Europe has hopes Eastern Mediterranean gas reserves can help to diversify its supply sources, as well as easing Cyprus’s economic pain and potentially playing a role in healing the rift between the northern and southern parts of the island.

Charles Ellinas, executive chairman of the Cyprus National Hydrocarbons Company, said authorities would also push ahead with plans to develop a liquefaction plant to handle exports expected from 2020.

But gas from the region also comes with Middle East complications since the fields are split with Israel and Lebanon, two countries technically at war, and Turkey objects to ethnically split Cyprus tapping offshore reserves.

“I am very confident that Cyprus can provide Europe with 30 to 40% of its additional gas needs by 2025,” Ellinas told Reuters as part of a series of interviews on the gas market.

Europe’s gas demand is slightly below 500mn cubic metres a year, and Ellinas estimated the increase in demand by then to be around 100bn cubic metres (bcm) a year, although many analysts say demand will grow much more slowly.

The US Geological Survey estimates a mean 122tn cubic feet (3.5tn cubic metres) of recoverable gas lie in the eastern Mediterranean basin, as well as 1.7bn barrels of recoverable oil.

Much of it lies trapped beneath the sea bed between Cyprus, Israel and Lebanon, including two vast gas fields off Israel which are some the largest discovered in the past decade.

So far an estimated 200bcm of natural gas worth $80bn at current prices have been discovered in the Aphrodite gas field in Cypriot waters, but research suggests that developing the field would require large amounts of upfront investment into a project that may not deliver high returns.

Analysts say gas prices could fall after 2015 when a wave of new supplies become available in the US, Australia and Africa.

Consultants estimate the first phase of the LNG facility including infrastructure and one delivery chain will cost $6bn. One option under consideration for funding the project was to use the LNG sales agreements as collateral.

“Given that the ownership of gas is, roughly speaking, two-thirds Cyprus’s and one third to oil companies, these LNG sales agreements are worth a large amount of money which can provide security for loans,” Ellinas said.

Ellinas said there was a chance developing the gas could lead Turkey and Cyprus to bridge their 40-year differences.

“One of the reasons Turkey has been putting so much pressure on everybody is because of their own needs (for gas),” he said.

The gas windfall is one economic positive for Cyprus, where the terms of an EU and International Monetary Fund bailout will see the island’s €17.5bn ($22.51bn) economy shrink by more than 8% this year.

Despite its close business ties with Cyprus in other sectors, Russia does not have any involvement in the island’s attempts to develop its offshore energy sources.

“The Eastern Mediterranean is a secure, independent supply corridor. It’s probably best if Russia is not involved,” Ellinas said when asked about Russian involvement.

Cyprus has signed production sharing contracts with US based Noble Energy, France’s Total, Italy’s ENI and South Korea’s KoGas.

Ellinas said Noble was scheduled to start appraisal drilling in June to verify initial findings of between 5 and 8tn cubic feet (tcf) of gas. Total was scheduled to start an exploratory drill in 2014, and ENI by 2015 or possibly earlier.

“I have seen the estimates of ENI and Total about how much gas there is in their blocks and it is quite significant,” he said. Asked if the estimates were on a par with those of Noble, he said: “The short answer is yes.”

Ellinas, who previously held senior positions at energy firm Mott MacDonald, said the construction of a pipeline to channel the gas to markets was impractical because of sea depths, but said that could not be ruled out in the future.

For now, the island will move ahead with plans to construct an LNG terminal, which will liquefy gas and ship it.

The terminal, which is expected to be built at Vassilikos, on the island’s south, could handle gas fom Israel and Lebanon as well as Cyprus, he said.

Published by:  www.gulf-times.com

The recent natural gas discoveries off Israel’s coast led to a discussion over how to best transfer the gas to Europe.

The paper quotes top Turkish officials as stating they are moving to be in favor of “extensive cooperation” with Israel and Cyprus. Turkish President Abdullah Gul and Energy Minister Taner Yildiz were said to have discussed the issue on Friday at an energy conference in Istanbul. Gul said at the conference that Turkey is “ready to contribute to any constructive project,” according to the report.

