The participation of Israel’s natural gas grid operator, the Natural Gas Lines Company, in the development of the East Med pipeline, planned to carry southeast Mediterranean natural gas deposits along a route stretching from Israel to Europe, is being examined by the Israeli government, energy minister Yuval Steinitz has revealed.
Established in 2003, the Israeli gas grid operator, wholly owned by the Israeli State, holds a 30-year license for development and management of the country’s natural gas network.
In comments offered to Israeli financial daily Globes, Steinitz, highlighting the important role played by the Natural Gas Lines Company in the domestic natural gas market’s growth, noted that the participation of a state-controlled Israeli firm in the East Med pipeline project would offer further impetus to its development.
The prospective pipeline has already received political support from the governments of Greece, Cyprus, Israel and Italy, as was made clear at a four-way meeting in December, staged for the signing of a Memorandum of Understanding.
The Globes article on the East Med project made reference to the gas pipeline’s technical challenges, which exist mainly because of the deep seas between Cyprus and Crete, an area where waters run close to 3.3 kilometers deep.
Subdued natural gas prices at present have also raised questions about the project’s feasibility. The price gap between regional and European markets will need to be between 1 and 2 dollars per mmBtu, currently not the case, if East Med’s feasibility is to be ensured.
However, this could change with the involvement of Greek firm Energean Oil & Gas, now a player in Israel’s Exclusive Economic Zone (EEZ) with licenses to the Karish and Tanin Fields, offshore Israel. Energean recently acquired further hydrocarbon exploration rights in another Israeli tender.
Less than two months ago, Energean Oil & Gas signed a series of natural gas sales agreements with Israeli gas retailers, offering price levels of less than 4 dollars per mmBtu, well below the price of Russian gas being sold to Europe, ranging between 6 and 7 dollars per mmBtu. This discrepancy is good news for the East Med pipeline’s prospects. Other players may follow Energean with similar price levels.
Utilization of recently discovered natural gas deposits in the wider area, such as Cyprus’s “Aphrodite” gas field and the Israeli-controlled block “Leviathan”, is in jeopardy as a result of the inability, so far, of governments and energy companies to establish export solutions.