While talks between Israel and Turkey over a joint pipeline have been quietly proceeding for some time, Turkish conglomerate Zorlu Energy for the first time last week told reporters it was seeking to purchase 3 billion cubic meters per year of natural gas from Israel's Leviathan field.
According to Zorlu Energy CEO Ibrahim Sinan Ak, the company was seeking a 15-year contract for 3 billion cubic meters of natural gas annually as part of a hoped-for $2.5 billion pipeline project running underwater from the Leviathan field to Turkey.
In 2010, Noble Energy and its Israeli partners Delek and Avner Oil and Gas made Israelis first hydrocarbons discoveries in the Leviathan and Tamar fields offshore in the Levant Basin. The two fields are estimated to have as much as 30 trillion cubic feet of natural gas.
Israel has a choice to make now in terms of experts: Either a pipeline to Turkey or a total focus on a pending project with Australia's Woodside Petroleum Ltd. for an LNG terminal geared to exports to Asian markets.
Related article: Kurds Complete Game-Changing Pipeline to Turkey
According to JP Morgan, a pipeline from Leviathan to Turkey would yield a faster and higher return on equity (less than four years) than would the construction of an LNG plant.
But for now, politics and immovable Turkish government negotiating are getting in the way of this pipeline, which would indeed be a game-changer for both Turkey and Israel, giving them immediate access to energy markets in Europe that are keen to get out from under Russia's grip.
Zorlu is the key player in this because not only is it one of Turkey's largest companies, it also already has a foothold in Israel, with 25% ownership in Israel's Dorad Energy Ltd, currently building the country's largest independent power station.
But while Zorlu is pushing ahead, Ankara is holding out for more from Israel. Still unresolved, from Turkey's perspective, is the incident in May 2010 when Israeli forces killed nine Turkish activists when they stormed the Mavi Marmara vessel which was trying to break the Israeli naval blockade of Gaza. Ankara has insisted on an apology, compensation and an end to the blockade. It's gotten the apology, engineered by the Obama administration, and it would likely back down on the request to end the blockade, but will continue to hold out for compensation that may not be forthcoming.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com More