The leviathan is already here and scary

Amiram Barkat

Why local energy companies are wary of Gazprom's interest.

Regardless of whether there is or isn't a gas discovery, the real leviathan is already on its way to Israel and people are hardly taking any notice. The name Gazprom, the world's largest natural gas company, still does not mean very much to the Israeli public but the Prime Minister's Office and Ministry of Foreign Affairs are losing a lot of sleep worrying about what to do with such a huge company.

After watching developments in the Israeli energy exploration arena for some time, Gazprom has now decided to enter the fray. Over the past few days, the Russian media has been quoting senior Gazprom executives as confirming that they are considering entering the Israeli market.

According to one report, Gazprom is interested in acquiring a stake of up to 50% in one of Israel's private gas companies. Following publication of these reports, Israeli businesspeople have held meetings with Gazprom executives in Moscow and London.

Nobody has any illusions as to what Gazprom is really interested in - drilling at the Leviathan structure. The big question is what are the aims of this mega company?

The main concern among the business people in Israel's gas exploration sector is whether Gazprom wants to block the possibility of Israeli gas exports to Europe. Even with Leviathan Israel would be a negligible player in the European gas market compared with the Russian giant, but prices and the type of agreements that will be signed with Israeli companies might create dangerous precedents from Gazprom's point of view.

Gazprom is prepared to come to Israel while other huge energy giants like Exxon, Royal Dutch Shell and the rest still fear entering the Israeli market because of a potential Arab backlash. Gazprom is not scared of any boycotts. It has a monopoly in gas exploration, production and marketing in Russia and controls the largest natural gas reserves in the world. The company sells 500 billion cubic meters of natural gas annually, the equivalent of the amount of gas some estimates suggest are in the Leviathan structure.

If large amounts of gas are indeed found in the Leviathan structure and it is decided that it should be exported, there is no company better suited to the task than Gazprom. As the European Union's main gas supplier, Gazprom will have no problems marketing the gas and setting up the infrastructure needed to transport it . Such an infrastructure could cost $6 billion.

That said, Gazprom's entry into the Israeli market has a far reaching political and strategic significance. Gazprom is not merely a huge energy company, it is also a corporation headed by the Russian government. Russia's President Dimitri Medvedev headed the company before becoming head of state.

Probing into the past of Gazprom throws up some disturbing findings. In 2006 Gazprom stopped supplying gas to Ukraine in the midst of winter after the Ukrainian government refused its demands to pay higher prices. In 2007, it gave an ultimatum to Belarus and threatened to cut off gas if it did not triple prices. At the time the Russian and Belarus governments were in dispute.

These incidents testify to the fact that, according to commentators, Gazprom's activities are dictated by Russian foreign policy and interests as well as economic considerations.

Published by Globes, Israel business news - - on November 24, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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