Israeli gas could benefit EU, but won’t eliminate dependence on Russia, experts say | JPost | Israel News

Offshore Leviathan gas field. Photo: (Albatross)

Although a Europe seeking to diversify its natural gas sources could potentially benefit from turning to the Eastern Mediterranean reservoirs, the continent’s dependency on Russian supplies will remain for the foreseeable future, experts say.

Gas exports from Israel to Europe would be “nice to have, but Europe will remain very dependent on Russian gas, and its dependence will probably grow as its own indigenous supplies dwindle,” Gina Cohen, a lecturer at the Technion’s Natural Gas and Petroleum Engineering Graduate Study Program and a consultant in the gas industry, told The Jerusalem Post on Thursday.

As of now, Israel has approximately 400 billion cu.m. worth of proven gas reserves that are eligible for export.

When divided into about 15 billion cu.m. annually, these quantities could be characterized as beneficial but non-essential for Europe, Cohen said.

Meanwhile, due to the fact that Israel can receive much higher prices by exporting gas to Asia rather than to Europe – as well as additional interests presented by its vying Cypriot and Turkish neighbors – there is no guarantee that Israel would choose to sell to Europe over the Far Eastern markets.

An examination of the European gas market by the International Energy Agency revealed that Europe imported about 167.2 billion cu.m.

of natural gas from Russia in 2013 – a roughly 13 percent increase from 2012 – and 82.3 billion cu.m. traveled via Ukraine. Imports from North Africa amounted to about 48.5 billion cu.m., from Iran and Azerbaijan collectively to about 13 billion cu.m. and liquefied natural gas (LNG) to about 45.8 billion cu.m., the IEA reported.

“We do see the fields in the Eastern Mediterranean as [having] potential and we feel that they can contribute not only to the security of the region but to the entire EU,” a European Commission official told the Post on Thursday. “We, from the Commission’s point of view, see that this gas might play a role in the EU’s diversification policy, but it’s too early at this stage.”

In the wake of the upheaval between Russia and Ukraine, Russian state-owned gas giant Gazprom Management Committee chairman Alexey Miller informed Russian Prime Minister Dmitry Medvedev on Tuesday that the company would no longer provide gas discounts to Ukraine beginning in April.

After hearing about Ukraine’s $1.529 billion debt to Gazprom Medvedev called the company’s decision “completely justified,” according to a statement from Gazprom.

All EU energy ministers, and EU Energy Commissioner Gunther Oettinger met on Tuesday, and among other issues, discussed energy supply issues against the backdrop of the Ukrainian crisis, a European Commission official told the Post.

In a press conference that followed, Oettinger addressed steps that the EU has taken in recent years to decrease dependence on Russian supplies and to increase security via diversification of supply and by building and upgrading energy infrastructure that “flexibly moves gas within and around Europe.”

“We need more people supplying, we need a diversification strategy,” Oettinger said. “We need LNG coming in with new terminals, we need to connect to Europe.”

Oettinger stressed that although the EU’s strategy regarding natural gas remains geared toward diversification, this cannot mean an abandonment of all Russian gas.

“We have mutual dependence – we need Russian gas for our market at the moment and Russians need money from Europe for Gazprom and the state budget,” he said. “So we don’t want to call into question these gas deliveries.”

Across the Atlantic Ocean, United States Speaker of the House John Boehner (R-Ohio) called for the hastening of American gas export policy approvals.

During a House address on Wednesday, Boehner quoted a recent Energy and Commerce Committee report saying that “by becoming a natural gas exporter, the US can supplant the influence of other exporters like Russia and Iran.”

Like Boehner, House Energy and Commerce Committee chairman Fred Upton (R-Michigan) slammed the Department of Energy’s slow approval process for LNG exports, saying that this is “unnecessarily putting our allies at the mercy of Vladimir Putin.”

As far as Russia and Europe are concerned, however, a “mutual dependence” is likely to remain, Cohen said.

Yet although imports from Russia continue to increase due to lower indigenous supplies, European demand for gas has also grown flat due to greater storage capacity, improved bi-directional gas infrastructure, warmer weather, usage of renewables and cheap coal purchased from the US, she added.

While Russia is trying it preserve its “historical client,” Europe, it has also been aiming to penetrate the Chinese market for the past 10 years, but any agreement has yet to be signed, Cohen said.

“In the meantime, Europe has been increasing purchases from Russia,” she said. “The issue of interdependence between buyer and seller is paramount in that seller is just as dependent on money – sometimes more – than the buyer is on gas.”

As Europe looks to other outlets to diversify its gas intake, the Eastern Mediterranean reservoirs can potentially play a role, as the European market is steady and increasingly dependent on imports, according to Cohen.

“The price in Europe is of course much cheaper than in Asia, but there is no guarantee that the Asian price premium – beyond the price of transportation – will persist,” she said. “And so Israel has to look at what is happening around the world to understand the trends and options.”

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