While Greek Cyprus disputes the gas finds with Turkish Cyprus and Ankara, building a pipeline through Turkey remains the most economical option. The report also stated that the rapprochement between Turkey and Israel will allow Ankara to cooperate with Jerusalem on a gas project, and that Yildiz has already begun planning for possible options.

Meanwhile, Turkish Foreign Minister Ahmet Davutoglu told the Turkish Star last week that Ankara will not accept Israel’s interference in any Muslim country, thus ruling out cooperation with Jerusalem over the crisis in Syria. He also said that the negotiations over the Mavi Marmara flotilla and the conflict in Syria were two separate issues.

Efrat Aviv, a researcher at the Begin-Sadat Center for Strategic Studies, told The Jerusalem Post that Turkish media reports have indicated that the country also seeks to be involved in projects with Egypt and Lebanon as part of a regional peace policy.

She said that for Turkey, economic interests often trump other factors, even when it comes to Israel.

Turkey has a team of technical experts working on regional economic cooperation, but on political matters such as the issue of the flotilla, the political leadership has the final say, according to Aviv.

The Turkish media is also reporting on Prime Minister Recep Tayyip Erdogan’s trip to the US next week to meet with US President Barack Obama.

The Turkish website Anadolu Agency is highlighting the fact that Erdogan will receive the highest state welcome with two full military honors – one at the airport and the other at the White House. Erdogan is set to stay at Washington’s Blair House, the president’s official guesthouse

Published by: www.jpost.com

from possible gas reserves within offshore Block 3 is being “considered” by the

government, the Sunday Mail has been told.
The venture had bid for Block 3 but was not picked, the exploration licence ultimately

awarded to the Italian-Korean consortium of ENI-KOGAS.
But Dr Eli Barnea, CEO of Sigma Explorations Holdings Limited – which has a 75 per

cent stake and was the designated operator in the Israeli joint venture – said this

week that their offer still stands.
The Israeli-led group’s proposal on Block 3 incorporated the construction of a power

plant on the island for exporting electricity to Israel and for generating electricity

for Cyprus’ local consumption, by linking the two countries’ grids via a subsea cable.
Due to their geography, both nations are currently isolated in energy terms and

vulnerable to failures at their main power plants, argues Barnea, citing the Mari

disaster of 2011.
In that respect, a 1500MW capacity plant in Cyprus would be a win-win for everyone.
Barnea says the Cyprus government and the ENI-KOGAS consortium could be persuaded to

‘farm-in’ the Israeli-led joint venture.
One option might be for the Israelis to purchase part of the Block 3 gas from the

Italian-Korean consortium. They would then finance a natural gas-powered plant on the

island and sell the bulk of the generated electricity to Israel.
In addition to the jobs created in building a facility, Cyprus would benefit from

charging a fee for the export of electricity to the neighbouring country.
Barnea sees Block 3 as being ideal for the project, because of the prospect’s close

proximity to Cyprus shores – some 65km from Cape Greco.
Moreover, drilling there would cost far less – about US$40 million compared to US$100

million in other prospects – because of the lower sea depths.
Lower development costs in turn would yield lower electricity prices, making them

attractive to the Israeli market.
“With electricity, you need only be competitive on a regional basis. With natural gas,

on the other hand, you’re competing on a global level,” Barnea argues.
And electricity exports from Cyprus to Israel could begin from late 2015 or early

2016; by contrast, the option of exporting gas via a liquefied natural gas (LNG) plant

cannot be achieved sooner than 2020 or 2021.
Barnea holds that exporting natural gas is not the best option for Cyprus because the

added value is not that high. According to his own estimates, Cyprus would stand to

make $10 per million BTU from exporting electricity, compared to just $3 per million

BTU from exporting gas via an LNG terminal.
The proposal is not a new one. It was brought to the attention of the Cyprus National

Hydrocarbons Company (CNHC) back in January through a detailed presentation.
And a month ago, Barnea expounded on the plan’s merits during a meeting with President

Anastasiades in Nicosia; the response from the president was “generally positive”,

says Barnea.
It’s also likely the idea was discussed between Anastasiades and Israeli premier

Benjamin Netanyahu during the former’s visit to Israel this week.
What’s changed since January is the financial crisis here, which has taken a sharp

turn for the worse.
“Before 2020 – and that’s being optimistic – LNG won’t be making a penny for Cyprus.

