European interest in Israeli gas deepens


The Energy Ministry director general will meet counterparts from Italy, Greece, and Cyprus to discuss a gas pipeline from the Leviathan reservoir.

High-level contacts between Israel and European countries on laying a gas pipeline from the Leviathan natural gas reservoir are about to take place. Sources inform "Globes" that Ministry of National Infrastructure, Energy, and Water Resources director general Shaul Meridor will travel to Brussels next Monday to meet his counterparts from Italy, Greece, and Cyprus in the European Commission offices. The meeting is designed to pave the way for a summit between the four countries' energy ministers next month in Israel.

The sources add that Francesco Starace, CEO of Italian electric company Enel Group, recently met with Minister of National Infrastructure, Energy, and Water Resources Dr. Yuval Steinitz, and expressed interest in buying Israeli gas for the company's customers in Italy. The meeting took place during an energy conference held late last week in Abu Dhabi. Israeli sources told "Globes" that the Italians are interested in Israeli gas as a substitute for the gas they are buying from the North Sea area, where gas production is gradually declining.

Enel, the former Italian national electric company, was privatized in the 1990s, but the Italian government still owns a quarter of its shares.

Talks to focus on construction of a gas pipeline

The talks between directors general in Brussels will focus on a venture to build a gas pipeline from the Leviathan gas reservoir to Italy via Cyprus and Greece. Such a pipeline, the longest of its type in the world - 2,000 kilometers, could connect Leviathan, the Aphrodite Cypriot gas reservoir, and other gas reservoirs to Rome, and from there to other customers in Europe.

In talks between Israeli and European government officials, the Europeans expressed their preference that Edison carry out this ambitious venture. One of the world's most experienced energy companies, Edison was acquired several years ago by EDF, the French national electric company, and is active in energy exploration in Israel and Egypt. In October, "Globes" reported the findings of a preliminary evaluation by Edison subsidiary Poseidon commissioned by the European Commission Directorate General for Energy. Poseidon found that building a gas pipeline to Greece would cost $5.7 billion.

The current plan includes another 200-kilometer undersea pipeline from Greece to southern Italy in the Brindisi area, and overland from there to Rome, capable of transporting 12 BCM of gas a year. The plan is meant to be economically worthwhile, and will be carried out by commercial companies with no direct government involvement, but with European Union aid and backing, among other things through the European Investment Bank for infrastructure development.

Gas experts consulted by "Globes" expressed doubt about the project's economic viability. They estimated that transporting gas over such distances would increase the price by $3-4 per heat unit. The current price of gas in a pipeline in Europe is $5-6 per heat unit, and the price of gas in the Italian gas market averages $6.50 per heat unit.

In the talks to be held early next week in Brussels, the directors general will discuss financing for comprehensive engineering and economic evaluations of the venture. It is believed that Israel will also be asked to pay part of the evaluation costs, together with the three European countries involved. Italy consumed 70.4 BCM of gas in 2016, 4.9% more than in 2015. As of 2015, Italy's import sources were Russia, which supplied 24 BCM; the Netherlands (6 BCM); Norway (7 BCM); Algeria (6.6 BCM); and Libya (6.5 BCM). Italy also consumed 5.8 BCM of liquefied natural gas (LNG) from Qatar. The quantity of gas exported to Italy by Algeria tripled to 18 BCM in 2016.

Published by Globes [online], Israel Business News - - on January 18, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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