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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Israel Mulls Indian Assistance in Developing Offshore Gas Fields

Israeli Minister of Energy and Water Uzi Landau, who is visiting India, met with Minister of Petroleum and Natural Gas Jaipal Reddy to discuss the possibility of Indian government energy companies taking part in developing Israel’s massive offshore Mediterranean natural gas fields, Leviathan and Tamar.

According to an Israeli energy specialist familiar with the negotiations, "During his visit, Minister Landau held many important meetings with key Indian government figures. They included meetings with the minister of petroleum and natural gas and the national security advisor of India. The minister discussed a range of issues with them, with an emphasis on energy and water. He did not discuss with anyone bringing the Indian government or Indian companies into the partnerships for the Tamar and Leviathan fields."

Of particular interest to the Israeli negotiating team could be India’s government-owned Oil and Natural Gas Corp. (ONGC).

Landau told India’s Business Standard, “Israel plans to attract investments in the gas sector, especially exploration and production. Israel has gas reserves of 122 trillion cubic feet, of which 20 per cent have already been found. We are in the midst of formulation of an action plan through several study groups. India can join hands with Israel in this regard and later Indian companies can bid in natural gas exploration and production.”

Landau’s portfolio is broad, as in addition to development of the offshore field, he informed New Delhi that the Israeli government was also interested in Indian expertise and investment for the construction of a liquefied natural gas (LNG) facility to process the output from the Tamar and Leviathan field, which would require an investment of $8 billion.

But the investment would not solely be Indian underwriting of projects in Israel. Beyond natural gas, Landau noted that his government was making huge investments in the water sector, especially purification, desalination and the reuse of waste water for drinking and agriculture purposes, telling journalists, “Water is quite scarce and therefore Israel has launched major investments in this sector. Our companies have developed desalination technologies and waste water management technologies at the cheaper level and they are keen to invest in India.” Addressing possibility of Israeli investment in India’s renewable energy sector, Landau told his hosts, “In Israel, our government is paying attention to the promotion of renewable energy that will be affordable. This is being achieved with new technologies, which India can deploy.”

But the asymmetry between investments in the two countries is extraordinary and will doubtless prove a significant element in any business arrangements proceeding forward.

In March 2010 the U.S. Geological Survey published its assessment of the Levant Basin, the region offshore Israel, Lebanon and Cyprus and concluded that there is a 95 percent chance at least 50,000 billion cubic feet of natural gas could yet be discovered and that in total the Levant Basin could contain as many as 227,430 billion cubic feet of natural gas and 483 million barrels of oil.

Accordingly, the wrangling over offshore delineation of national waters has already started, producing a complex series of claims and counter-claims – Israel and Lebanon, Turkey and the Republic of Cyprus, with Syria yet to be heard from. East Tennessee State University political science assistant professor Dilshod Achilov observed during an interview, “It is a great advantage for Israel. The new findings do not only shift the geostrategic balance in the region, but also send a major strategic blow to Tehran. In the bigger context, this may instigate a large-scale regional competition to search for oil and gas in the Eastern Mediterranean as Lebanon, Cyprus, Syria and Turkey may launch their own search missions. Iran's proxy in Lebanon, Hezbollah, will probably act fast within the Lebanese government to push hard to seek its share of the pie."

And it is Iran’s ghostly image hovering over any Israeli-Indian energy deals that may prove the deal-breaker. India is Iran's second-biggest crude buyer after China, with Iran providing about 12 percent of India's oil imports, roughly 370,000 barrels per day (bpd).

Amidst rising U.S. pressure India, China and Japan, which between them purchase about 45 percent of Iran's crude exports, have announced planning cuts of at least 10 per cent in their purchases of Iranian crude, as tightening U.S. sanctions make business increasingly difficult with the Islamic Republic. The Indian government is reportedly pressing its refineries to cut Iranian imports even as the Indian government has said it will not abide by U.S. unilateral sanctions.

So, stripped of flowery diplomatic toasts, India’s dilemma in investing in Israel comes to this. While New Delhi is currently urging the nations’ refineries to make 10 percent reductions, or about 37,000 barrels, a total Iranian shutoff of exports would leave New Delhi scrambling to replace 370,000 bpd, which could be done on the spot market, but at an enormous cost. Furthermore, as Iran sees Israel as its prime enemy in the Middle East (and vice versa), too significant a deepening of India energy ties with Israel could conceivably see Tehran unilaterally halt oil exports to India, as it already has with Britain and France. So, central to India’s calculations must be – is investing Mediterranean natural gas fields already in contention worth risking 12 percent of its energy imports?

Accordingly, it might be best for India to begin its energy relationship with Israel by focusing on water and renewable, however much Israel might wish otherwise.

By. John C.K. Daly of Oilprice.com

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  • Robert Berke on February 29 2012 said:
    Hi John: ...wondering if you saw the Bloomberg article on talks between Gazprom and Leviathon?

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