Fuel Price Drop Won't Affect Israel Gas Plans, Steinitz Says

  • Energy minister downplays gas price impact on offshore fields
  • 2020 still `realistic deadline' for developing Leviathan site

The biggest drop in global energy prices in more than 12 years is not expected to derail the timetable for developing Israel’s largest offshore natural gas field, Leviathan, Energy Minister Yuval Steinitz said.

“The 2020 deadline for developing Leviathan remains in place,” Steinitz said in a phone interview. “It is not going to be easy, but I think it is very realistic. In case the developers cannot raise the financing, they might have to bring in new partners.”

Under a recently approved government programfor Israel’s natural gas industry, Leviathan is to be developed by Texas-based Noble Energy Inc. and units of Israel’s Delek Group Ltd. But the decline in global fuel prices has spurred concerns over the ability in current market conditions to raise the billions of dollars needed to develop the field, whose gas is slated mostly for export.

The drop in gas prices raises “significant questions regarding the feasibility of exports,” the Bank of Israel said on Dec. 14.

Take It Back

If the field is not developed on target, “then the government of Israel can take it back,” Steinitz said. “Yet I believe that such an extreme scenario is not very likely.”

The declining oil prices may have an upside for the project, Steinitz said. “Development costs have already declined by 20 to 30 percent, following the cancellation of some other gas and oil projects around the globe,” he said.

Israel has already signed gas export agreements with the Palestinians and Jordan, and has also held discussions on sending fuel to Egypt and Turkey. The prospect of an undersea pipeline to Turkey may be linked to efforts to repair a diplomatic rift caused by an Israeli naval raid in 2010 that resulted in the death of 10 Turks trying to breach Israel’s blockade of the Gaza Strip.

“I think that we are closer to an understanding than we were in the last several years,” Steinitz said of the talks with Turkey. “If such normalization will take place soon, I think that the prospect of exporting Israeli gas to the Turkish market will become very realistic for the benefit of both sides.”

A pipeline to Turkey would also open up the possibility of sending Israeli gas to Europe. Steinitz said he recently discussed that possibility with European Union Commissioner for Energy and Climate Change Miguel Arias Canete.

“It seems to me that he sees it in a positive way, realizing that the prospect of additional gas discoveries in the economic waters of Israel, Cyprus and Egypt is significant,” he said.

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