It is now clear that the natural gas discovery at Leviathan will turn Israel into a natural gas power. The Tamar gas discovery should meet Israel's energy needs for 20 years, and the Leviathan reserves can be partly designated for export.
Expectations of the natural gas discovery have already generated worldwide interest. The most attractive customers are in the Far East: Japan, Taiwan, and South Korea, three wealthy industrialized countries, with few energy sources of their own, and which are prepared to pay top prices. While China and India are considered to be the markets with the greatest potential, for now they are a secondary priority because of their reputation for not honoring agreements and enforcing contracts.
The next challenge: Building an LNG facility
In order to export natural gas to the Far East, it will first have to be converted into liquid natural gas (LNG). This will require special facilities to cool the gas to minus 160 degrees Celsius, at which point it liquefies.
Construction of such a facility in Israel involves many challenges. LNG facilities can cost up to an astronomical $6 billion per facility. There is limited available land. It can be assumed that coastal residents, who have already blocked the construction of a land terminal at Dor for natural gas from Tamar, will fight tooth and nail against an LNG facility, which would be far larger.
One idea that was recently raised was to link the Leviathan field by a pipeline to one of the two LNG facilities in Egypt.
The second way to export natural gas is by undersea pipeline to a southern European country. Turkey used to be mentioned, but the recent political crisis with it has rendered this option impractical. Greece, by contrast, has already announced its willingness to be connected to a future pipeline network, and secret talks have begun.
The challenges of such a pipeline are at least as great as building an LNG terminal. The cost is also about $6 billion, on top of which there are geopolitical difficulties from hostile nations and organizations in the proximity of the pipeline's route. They could claim that the pipeline passes through their exclusive economic waters. Last month, Israel signed an agreement with Cyprus demarcating the border of the two countries exclusive economic zones. While the Cypriot hurdle has been overcome, the road to Greece is still a very long one.
Published by Globes [online], Israel business news - www.globes-online.com - on December 29, 2010
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