But if Cyprus can cash in on hundreds of millions of euros from electricity exports as

of 2016, for a period of 20 years, that’s a hell of an incentive,” Barnea says.
In the meantime, the CEO continues to lobby Tel Aviv.
Barnea aims to persuade the Israeli state to issue a conditional statement of intent

to purchase around €1bn of electricity a year from Cyprus.
And in an unmistakeable display of can-do attitude, the entrepreneur thinks he can get

that “in a month”.
To finance the approximately €5bn project, Barnea will be seeking an offtake agreement

backed by the state of Israel. An offtake agreement is a deal between a producer of a

resource and a buyer of a resource to purchase/sell portions of the producer’s future

production. It is normally negotiated prior to the construction of a facility (such as

a mine) in order to secure a market for the future output of the facility. If lenders

can see the company will have a purchaser of its production, it makes it easier to

obtain financing to construct a facility.
Offtake agreements are frequently used in natural resource development, where the

capital costs to extract the resource are significant and the company wants a

guarantee that some of its product will be sold.
Barnea also suggests the Electricity Authority of Cyprus and the Israel Electric

Corporation could be invited to co-finance and be stakeholders in the project.
Speaking on condition of anonymity, an energy official here called Barnea’s pitch

“both serious and worthy of consideration.”
What makes the proposal interesting, the source said, is that it does not rule out the

LNG project – the stated cornerstone of Cyprus’ energy plans.
“Rather, the two can be complementary,” the source said.

Published by: www.cyprus-mail.com

During an interview, on the sidelines of the 2013 Offshore Technology Conference, in Houston, Texas, Elliot said he was satisfied with the working relationship established with the Cyprus government, adding that he did not believe things were progressing too slowly. Elliott has recently (last April) assumed his new duties, following an overhaul in Noble’s organisational structure, that added three major operating regions, including the Eastern Mediterranean.

Elliott said that as soon as the exploration well in Israel’s “Karish” field is finished, Noble will move the rig directly to Cyprus’ block 12 for the appraisal well. He added that the well in Israel is expected to finish in the first half of June, while drilling in block 12 will take up to three months. He noted that a lot depends on that operation, since “the purpose of the appraisal well is to try to narrow that bandwidth of uncertainty” with regards to the reservoir models and interpretations.

Elliott did not exclude another appraisal drilling in block 12, saying that “for a resource of this size and scale, two would be a very optimistic number”. He cited the example of Israel’s “Tamar” field, where Noble drilled two appraisal wells. “I wouldn’t want to leave anyone with the impression that this would be the last well”, he said, adding that if the company is able to build confidence in the resource base and size, this will result in fewer wells. Noble’s Vice President for the Eastern Mediterranean compared the company’s job to evaluate the resource through seismic data and drills, almost as “looking through an opaque screen”. “Our objective is to understand the resource,” he said, noting that this may take more wells. Cooperation with the government “fantastic”.

Published by: www.cna.org.cy

“We feel that through a close collaboration with Israel we will be able to be a major player in the world energy market, something that for each country individually might be too hard to achieve,” said Energy, Commerce, Industry and Tourism Minister Yiorgos Lakkotrypis.

Lakkotrypis was addressing a group of Israeli and Cypriot business leaders and government officials at a seminar entitled “Cyprus: An International and Professional Center,” held in Tel Aviv on Tuesday afternoon and hosted by the Cyprus Chamber of Commerce and Industry, the Cyprus Energy, Commerce, Industry and Tourism Ministry, in association with the Federation of Israeli Chambers of Commerce.

While the participants from approximately 100 Israeli companies and 30 Cypriot firms ranged in fields “from milk to gas,” the focus of leaders from both countries remained largely on the Mediterranean natural resource that each of the nations has come to enjoy.

The amounts of gas discovered in each country respectively might be considered small individually, but, by working together, Israel and Cyprus have the capability to “create the third pillar of energy routes” in the world, according to Lakkotrypis.

