(November 30, 2018 / JNS) When Israel, Italy, Greece and Cyprus announced the mega East-Med pipeline project last week, it was met with by some skepticism as being far-fetched and prohibitively expensive. This despite the fact that the European Union has taken the idea seriously and agreed to donate $100 million to produce a feasibility study for the project that could transform Israel into a major player in the world energy field, as well as potentially reshape Israel’s relationship with Europe.
Israel has already become a “startup” player in recent years, due to the discovery and development of Noble Energy’s Leviathan gas field off the Haifa coast, which is due to go online at the end of 2019. In anticipation of becoming a significant gas producer and exporter, Israel already has deals in place for domestic use and agreements to sell gas to Egypt and Jordan.
Italy and Greece are now fully aboard the pipeline project, connecting current and future Israeli and Cypriot gas fields to Europe. But the East-Med pipeline requires heavy investment, as well as the patience to endure likely delays due to engineering challenges. Once the feasibility study is completed in about a year’s time, entrepreneurs, corporations and engineers will be able to assess the commercial and technical feasibility of this vision.
Israeli Energy Minister Yuval Steinitz negotiated the deal and sees potential for a financial windfall. He also claimed that the pipeline would be a strategic asset that can be used to moderate Arab diplomatic influence in Europe.
“The export of gas to Europe can to an extent become a counterweight to Arab power,” Steineitz said shortly after the deal was announced.
Pipeline could ‘elevate’ relations with Europe
For Israel, the pipeline creates a major diplomatic and economic partnership. From a European perspective, it’s an opportunity to diversify supply and reduce dependence on Russia and Arab oil. Fossil fuels are beginning to exhibit depletion in Norway, and Europe’s only other sources of gas are Russia, Qatar and Algeria.
Eli Groner, former director general of the Prime Minister’s Office, who until his resignation earlier this year was the Israeli government’s point man for the Leviathan gas-field project, told JNS that the pipeline has the potential to become a substantial factor for Israel, economically and diplomatically.
Groner, who was in the loop in the planning of the Energy Ministry-led project, said that “if the pipeline comes to fruition, it’s the first time Israel would have teamed up with the European Union on any major infrastructure project.”
According to Groner, the project will “elevate Israel’s relationship with Europe to reflect its new position as a legitimate energy power.”
He added that Leviathan appears to be on schedule to go online pumping next year, “making Israel a net natural-gas exporter within a very short time.”
It could also strain relations with Russia
Former Israeli Deputy Foreign Minister Danny Ayalon told JNS that the pipeline project is “a major geopolitical game-changer that elevates Israel’s status.”
Ayalon, founder of the “Truth About Israel” organization, explained that “the discovery of a major natural-gas find in Israel already elevated our position in energy politics. This delivery system to Europe will place us in a whole different category.”
Calling the development a potential “windfall” for Israel, Ayalon predicts that the gas finds and pipeline will strengthen an already strong shekel, increase economic growth, and lower inflation and unemployment.
However, he remains doubtful that the deal will reduce anti-Israel hostility or serve to counter BDS in Europe, saying “it may improve relations with European governments that become somewhat reliant on Israeli gas, but that will not change views on the Arab-Israel conflict.”
On a cautionary note, Ayalon noted that the pipeline could strain relations with Russia, which is a major supplier of natural gas to Europe.
‘Most ambitious pipeline in the world’
The East-Med project has been described in the media as potentially the longest and deepest underwater pipeline in the world. The pipeline is planned to begin in the Mediterranean Sea, about 170 kilometers (105 miles) off Cyprus’s southern coast and stretch for 2,200 kilometers (1,350 miles), including the Greek mainland, before reaching Otranto, Italy. When completed, the pipeline will have the capacity to carry up to 20 billion cubic meters (706 billion cubic feet) of gas annually.
Israel has discovered more than 900 billion cubic meters of gas offshore. Cyprus’s Aphrodite gas field holds an additional 128 billion cubic meters, and both Israeli and Cypriot waters are expected to hold more reserves, estimated to be as high as 122 trillion cubic feet of undiscovered resources in the Levant Basin. The proposed East-Med pipeline could transport up to 16 billion cubic meters of gas per year.
Despite European seed money and substantial benefits for Israel and southern Europe, prospects for the pipeline project becoming a reality are still anything but certain.
Israel’s Steinitz has described the project as “feasible, but with technical challenges due to the ocean depths involved.” He put the estimated price tag for the pipeline at $7.36 billion, but until Europe completes its feasibility study, Steinitz’s numbers are a “guesstimate” at best.
“No one really knows how long it would take to build the East-Med or its real cost. While it’s the most ambitious pipeline in the world, there is great potential both economically and diplomatically,” said Groner. “The biggest challenge will be to locate interested parties willing to invest. That remains a major, major challenge.”
Investors, he noted, would plan to recoup their investment by charging for the conveyance of the gas through the pipeline.