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RUSSIA-ISRAEL: New Oil & Gas Geopolitics in the Mediterranean

Bottom Line: Russia’s announcement this week that a Gazprom subsidiary had signed a deal for Israel’s offshore Tamar gas field will exponentially strengthen Gazprom’s prowess in the massive Asian LNG market. (Israel has yet to approve the deal, but it will—it’s needs the money for infrastructure and it needs the deal for a new geopolitical landscape).

Analysis: What Russia has right now is a single LNG plant in its Far East (Sakhalin-2), supplying LNG to South Korea and India (though it plans to build another plant in Vladivostok). With the Israel deal, it will gain direct export access to Japan, South Korea, China and India.

The deal Russia signed on Tuesday will see Gazprom provide financial support for the development of the Tamar Floating LNG Project, which should begin construction in 2017. The deal also gives Gazprom exclusive rights to purchase and export Tamar LNG. The Tamar gas field is the second major gas field in Israel (after Leviathan), both off the coast of the port city of Haifa. Tamar has an estimated 270 billion cubic meters of gas. The floating LNG project would liquefy gas from Tamar at a floating liquefaction vessel with a capacity of 3 million tons/year.

This is a major step for Russia in its attempt to diversify from the European market, and it is also significant that Tamar is a US-Israeli joint venture for the most part. Russia isn’t courting Israel to this extent without the US blessing—and…

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