“What an unbelievable opportunity we have as two countries to play a role in the energy market that is shaping as we speak, worldwide,” he said.

Lakkotrypis and the Cypriot businessmen and women had arrived in Israel as part of a larger delegation that includes Cypriot President Nicos Anastasiades and officials from the country’s Foreign Affairs Ministry.

Echoing Lakkotrypis’s comments, Anastasiades likewise stressed during the seminar that natural gas “can become the driving force” for partnership between Israel and Cyprus.

Natural gas finds from the Tamar reservoir’s 250 billion cubic-meters are already flowing into Israel, to be used for domestic purposes only. The neighboring, more than double-sized Leviathan reservoir should be providing gas within the next few years, and will likely be doing so in both an export and domestic capacity – pending government approval of an export policy.

Cyprus’s first explored basin, the Aphrodite reservoir in Block 12 adjacent to Leviathan, is estimated to contain about 198 billion cu. m. of gas and is being drilled by some of the same partners working on the Israeli reservoirs – Houston-based Noble Energy and Israel-based Delek Drilling and Avner Oil Exploration.

There are two other clumps also slated for exploration in the Cypriot zone, under a combination of Italian, Korean and French firms.

Israel and Cyprus signed a delimitation agreement on their Exclusive Economic Zones in 2010, and a framework agreement is now underway concerning the development of cross-border hydrocarbon management, Lakkotrypis explained.

Anastasiades likewise confirmed that his administration would “remain dedicated to proceeding expeditiously with the conclusion of a framework agreement.”

At Aphrodite, the American and Israeli cohort should conclude drilling an appraisal well by October 2013, after which the team can determine for sure that its contents are proven reserves with commercial capacity, the minister said.

Gas flow from Aphrodite should start between 2020 and 2021, Lakkotrypis added.

Simultaneous to the exploration of Cypriot reservoirs, plans are unfolding to construct an onshore liquefied natural gas (LNG) generation plant, in order to facilitate the export of the country’s gas.

While “the decision to go for an LNG terminal was not taken lightly” and is considered very expensive, the plant will allow for the most flexibility in Cyprus’s export options, Lakkotrypis explained.

Unlike Israel, Cyprus is not facing much resistance among its citizens toward the idea of exporting gas, as the quantities likely found in the reservoirs are “very small compared to the needs of the country,” Lakkotrypis explained.

The Cypriot government is therefore working with Noble Energy on developing its future LNG plant, which will likely be completed by 2019 or 2020. As competition around the world for natural gas surges – particularly due to the United States’ massive shale gas discoveries – moving quickly with the plant’s construction “is super critical,” Lakkotrypis said.

Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, emphasized that cooperation on natural gas and on other business ventures between the two countries would be beneficial “for our region as a whole.”

To further this growing partnership, an Israeli business delegation would be officially visiting Cyprus in June, Lynn said.

Christakis Papavasilious, president of the Israel-Cyprus Business Association, emphasized “the new historic era” that Cyprus and Israel are entering together, and that the two countries should rely on each other in order to push forward.

“The discovery of energy resources in our region has created a very strong impetus in our relations,” Papavasilious said. “There is no turning back.”

Gad Yardeni, president of the Israel- Cyprus Chamber of Commerce, called the gas discoveries a “gift from mother nature” and stressed the need for middlesized energy firms in both countries to pursue connections with one and other.

At a luncheon that the Cypriot president attended earlier that day in Jerusalem with President Shimon Peres, Anastasiades spoke of “inaugurating a new era” for the two countries due to the natural gas discoveries.

“We are both committed to working together and we have a common blessing in our seas,” he said. “God has blessed us with energy and it is our duty to see how we can secure each other.”

Anastasiades expressed his feeling that Cyprus truly “needs” Israel and that he did not expect Israel to need Cyprus to the same extent in return. That being said, he declared his country to be a “reliable and credible friend and brother,” and voiced the hope that both countries should enjoy stability, peace and prosperity.

Describing both countries as islands – Cyprus in the geographic sense and Israel in the political sense – Peres noted that the two nations share many similarities and reciprocal benefits.

