Israel’s National Council Approves Gas Pipeline to Jordan

Posted: January 7, 2015 in Econ 101, Free Trade, Technology and Energy

SOURCE: http://www.jpost.com/Israel-News/National-Council-for-Planning-and-Building-approves-system-to-pipeline-gas-from-Israel-to-Jordan-386857

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National Council approves system to pipeline gas from Israel to Jordan

Despite the uncertainty shrouding Israel’s natural gas reservoir development, the National Council for Planning and Building approved on Tuesday a distribution system that will enable the conveyance of the country’s natural gas to Jordan.

Council members, under the direction of Dr. Shuki Amrani, approved a distribution pathway enabling two gas connections to Jordan – one north of Beit She’an and one south of the Dead Sea, the Interior Ministry said.

Export of natural gas through these two spots allow for a prioritization of safety, operational support and system reliability, according to the ministry.

The routes were approved in accordance with a council directive from December 8, as part of National Master Plan (TAMA) 37-A-1-8, which called for a detailed design plan for transporting gas from the existing Sodom gas station to the Jordanian border.

The National Council’s approval of gas export logistics to Israel’s eastern neighbor comes just  just days after a Jordanian parliament member announced the temporary cessation of gas import negotiations between the two countries.

MP Jamal Gammoh, head of the Lower House Energy Committee, was cited in Jordanian media reports on Saturday as saying that “discussions regarding the Israeli gas-importing agreement are currently suspended.”

The parliamentarian was referring to a letter of intent signed on September 3 by the Leviathan reservoir partners to supply about 45 billion cubic meters of natural gas to Jordan’s National Electric Power Company (NEPCO) over a 15-year period.

Gammoh said the decision was motivated by the upheaval in Israel between the country’s Antitrust Authority and the Leviathan gas reservoir’s main stakeholders.

Two weeks ago, Antitrust Authority commissioner David Gilo announced that he would be examining whether the ownership of the Delek Group and Noble Energy in the 621-billion cubic meter Leviathan reservoir qualifies as a cartel. The companies are the major shareholders in both Leviathan and its smaller, 282-b.cu.m.

neighbor Tamar, whence gas has been flowing to Israel since March 2013.

Following Gilo’s announcement, the future of Leviathan – which was slated to begin production at the beginning of 2018 – has become uncertain.

Foreign investors have expressed increasing reluctance to become involved in Israel’s gas industry.

The letter of intent signed with Jordan in September is one of several preliminary export deals that the Leviathan and Tamar partners have signed in the region. If this agreement does evolve into a full-fledged deal, the parties intended for about 9 million cubic meters of gas to flow daily to Jordan, over land.

Senior executives from the Delek Group and Noble Energy reportedly visited Jordan on Sunday, in order to assure the kingdom’s officials that the arrangement would occur as planned – despite the uncertainty with the Antitrust Authority. Representatives from the two companies would neither confirm nor deny the veracity of these reports, however.

Another agreement with Jordanian parties involves the private sector. In February, the Tamar reservoir partners signed a $500 million deal to provide 1.8 b.cu.m. of gas to the Jordanian firms Arab Potash and Jordan Bromine over 15 years, beginning in 2016.

The Tamar and Leviathan partners have also signed letters of intent with British and Spanish operators of Egyptian liquefied natural gas facilities and an export deal with a future Palestinian power plant in Jenin.

As far as the logistics of conveying gas to Jordan are concerned, the National Council for Planning and Building members said they chose the connection points after evaluating engineering, economic and environmental aspects of the various alternatives.

Amrani, the chairman of the National Council, emphasized the “great significance of the decision,” adding that exporting gas to Jordan “is a project of national importance, including in the field of foreign affairs, that requires system supply reliability of the highest level,” a statement from the Interior Ministry said.

Separately, in a letter sent to Prime Minister Benjamin Netanyahu and National Infrastructure, Energy and Water Minister Silvan Shalom on Sunday, Petroleum Commissioner Alexander Varshavsky stressed that “the government of Israel must establish unequivocally that the development of natural gas fields discovered off the coast of Israel is the main objective of the energy sector by the end of this decade.”

The commissioner made these comments as part of a broader response to a mid-December Public Utility Authority document that criticized gas pricing in Israel.

“Development of the Leviathan field is a most important project in the Israeli energy sector, and it is likely to give the Israeli market natural gas supply credibility for the coming decades, as well as grant it a surplus of supply over demand (an important condition for improving the economic situation),” Varshavsky wrote. “The development of Leviathan is also the single most expensive project in the history of the State of Israel.”

If Leviathan is not developed, he warned, Israel will neither be able to meet its own natural gas demand nor become an exporter.

“Freezing the development of new natural gas fields will bring damage to the economy and to the public,” Varshavsky wrote.

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