The European Union (EU) will fund the detailed planning for laying a natural gas pipeline from Israel's Leviathan offshore gas reservoir to Europe. On January 25, the European Commission in Brussels published a list of its priority clean energy projects for 2018 that will receive €873 million in aggregate funding.
The project, called EastMed, is for an undersea pipeline from Leviathan through Cypriot waters to Crete and Italy. The EU has allocated €34.5 million to complete planning, so that a final decision can be made about investing in the project in 2019.
Financing will be transferred through IGI Poseidon, a subsidiary of French company Edison, which is conducting the engineering feasibility tests for the project. The EastMed project, which was first proposed two years ago by Minister of National Infrastructure, Energy, and Water Resources Yuval Steinitz, involves laying a natural gas pipeline from Israel's Leviathan gas reservoir and Cyprus's Aphrodite gas reservoirs through Crete to southern Italy, where it will be connected to the European gas market.
According to the current timetable, construction of the project will begin in 2021 and take four years. At the same time, discussions are continuing between the directors general of the energy ministries of Israel, Cyprus, Greece, and Italy for a political umbrella agreement for the project. The EU regards EastMed as a strategic project that will enhance the energy security of European countries by giving them access to a supply of gas through another pipeline besides Russia's and the dwindling gas resources of Norway and the Netherlands.
This ambitious project, however, is still far from implementation. The engineering difficulty in this complex infrastructure project lies in its undersea route, which reaches a depth of 3.3 kilometers, and the volcanic activity on the sea bottom between Cyprus and Greece. Such activity is liable to cause damage to the pipeline that will be very hard to repair. Another equally important difficulty is the project's economic viability. The average price of gas in Europe over the past year was $5.50-6 per Btu, while the price is not much cheaper in Israel - $5.3 per Btu. In order to justify the considerable expense of building the undersea pipeline, the difference should be $2-3 per Btu.
Even if the pipeline is laid, Israel will not replace Gazprom, which supplies an estimated 200 BCM of natural gas a year, but Israel will definitely become an important supplier of gas in the region. The pipeline will be able to carry 5-10 BCM a year.
"Globes" recently reported that involvement of government company Israel Natural Gas Lines in the project was being considered. Involvement of a government company in this huge project makes its implementation more likely.
Published by Globes [online], Israel Business News - www.globes-online.com - on January 29, 2018
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