“Without Cyprus, we would be far from Europe,” Peres said. “We see in Cyprus a friend – politically and geographically.”

In order to secure that European mainland connection, the two countries will need to work together by combining their resources to achieve a new route of energy, Lakkotrypis stressed back at the business seminar.

“None of our two countries individually can make a big difference,” Lakkotrypis said. “The quantities that we have are negligible compared to the total needs that Europe has and will have.”

“We are living in very important times, very exciting times for both countries,” he continued. “We have our fair share of challenges, but the prospects do remain excellent.”

Published by: www.jpost.com

Published by:  www.incyprus.com.cy

Published by: www.financialmirror.com

Published by:  www.incyprus.com.cy

Whatever is under the seabed in Syrian waters remains undiscovered but in the wake of major strikes by Israel and Cyprus, and Lebanon supposedly sitting on similar prizes, it’s a pretty good bet Syria has significant gas holdings.

There seems little doubt that Syrian President Bashar Assad’s regime will eventually be displaced as rebel forces, disunited but backed by most of the Arab powers and, up to a point, the United States and Europe, make steady gains in a war now in its third year.

Rebels seized Syrian oil fields in northeastern Deir al-Zor province near the Iraqi border in late 2012.

This year they’ve pushed into resource-rich Hassaka and Raqqa, securing control of most of Syria’s oil reserves. These total 2.5 billion barrels, a modest tally, although Damascus was earning around $4 billion a year from exports before the anti-Assad uprising began.

Many of the fields are controlled by Jabhat al-Nusra, the most formidable of the Islamist factions with links to al-Qaida.

Gen. Selim Idriss, chief of staff of the Supreme Military Command which supposedly runs dozens of rebel factions, wants to form a 30,000-man secular force to secure the oil fields and other key economic sectors to keep them out of Islamist hands.

He wants the West to provide the $30 million-$40 million a month he says he’d need to do that.

There’s another more important element in this unfolding energy contest in the Middle East and the East Mediterranean.

Key players in this complex competition are Qatar, which is supplying arms and funds to the Syrian rebels, and Turkey, Syria’s northeastern neighbor, which acts as facilitator and also wants to see the Assad regime destroyed.

The tiny emirate is one of the world’s leading gas suppliers and it has long sought to wreck Iranians plans to pump gas westward to Europe via Iraq to Syria’s Mediterranean coast.

One of its primary objectives in backing the Syrian rebels has been to ensure that the $10 billion Iran-Iraq-Syria gas project signed in 2011 even as the uprising against Assad gathered momentum never gets off the ground.

Both Tehran and Baghdad support Assad’s regime.

Qatar, one of the smallest Arab monarchies in the Persian Gulf has for some time sought to establish itself as a regional power, equal if not superior to long-dominant Saudi Arabia.

The battle of the pipelines reflects the growing sectarian rift in the Middle East and the wider Muslim world.

On one side is Islam’s mainstream Sunni sect, with Saudi Arabia at its head. On the other, the Shiites, who broke away in Islam’s early days. This group is led by Iran.

The Americans, and no doubt the Europeans who’d be able to break their dependence on Russian gas if they got supplies via Syria, would be immensely happy with a pipeline that isolates Iran and its allies.

Turkey, which also wants to shed its dependence on Russian gas, would also be happy to be cut in on the Qatari gas flow because that would further Ankara’s ambition to become the region’s pre-eminent energy crossroads.

Energy-short Jordan, too, would partake of the Qatari gas, assuring it of a steady supply, although the Qataris would prefer a Muslim Brotherhood regime in Amman than the Hashemite dynasty, which is looking increasingly shaky amid the turmoil sweeping the Arab world.

All this would profoundly alter the geopolitical and energy landscape in the Middle East, much to the benefit of the United States and Europe.

But the real clincher was the discovery of large gas fields off northern Israel in 2009-10, and later nearby Cyprus. This has already shifted strategic perceptions in the region. The U.S. Geological Survey says there’s 123 trillion cubic feet of gas there.

