Israel has paved the way to sign multi-billion dollar contracts for exports from its Leviathan gas field. Government officials and the companies developing the reservoir typically speak about two main options for exports: Egypt and Turkey. Both scenarios carry geopolitical risks in a region fraught with them.

1. When will Israel start exporting gas?

Israeli company Delek Group Ltd. and its U.S. partner, Noble Energy Inc., have begun development work on Leviathan, a natural-gas field discovered in 2010 in the Mediterranean Sea off Israel’s coast. The goal is to start exporting gas by 2019. In the first stage, the partners want to pipe the majority of 12 billion cubic meters of gas annually to Israel, Jordan and the Palestinian Authority. The rest could go to Egypt’s domestic market through existing infrastructure. A later stage could involve a pipeline to a regional neighbor for a cost of $1.5 billion or more. 

2. What are the main options?

Israeli companies had been negotiating to build an undersea pipeline to the Idku liquefied natural gas (LNG) plant in Egypt, operated by Royal Dutch Shell Plc. However, Israel’s recent reconciliation agreement with Turkey raises the possibility that Israel could build its first pipeline northward and sell, say, to Turkey’s state-owned BOTAŞ Petroleum Pipeline Corporation.

3. Is there enough gas to do both?

That depends whom you ask. The partners say the Leviathan field holds 620 billion cubic meters of gas, which could support large contracts with both Shell and a Turkish partner. The government’s estimates are 20 percent lower, which would mean there’s probably not enough for significant export to both countries, said Brenda Shaffer, a senior fellow at the Washington-based Atlantic Council research institute’s Global Energy Center. Israel’s energy minister says there’s enough for two pipelines carrying at least 150 billion cubic meters to each country: “I want to have two, not one export option,” Yuval Steinitz said in an August 30 interview. There’s also the potential for additional gas finds.

4. Which option makes the most commercial sense?

Turkey presents a more lucrative market and has a stronger economy. Israel would compete there against Russian and Iranian gas, which are priced at least 20 percent above current global LNG prices. But Turkey is also farther away, and it would cost a few hundred million dollars more to build a pipeline there than the estimated $1.5 billion it would cost to connect to Egypt.

5. Which option makes the most geopolitical sense?

Both carry risks. Two Egyptian governments have been overthrown in the last six years, and pipelines that once carried gas from Egypt to Israel’s domestic market have been repeatedly sabotaged in the Sinai desert. Nevertheless, Israel and Egypt have been quiet allies for decades and currently are enjoying unprecedented ties. The relationship with Turkey has been volatile since Recep Tayyip Erdogan became prime minister in 2003 at the head of an Islamist party and set about reorienting Turkey’s foreign policy away from Israel. July’s failed coup attempt in Turkey, and the ensuing crackdown, raised concern in Israel that Turkey could become more authoritarian and move closer to the Russia-Iran orbit.

6. Who else is weighing in?

The U.S. is keen on a pipeline going north, adding an energy corridor to Europe to compete with Russia’s. Amos Hochstein, U.S. Secretary of State John Kerry’s envoy on energy affairs, said Leviathan has enough gas to serve both Egypt and Turkey. Europe also favors a pipeline to Turkey and the Balkan states, many of which now depend on Russia for gas. Some even talk about a pipeline to Greece, though that would be more expensive. Russian President Vladimir Putin has done nothing to block potential Israeli gas exports to Turkey, and -- publicly at least -- has given them his blessing.

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