Eni’s discovery gives ‘peace pipelines’ a chance

Selin Nasi

Last Sunday, Italian energy giant Eni announced the discovery of a massive natural gas field in the Zohr area, off the coast of northern Egypt. Heralded as the largest field so far in the Mediterranean, with an estimated reserve of 30 trillion cubic feet of gas (40 percent more than the quantity in the Leviathan), the latest discovery is likely to change energy equations by increasing competition in the region.

Egyptian daily Al-Ahram described the breakthrough as “a gift from heaven.” Indeed, it suits Egypt very well. The Abdel Fattah el-Sisi government has been struggling for a long time to meet domestic natural gas demands due to rising consumption and falling reserves. Especially in summer time, authorities have been forced to occasionally stop factories so as to provide gas for electricity for households. 

Based on the estimated potential of the Zohr field, Egypt will reach self-sufficiency in less than five years, meaning that Cairo will be able to satisfy domestic demand and even return to the good old days of being a gas exporter once again. The discovery is likely to boost industrial development as well, pumping enough gas into the system to ensure a healthy functioning of the economic cycle.

In contrast to Cairo’s enthusiasm, the news sparked panic in Tel Aviv. Not only did shares of Israeli gas companies plunge dramatically, but long-term energy projects now face a serious risk because Israel’s plans, by and large, relied on Egypt both as a consumer and as a partner. 

Having crossed off the pipeline option due to a freeze in bilateral relations with Turkey, Israel gave weight to liquefied natural gas projects that were, in fact, way too expensive compared to building pipelines. Last year, energy partners signed a preliminary deal to export gas from the Leviathan field to the BG group’s liquefied natural gas terminal in northern Egypt. The amount of money Egyptians agreed to pay was supposed to finance the development of the field. In a similar move, investors in another offshore field, Tamar, were planning to export a quarter of the gas to Egypt. 

However, contentious debates over an anti-trust law – which required the Noble and Delek groups to sell some of their shares – impeded approval of the agreements by the Israeli government and therefore delayed the start of production. That’s why, following Eni’s announcement, Israeli Energy Minister Yuval Steinitz criticized foot-dragging cabinet members such as Economy Minister Aryeh Deri with contempt, saying that “Israel has been asleep at the wheel, delaying final approval of the gas deal and additional exploration. The world is changing before our very eyes with implications for export possibilities.”

The discovery, which makes Egypt a competitor rather than a customer in the energy game, in addition to already falling gas prices that are likely to fall further once Iran enters the market, compels Israel to revise its energy plans. Faced with the increasing costs of developing the Leviathan and Tamar fields, the peace pipeline issue has gained the utmost importance once more. 

Carrying Israeli gas through an under-sea pipeline to Europe via Turkey still remains the most profitable option compared to alternatives such as the Israel-Cyprus-Greece pipeline, considering the costs as well as the technical details. 

Eyeing European as well as Asian markets, experts point to Jordan, Greece and Turkey as alternative buyers of Israeli gas in the short run. However, Turkey already buys gas from Iran. Besides, the two countries have to first overcome the chill in bilateral relations to foster further cooperation. 

In fact, initial steps were taken in Rome two months ago, when Israeli Foreign Ministry Director-General Dore Gold met Turkey’s then-Undersecretary Feridun Sinirlioğlu. The appointment of Sinirlioğlu, an experienced diplomat who served as ambassador to Israel between 2002 and 2007, as Turkey’s new foreign minister in the interim government has been interpreted as a sign of a coming thaw in Turkish-Israeli relations. 

While the backdoor diplomacy to lift the Gaza blockade continues, Eni’s latest discovery presents an opportunity for Turkey and Israel to mend their broken ties and build bridges – or perhaps even pipelines.