Israel and Turkey, with U.S. encouragement, are moving toward mending a diplomatic rupture in their strategic partnership. Israel could export its gas to Europe via an undersea pipeline to Turkey.

But before that can happen, Assad has to go, with a secular Sunni-majority successor regime installed in his place.

Published by: www.upi.com

The U.S. Geological Survey Authority estimated the quantities of the natural gas under the sea to be around 122 billion cubic meters accompanied by 1.7 billion barrels of oil which could technically be extracted.

This discovery could cause havoc among the countries overlooking the east of the Mediterranean consisting of Egypt, Israel, Turkey, Cyprus, Lebanon, Syria and Palestine. This discovery might fuel conflict and ferocious competition among these countries to have the largest chunk of the discovered natural gas, especially in the absence of agreements among them to clearly demarcate the boundaries of their territorial waters.

The discovery has regional and international significance. On the regional side, it will uplift the standard of services to the beneficiary countries, particularly that they are relatively poor in energy sources (oil and natural gas). It will provide them with their energy needs and save them the funds they used to spend on importing natural gas. They will become exporting countries, instead of importing ones.

The challenges of exporting

On the international side, the extraction and exporting of natural gas from the east of the Mediterranean is deemed to face big political, security and economic challenges which may impede cooperation among the countries of the region. Israel, which is counting on its military might and American support, will likely want to grab the shares of the other countries in the discovered natural gas. The Arab-Israeli conflict is still continuing. The state of war is still very much alive between Israel, on one hand, and Syria and Lebanon on the other. There are no clearly defined maritime borders between Israel, Egypt, Lebanon and Palestine. In addition to this, there is a chronic conflict between Turkey and the Cypriot Republic over Northern Cyprus. The implications resulting from the Arab Spring will also have their shadows on the relationships between the countries of the region. The ties between Egypt and Israel have become more complex. Syria is living through a phase of instability for more than two years now. As a result, the development and exporting of the newly discovered natural gas will face serious problems.

The significance of the natural gas discoveries are also reflected by the hectic attempts to control sources. These attempts are not only being made by some Middle Eastern countries like Qatar, which is the second largest natural gas producer after Russia, but also by the European Union countries and China which are main consumers.

Natural gas is a safe and clean energy source compared to nuclear and coal energies. It is the most suitable substitute for nuclear energy being used to operate electricity stations. This has become more obvious after the disaster in the Fukushima electricity station in Japan. It is also a suitable replacement for coal which emits large quantities of carbon. Being a cost-effective source of energy, natural gas is gaining rapid momentum in the world.

Putting gas to use

Egypt needs the discovered natural gas to be able to deal with its enigmatic energy problem and to rectify its deteriorating economic condition. Israel needs it after the semi-free natural gas supplies from Egypt have stopped and also to break its political and economic seclusion resulting from the slackening peace process. Syria needs the natural gas to be able to reconstruct its economy which has been devastated by two years of internal fighting. Turkey, which does not produce either oil or natural gas, needs it not only as an additional source of income but also to give it more importance in the region. Lebanon needs the natural gas to be able to settle its foreign debts which have reached more than $50 billion. Cyprus also needs it to avoid its imminent cash crash.

All the countries of the region, including Israel, should provide huge financial and investment funds to build the basic infrastructure required to produce, transport and export the newly discovered natural gas. These investments may face commercial challenges resulting from the decreasing international prices of gas and also internal political challenges which may result in the unavoidable disagreements on how to exploit the discovered natural gas and if it should be used for local consumption or for export. There are also some security issues involved. Oil and natural gas installations in the east of the Mediterranean must be protected against any possible missile attacks.

When we say the natural gas discoveries in the east of the Mediterranean have economic and security benefits as a safe source of energy, these discoveries may have positive political impact. They may ultimately lead to genuine and lasting peace in the region. How?

First: The establishment of an international company to extract, liquefy and export the natural gas.

Second: This company should be owned by the governments not by individuals or private firms.

Third: The contract establishing the company should clearly stipulate how the dividends will be distributed.

Fourth: The company should have the same status of committing international agreements and treaties.

Fifth: Differences should be settled by international arbitration.

Sixth: Workers in this company should be the citizens of the countries of the region only.

