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Comment and Opinion

INSS – The Gas Framework: Regional and International Aspects, by Oded Eran

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The draft of the framework pertaining to the natural gas produced from the Tamar gas field and the development of other fields, especially Leviathan, has not yet been approved by the government or the Knesset. Nonetheless, it is already possible to discuss some regional and international aspects of the issue and their implications for Israel’s relations with its neighbors, the United States, and other nations, e.g., Russia.

Ostensibly the proposed framework does not fundamentally change the basic data relating to regional considerations. The amounts of gas that the Tzemach Committee approved for export in Government Decision No. 442 on June 23, 2013 have not changed. These amounts limit the export potential to Israel’s near geopolitical sphere, and do not necessitate large scale investments required for liquefying gas for transport over large distances without the use of a pipeline. Recently, the companies holding the Tamar field concession have held talks with Jordan, the Palestinian Authority, and Egyptian companies on supplying natural gas from the field before production begins at Leviathan. The decision to export to these markets before ensuring the entire amount determined to be indispensable to the Israeli economy stemmed from an understanding of the strategic importance of Israel providing economic assistance to stabilize the country’s immediate political neighbors. On the other hand, contracts for selling gas from Tamar and, in the future, from Leviathan, are necessary mostly to finance the large Leviathan field and the smaller fields, Tanin and Karish. The framework, in its current draft, would force the present owners to sell the two smaller fields within 14 months after the proposal is approved.
The demand that Delek Group transfer all its rights to Tamar within 72 months to a third party and that Noble Energy reduce its holdings to 25 percent does not change the situation in any essential way. But the internal debate in Israel has delayed the completion of the talks with potential regional buyers, and this delay is playing into the hands of internal elements in those countries opposed to any contact with Israel, especially when it comes to infrastructures that involved long term contracts. Thus, for example, the first trial delivery of Qatari gas to Jordan arrived at the Aqaba Port on May 25, 2015. It was transported in liquid form in special containers and will undergo a reconversion to gas on a specially fitted ship anchored off the Aqaba shore. At the same time, Shell has reached an agreement in principle to supply natural gas to Jordan. Supplying Jordan with gas this way raises its price, and the Jordanian government prefers to realize the opportunity of importing gas from Israel (with symbolic imports of Palestinian gas from the field off the Gaza coast, which is very far from production with economic feasibility). Nonetheless, the existence of an alternative from Qatar, albeit more expensive, is liable to strengthen the argument of those, especially in the Jordanian parliament, opposed to any move that might mean dependence on Israel and an opened door to normalized relations. The willingness of Qatar or any external source to subsidize the gap in the price might delay the deal with Israel, or thwart it altogether.
Read the article in full at INSS.