Unless there is some last minute hitch, tomorrow, September 20, Energean (LSE: ENOG; TASE: ENOG) will start to transport gas via the pipeline from the Karish production platform to the shore, and back. This is a technical exercise to test the system, with a view to transporting gas to shore for Energean’s customers. The Greek-British company, which is traded in Tel Aviv and in London, has gas supply agreements with ICL Israel Chemicals), Haifa Oil Refinery, private power producer OPC, and others.
The total volume of gas to be supplied under these agreements, together with earlier agreements signed with the Dorad Group and Edeltech Group, is over four billion cubic meters (BCM) annually from the Karish and Tanin reservoirs. The supply of gas to customers via the undersea pipeline is planned for the first week of October, but it is not clear that it will start on time even if Energean is ready.
Behind the scenes is the constant stand-off between Israel and Hezbollah, overshadowing the negotiations on the maritime border between Israel and Lebanon. The negotiations have reached the stage at which the two sides are examining a draft agreement that will regulate development of the Qana/Sidon gas field, which stretches from Lebanese territory via the territory in dispute deep into Israeli territory.
According to a source familiar with the details, the hope is to finalize the agreement within two weeks, but a few contentious items are delaying the process. One is the starting point of the maritime border on the shore at Rosh Hanikra/Naqoura. Another relates to islands belonging to Israel that change the line of the border. A third is over the distance that Israeli defense officials are demanding between Energean’s Israeli production platforms and the platform due to operate in Lebanon’s economic waters.
Sources inform "Globes" that messages have been exchanged indirectly between Israel and Hezbollah within the past few days with the aim of avoiding a conflagration. Hezbollah leader Hassan Nasrallah more than hinted at this when he retracted ultimata that he had made earlier setting a deadline for the conclusion of the negotiations. The new red line he drew was the beginning of actual gas production from the Karish reservoir.
In his speech, Nasrallah referred to an announcement by Israel’s Ministry of National Infrastructures, Energy and Water Resources last Friday afternoon - not a normal time for such announcement - stating, "The Ministry of National Infrastructures, Energy and Water Resources announces that it is readying for the connection of the Karish reservoir to the Israeli network. In the next stage of the project, planned for the coming days, checks will begin of the production platform and of the natural gas transport system from the platform to the onshore network." Various sources were at pains to stress that this was not a matter of the start of natural gas production, but of sending natural gas in the reverse direction, from the shore to the platform, to test the systems.
The announcement is no different from what was reported in "Globes" a week and a half ago about a gas feed tomorrow to test the system. That being the case, why was the announcement released? According to the information that has reached "Globes", it’s a matter of an official Israel announcement designed to make clear to Hezbollah that actual gas production is not beginning.
Nasrallah lowers the tone
Nasrallah himself confirmed this when he said that it was a clarification of an indirect message from Israel. "In the past two days, it has been announced that production will start in order to test the system. We conveyed a message of strength, not in the media, far away from it, and gave notice that if production started, Israel would have a problem. A clarification has come from Israel that this is not the transport of gas from Karish to the shore, but the other way around, in order to check the pipeline."
Nasrallah added a threat, saying, "We will not allow the extraction of oil and gas from the Karish field until Lebanon receives a response to its just demands," i.e., an agreement. Nevertheless, Nasrallah acknowledged in his speech that his stance had moderated. "We do not determine the demands; that is the government’s task. For several weeks we have not issued threats, because we wanted to give those conducting the negotiations an opportunity to make progress on an agreement," he said.
Furthermore, Nasrallah did not set a precise deadline as he had done previously, but linked it to actual production from Karish. "The red line is the start of production of oil and gas from Karish," he declared. He claimed that it was his threats that had expedited the negotiations - not an untenable claim - and added, "We have patience, and are giving an opportunity to negotiations to yield results."
Senior Israel sources expressed reservations about the expression "an indirect exchange of messages" with Hezbollah, but confirmed that in order to let the negotiations proceed, various clarifications directed at Hezbollah had been made in the media. "These are statements in response to Hezbollah’s threats, in which we made clear that any attempt to attack the gas platforms will trigger an especially fierce response from Israel against Hezbollah. The prime minister, the minister of defense, the chief of staff, and others, have expressed themselves in no uncertain terms on that." One of the sources confirmed that Friday’s announcement was also intended for the ears of Hezbollah, which was not satisfied with Energean’s announcement that it was testing the system, and wanted a commitment from an official Israeli source.
This dialogue indicates that Israel would very much prefer the negotiations to be concluded before production starts, in order to avoid possible confrontation: "After all his threats, Nasrallah cannot refrain from acting if production starts from Karish before we have reached an agreement with the Lebanese government." The criticism within Israel’s leadership is over the fact that this sounds like capitulation to Hezbollah threats, and strengthens its standing in Lebanon.
Published by Globes, Israel business news - en.globes.co.il - on September 19, 2022.
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