This can be a good start to bring the region’s warring countries together for the first time. It will provide the governments with an opportunity to talk directly to each other to discuss their common issues. The workers will be meeting daily and the senior officials will get together regularly to inspect the workflow.

Some people may jump to the conclusion that I am asking for the impossible and tell me bluntly that this is not the time of miracles. I reply to them that the matter is very simple if there is good intention and a strong political will for peace. There should also be a genuine desire for peace which is not just an empty word to be uttered during formal and diplomatic occasions. It will not be impossible for the officials of the east Mediterranean to get together openly to run their natural gas company, especially that it is no secret that they often meet behind closed doors.

This article was first published in the Saudi Gazette on April 11, 2013.
__________
Hassan Tahsin is a veteran Egyptian writer and a regular contributor to pan-Arab newspapers, including the Saudi Gazette. His writing focuses on Middle East conflicts and global energy issues. Tahsin’s political analysis particularly centers on Arab-Israeli relations on a regional level, and Egypt’s domestic and foreign policies, including ties with the Western world. Tahsin can be reached at [email protected].

The head of the US company leading natural gas exploration offIsrael’s coast on Thursday urged the country to develop a national gas export policy, warning that government tax policy was scaring off potential investors.

Charles Davidson, CEO of Texas-based Noble Energy, criticized Israel’s decision in 2011 to nearly double tax rates on gas profits after his company had already invested $1 billion in an offshore field. He said the “very unusual” move may have driven away companies from investing in Israel’s emerging gas sector.

He said he sensed hesitation from potential investors who could help develop the Leviathan field, a large find that is expected to produce enough gas for export.

“I felt that … companies were a little bit reluctant because of what had happened on taxes in the past,” Davidson said at the company’s local offices in the coastal town of Herzliya.

In 2011, Israel’s government raised taxes on gas and oil finds, boosting the revenues to between 52% and 62% from under 30%.

Davidson is in Israel after gas from Tamar, one of Israel’s new, sizable fields, started being extracted last month. He hopes to convince authorities to agree on an export policy that would provide clarity for investors looking to develop the resource. For now, the gas is being used for domestic use only and sold at fixed, previously negotiated prices.

On Wednesday, Davidson met Prime Minister Benjamin Netanyahuand said he “encouraged” him to move on export. He said Netanyahu was receptive but gave no time frame.

The Tamar field was discovered in 2009 and holds an estimated 8.5 trillion cubic feet of gas. Leviathan, found in 2010, boasts an estimated 16 to 18 trillion cubic feet and is expected to go online in 2016. Around that time, Israel is expected to begin exporting.

Israel has yet to adopt an export policy for its natural gas reserves. A 2012 inter-ministerial report concluded that Israel should preserve enough natural gas for itself for 25 years, leaving about half of its estimated reserves for potential export. The discoveries are minimal compared to gas giants Russia, Qatar or Iran but the country’s proximity to Middle Eastern and European markets could make it an important regional player.

The consortium drilling off Israel’s coast has been pushing for Israel to adopt the recommendations. They say until there is a decision, they are not able to move forward on financing the field’s development, building infrastructure to transport the gas or securing global markets.

There have been calls from some in Israel to minimize gas available for exports in order to ensure domestic supply.

Published by: www.ynetnews.com

The fallout between Israel and Turkey over the past four years pushed Israel for strategic and economic reasons to cozy up to Greece and Cyprus, Turkey’s historic rivals in the Eastern Mediterranean.

“The relations that were built in the last four years with Greece and Cyprus were to a great extent a result of the severe crisis with Turkey,” Alon Liel, the former Israeli ambassador to Turkey, told SETimes.

Some analysts say this geopolitical and economic calculation could change following Israeli Prime Minister Benjamin Netanyahu’s apology to Turkey for the 2010 raid on the Turkish aid ship, the Mavi Marmara, as it tried to breach an Israeli blockade of Gaza, resulting in the death of nine Turkish activists.

Mavi Marmara led to a severing of relations between once close regional powers. The apology opened the way to a still nascent rapprochement.

