Wednesday, September 12, 2012

East Mediterranean gas could be piped to Europe by 2018

Proposed East Mediterranean pipeline. (Pytheas Investor Service)
Proposed East Mediterranean Pipeline   (Source: Pytheas Limited)
Interfax (Natural Gas Daily) 12 September 2012 16:00 GMT
by Leigh Elston

The ITGI pipeline project, which in February was excluded from the bid to carry Azerbaijani gas into Europe, may instead tap into the East Mediterranean’s vast offshore gas reserves.

“By 2018-2019, gas from the East Mediterranean may find its way to Greece and through Greece to the rest of Europe, providing diversification and security of supply as well diversification of routes,” Dimitris Manolis, ITGI’s director of international activities, told Reuters on the sidelines of an energy conference in Vienna.

East Mediterranean gas explorers, led by Texas-based Noble Energy – the operator of the 480 billion cubic metre Leviathan gas field and 275 bcm Tamar gas field off the coast of Israel, as well as Block 12 offshore Cyprus – have so far favoured LNG export options over pipeline routes.
However, the huge gas potential of the Levant Basin – the US Geological Survey estimates 3.5 trillion cubic metres of recoverable gas lies off the coasts of Cyprus, Israel, Gaza, Lebanon and Syria – could support both an LNG export project and the ITGI pipeline link to Europe.

While a pipeline project is possible, it would be difficult to have a project operational within the next six years, according to Harris Samaras, chairman and chief executive of investment bank Pytheas. “It is highly unlikely that further exploration, confirmation and exploitation procedures would be timely enough to meet the extremely ambitious 2018 or 2019 date. The challenges are ample, engineering and construction related, management and time related, economic and geopolitical,” he told Interfax on Wednesday.

Alternative options

The ITGI project “remains open to export natural gas from Shah Deniz 2”, Manolis said, but only the Nabucco West pipeline and the Trans-Adriatic Pipeline made the shortlist drawn up in June (see Shah Deniz 2 decision looms for TAP and Nabucco West, 27 July 2012). Following this decision, “we are forced to consider, in parallel, alternative sources of gas”, Manolis said.

Italian utility Edison, one of the partners in the ITGI project, teamed up with Israel’s Delek Energy, Australia’s Woodside Petroleum and Italy’s Enel Trade to bid in Cyprus’ second offshore licensing round earlier in the year. Interfax reported in May that Delek’s decision to partner with Edison may signal intentions to use East Mediterranean gas as an alternative supply for ITGI (see Delek, Woodside and Edison team-up for Cypriot gas exploration, 14 May, 2012). Edison confirmed it was interested in gas exploration opportunities in Israel and Cyprus when contacted by Interfax on Wednesday, but declined to comment on potential infrastructure plans.

Commercially feasible?

Greece’s state-controlled DEPA, Noble Energy, Israel’s Delek Group and the Cypriot government are examining whether building a pipeline to bring Eastern Mediterranean gas to Europe is possible.
“At this point, it is premature to judge the feasibility and commerciality of a gas pipeline that would connect Israeli gas to Greece, via Cyprus. It’s long distance and over deep waters, and will be expensive to construct. It can only be justified if other factors fall into place – and one of the most important of those factors is finding other gas reserves,” Antony Livanios, chief executive of Energy Stream CMG, an international oil and gas advisory firm, told Interfax.

“Despite technical difficulties, the construction and operation of such a pipeline is doable,” Manolis told Reuters.
Yannis Maniatis, Greece’s former energy minister, is even more optimistic that the project will be commercial. “What is certain is that a pipeline from Cyprus or Israel is a bankable project, technically efficient and, of course, we in Greece fully support its construction and startup,” he told Interfax in May.

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