Alexandria Rising

It is a little startling just how fast this gas is getting to market. It also establishes a major trade opportunity for Turkey. Pumping gas to Europe in competition with Russia is desirable. Pumping it from Israel is both ironic and a sharp rebuke to the local political dispensation. There are huge amounts of gas in Iraq and Iran that could also feed this pipeline.

Perhaps the opportunity to actually profit will focus folk's attention? We can hope.

In the meantime, the economic posture of Israel will steadily improve making them the natural Hegemon in the Middle East. At the same time, neither Egypt nor Syria can mount a creditable military assault on the borders of Israel. Syria because it is now fully engaged in a long civil war in which the only outcome will be a rump Alawite state isolated from Israel but with most of the conventional army and the successor state with a citizen's militia for defense. Egypt has a conventional army totally tied to an American tail that effectively and intentionally grounds any such aspirations. In either case it will take money that is nonexistent and years of building, all in the face of dire national needs.

In fact the Copts and Muslims in Egypt are actually sorting themselves out and heading to an inevitable compromise that precludes any military adventures.

Once the gas starts flowing, Turkish influence along the Levant will be magnified and their accommodation with Israel will become the start point for all other arrangements.

Remember Alexandria.

Gas Starts Flowing from Israel's Levant Basin, What Now?

By. Jen Alic

Washington DC (SPX) Apr 09, 2013

http://www.energy-daily.com/reports/Gas_Starts_Flowing_from_Israels_Levant_Basin_What_Now_999.html

The first gas has started flowing from Israel's supergiant Tamar gasfield in the Levant Basin. Where it will go will redraw the Mediterranean energy map and the geopolitics that goes along with it.

The Tamar field stakeholders announced on 30 March that the gas had started flowing, raising the value of Texas-based Noble Energy, which holds a 36% stake, and Israel's two Delek Group subsidiaries, which each hold a 15.6% stake.

For now, the gas is being pumped to mainland Israel, where it will feed the domestic market, but exports should begin in 2-3 years. What Israel has in mind is the European market, via a hoped-for undersea Mediterranean pipeline to Turkey, which has the infrastructure to get it to Europe.

The competition for this prized market is stiff. In total, the Mediterranean's Levant Basin has an estimated total of 122 trillion cubic feet of gas and 1.7 billion barrels of oil. Lebanon and Cyprus are eyeing the same market for their own Levant Basin gas resources. Cyprus has found gas in its section of the basin, and Lebanon has announced a tender for exploration off its shoreline.

The Greek Cypriot government believes it is sitting on an amazing 60 trillion cubic feet of gas, but these are early days-these aren't proven reserves and commercial viability could be years away. In the best-case scenario, production could feasibly begin in five years. Exports are even further afield, with some analysts suggesting 2020 as a start date.

Israel has the upper hand right now in terms of development and production, but it lacks the infrastructure without Turkey.

Israel was originally hoping to lay a pipeline that would traverse both Cyprus and Turkey, but there are too many political pitfalls to this plan (which would essentially mean a final resolution to the Turkey-Cyprus spat). The ideal would have been a pipeline that connects all the Levant Basin resources-including Lebanon, Israel, Cyprus and Turkey-but this is the stuff of geopolitical dreams.

In the end, it is shaping up that an Israel-Turkey pipeline is not only possible, but coming to fruition. Earlier this month an official apology from the Israeli prime minister to his Turkish counterpart for some high-level grievances was engineered by US President Barack Obama. It was an unprecedented move by Israel and one that illustrates how important this pipeline is for Israel. An apology was really the only thing keeping Turkey from green-lighting this pipeline project without a backlash at home.

This Israel-Turkey pipeline makes Lebanon and Cyprus nervous. It essentially cuts them out of the equation. Politics for now will keep Lebanon from connecting up to any Israeli pipeline, and Turkey won't have a connector to Cyprus.

Russia's Gazprom, of course, is not keen to lose its stranglehold on the European market. To that end, it's jumped in on Tamar itself, obtaining exclusive rights from Israel to develop the field's liquefied natural gas (LNG).

Here's the plan: Russia is hoping to divert Israeli gas exports to Europe by banking on these resources being turned into LNG for Russian export to Asian markets instead. Russia is willing to invest heavily in a $5 billion floating LNG facility to this end. In return it gets exclusive rights to purchase and export Tamar LNG. (Gazprom has signed the deal but it still awaits final approval from Israel).

For Israel, this is a windfall. There is an estimated 425 billion cubic meters (16 trillion cubic feet of gas in its Leviathan field, plus the 250 billion cubic meters in the Tamar field, which is now officially pumping.

All this gas is worth about $240 billion on the European market, and Tamar gas alone could boost Israel's GDP by 1% annually. For now, the Tamar gas will result in a decline in the price of electricity for Israelis by way of reducing the production costs for the state utility.

For Europe, it will mean newfound power to deal with Russia differently like it did with the recent Cypriot bailout package that came along with a harsh lesson for Russian oligarchs who are seeing their Cypriot banks holdings sequestered.