The prospect of Turkey and Israel rekindling their once close relationship has many observers looking to the large but disputed gas deposits in the Eastern Mediterranean that could transform the geopolitical future of the region.

Turkish Energy Minister Taner Yildiz said recently the Israeli apology could open the way for energy co-operation between the two countries.

He added Israel’s energy plans in the Eastern Mediterranean “would only be reasonable if Turkey was involved.”

Cyprus and Israel have been mulling building a liquefied natural gas (LNG) plant in Cyprus combining both Israeli and Cypriot gas finds in the Eastern Mediterranean. Amid the speculation over bringing Israeli gas to European markets — whether through Turkey or Cyprus — there is the question of how much Israel would decide to export. Hawks in Israel are pushing to keep the gas for domestic consumption to bolster energy security and independence for decades.

Without Israeli investment and gas supplies some energy analysts question whether such a 10 billion euro price tag LNG plant in Cyprus would be economically viable. The cheapest and shortest option to bring Israeli and Cypriot gas to European markets would be through Turkey via a pipeline.

George Leventis, director of the International Security Forum in Nicosia said he thinks Greece and Cyprus will lose leverage now.

“The observation that a revamped alliance between Israel and Turkey will squeeze out Cyprus and Greece is correct,” he told SETimes. “If Israel manages to sell its gas — which already is pumping out of the Tamar gas field — via Turkey then Cyprus [and Greece] stand alone.”

“Israel is considering all possible options in geopolitical-geostrategic terms. If Israel’s choice is for an LNG plant it does make sense to place it in Cyprus rather than the Israeli coast. It will be safer on Cyprus. But this again presupposes that Tel Aviv will play the Cyprus card against Turkey and the current trend is to the opposite,” he added.

Meanwhile, The Cyprus Mail quoted Israeli Deputy Ambassador Shani Cooper as saying that the “the normalisation of relations between Turkey and Israel was an important bilateral step but it will not affect any multilateral, trilateral or bilateral relations between Israel and other countries. Israel will maintain its close relations with Cyprus, and continue strengthening them as we have done the last few years.”

Similarly, Spiros Lambridis, Athens’s new envoy to Israel, said that “regardless of what Israel does with Turkey, we have a strategic relationship that is autonomous and has nothing to do with Turkey,” the Jerusalem Post reported.

Lambridis said the new Israeli-Turkish rapprochement could help regional stability and lessen tensions in the area between Southeast Europe, Asia and the Middle East. “The more tranquility in the region, the better,” he said.

Whatever Israel decides, some observers see the gas row as an opportunity to settle the long standing dispute between the Turkish and Greek Cypriots on the island. The Israel-Turkey rapprochement came only three days before Cyprus was forced to restructure its banking sector to avoid default and an exit from the Eurozone in exchange for a 10 billion euro IMF and European bailout.

Without a strong banking system to prop up the economy, cash-strapped Cyprus now needs to extract natural gas more than ever.

Cyprus seems determined to push ahead on its own if necessary. Foreign Minister Koannis Kasoulides said the island’s natural gas deposits are enough to warrant the construction of LNG plant to export excess supply, regardless of whether Israel decides to be a partner in the project. He added that Israel’s apology to Turkey “doesn’t mean Israel is obliged to follow what Turkey is dictating in this region.”

An Israeli or Cypriot move would run up against Turkey, which demands the consent of Turkish Cypriots as “co-owners of the island” in the extraction of gas. Turkey has already sent its navy to the region to protect Turkish Cypriot interests and said recently energy companies doing business with Cyprus would be barred from current and future energy projects in Turkey.

Turkey would like a negotiated settlement on the island, but it ratcheted up pressure recently by saying for the first time it would push for a two-state solution on the island if no deal on joint exploration could be reached with the Greek half of the island.

Analysts like Ali Balci from the Sakarya University in Turkey argue all sides need to realise that the transfer of energy to the European market requires co-operation among Cyprus, Greece, Israel and Turkey.

“Because of the economic crisis, Cyprus is in need to use these energy fields as soon as possible. This is another incentive to construct peaceful relations among sides. Politics is not always zero-sum,” he toldSETimes.

Published by:  www.setimes.com