for receiving such fuel, they are not loaded. In addition, due to sales of LNG to Israel can be more flexible, not tied to the local market. LNG supply: more global,” says the newspaper LOOK Director of the energy development Fund Sergey Pikin.

If tel Aviv will choose a pipeline project, the prospects for its implementation have still gone far beyond 2020.

“Because you need to pass not only through Turkey, but also to build capacity to transport gas within Europe, and for this we must obtain the approval of the EC, to obtain a certain status, as did the Azerbaijani project TAP (Russia such status for Opal, for example, not given – approx. OPINION). This is all clearly beyond 2020,” – says Pikin.

For comparison: for the first time about the project of Azerbaijani-Turkish TANAP gas pipeline began in 2011, had previously discussed the feasibility of the Nabucco project, which eventually buried. Only this year was fundamental decisions about the future of this project, in particular TAP (continued pipe from Turkey for the European territory) just now got the green light from European regulators (with the exception of the operation of the rules of the third energy package of the EU). The first deliveries are expected no earlier than 2019. That is, since the actual supply may take at least eight years. In fact, the project of the Israeli pipeline through Turkey to Europe is now under Azerbaijani project 2011.

Resource base

Israel interested in gas supplies through the development of the continental shelf in the Eastern Mediterranean sea, where the already operating Tamar field and is preparing to enter the Leviathan field (according to preliminary data, contain 453 billion cubic meters of gas).

However, the decades long conflict this summer was resolved. In may, Netanyahu presented the new agreement with Noble Energy and Delek Group on the development and export of gas from the field. It is, apparently, all arranged as a consortium at the beginning of June, finally received permission for the development of Leviathan. The agreement introduced a clause allowing for future Israeli governments to change the terms agreed with oil and gas companies. It also creates risks for miners. Perhaps this is due to the fact that after the termination of cheap gas imports from Egypt, the domestic prices of gas rose, but after the development of the Tamar didn’t come back. That is the import of gas, as it turned out, was better for the Israelites, than when the country began to produce their own gas.

Although the conflict over the Leviathan is allowed, it will take more than one year for industrial development.

“Design of the rig will take at least a year, plus coordination with various authorities responsible for the environment, transport and so on. Bureaucracy in Israel is not less than in Russia. Go platform manufacturer, transportation, Assembly on site, commencement of drilling, production of first gas, the increase of wells, the extension of the field of drilling. This project, in my opinion, also popping up beyond this decade,” – said pikine.

According to the plan of the consortium, originally the power of the drilling platform will reach 34 million cubic meters of gas per day or 12 billion cubic meters per year. Then its capacity can be increased to 60 million cubic meters per day or 21.6 billion cubic meters per year.

However, part of the produced gas will be resold Israeli IPM Beer Tuvia for the construction of a new power facility. For 18 years she intend to put to 13.4 billion cubic meters.

Israel had previously offered to Europe 16-17 billion cubic meters a year, probably the same amount of tel-Aviv is ready to offer today, said Andrievsky. Even with the supply of 10 billion cubic meters of Azeri gas (plus 6 billion for Turkey) this is not comparable with the volumes of deliveries of Gazprom in Europe – at the level of 160 billion cubic meters every year.

And finally, one of the important issues – the price of the project. “Now the cost of energy is low, and Israel produce gas on the shelf. Offshore fields are among the most expensive in the production, to the same energy are still at a great depth relative to the seabed, which further increases the cost. At current gas prices, plus infrastructure costs, plus investment risks, the pole transit costs – the Israeli project to deliver gas to Europe is at least very risky”, – says Ivan Andrievsky.

Thus, the positions of Gazprom in Europe in the future five years, the Israeli gas is not in danger. However, to exclude the supply of Israeli gas to the EU is not, the competition of gas supplies to South-Eastern Europe and the Balkan Peninsula will grow.

A challenging game of Turkey

Ankara clearly confronts head-on three projects of supply of gas to Europe, Azerbaijani, Russian and Israeli. “It is not excluded that Gazprom will now revive the project “Turkish stream” in the new version of “Poseidon” with access to Italy. No wonder that Erdogan apologized. This is done in order to eliminate the damage to the Turkish economy due to the rupture of relations. And possible assignment could be “Turkish stream”, – says Sergey Pikin.

The project TANAP and TAP to supply Azerbaijani gas to Europe through Turkey has got everything you need to bring.

“It’s a challenging game, which is Turkey. In my opinion, it flows through all three of the project – not only Azerbaijani, but also Russian and Israeli. Moreover, if necessary, and will miss the fourth project Iranian. The more pipes passes through its territory, the more important is the role of Turkey and the greater its leverage over the EU. Not only by migrants but also by means of a gas policy”, – says Sergey Pikin. Indeed, in this case through Turkey can pump more than 100 billion cubic meters of gas from different countries. It not only meets the Imperial ambitions of Turkey, but also provides additional income in the form of payments for gas transit and the ability to receive imported fuels at a very attractive price.

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