At TheMarker’s Energy Conference, Israeli exec sees future for Israeli gas exports, but adds: exports to Palestinians, Jordan ‘would be philanthropy.’
By Ora Coren | Jul. 24, 2014

Israel’s vast new natural gas reserves could break the diplomatic and commercial ice between Israel and its neighbors, but Jerusalem might still need an accommodation with the Palestinians for this to happen, executives said at TheMarker’s Energy Conference on Tuesday. Meanwhile, a Jordanian gas official says that both Jordan and Palestinians want to import Israeli gas, just that it would need to be done “quietly.”

The gas Israel found offshore at the Tamar and Leviathan fields presents a “historic opportunity to anchor relations with our neighbors and create critical economic ties,” said Gideon Tadmor, chairman of Delek Drilling, one of the partners in the two fields. “It will create the foundation for a change in Israel’s geopolitical situation in the region.”

This spring, the Leviathan partners signed a deal with two European companies — Britain’s BG and Spain’s Union Fenosa, which operate liquefied natural gas plants in Egypt — to supply them with gas over 15 years.

In February, Tamar agreed to sell at least $500 million in gas over 15 years to two Jordanian companies. “The energy talks with Egypt and Jordan are creating a basis for strengthening Israel’s strategic cooperation in the region,” Tadmor said.

Alon Liel, a former director general of the Foreign Ministry, expressed confidence that gas could be the catalyst for improving Israel’s relations throughout the Middle East. “There’s no end to their hostility toward us in the region,” he said. “I don’t say that gas can solve everything, but we need to make use of it.”

But Nimrod Novik, who played a key role in building the infrastructure in a failed plan to import Egyptian natural gas to Israel, said energy alone could not anchor stronger ties between Israel and its neighbors. He pointed to his experience with Cairo.

“We thought it would create a precedent, but it turned into an exception,” he said. “No other businesspeople were willing to take a chance with Egypt.”

Without an intricate web of bilateral business ties, executives from Egypt, Jordan, the Gulf and Turkey don’t feel they can do business with Israel publicly, Novik said. There is a limit to how much energy trade can lead to wider cooperation.

“Jordan really has no real alternative to Israeli gas, but still, there are real problems in doing business with them,” he said. “There needs to be a reasonable political environment for a country like Jordan to sign on. A political process [with the Palestinians] will soften public opinion and enable us to get the signatures, not the other way around.”

Tarek Awad, the CEO of the Jordanian company Progas, said both Jordan and the Palestinian Authority wanted to import gas from Israel, but “quietly.” That could be facilitated because of the fact that an American company, Noble Energy, is a partner at Leviathan and Tamar.

Liel expressed optimism about dealing with Turkey, even though its prime minster, Recep Tayyip Erdogan, has lashed out at Israel for its assault on the Gaza Strip.

“With Erdogan, there’s a wall between politics and economics. He’s ready to put gas into the economics department,” Liel said. ”We have indications that he wants to do a gas deal with Israel and looks at it as strictly business.”

But, Liel warned, Turkey under Erdogan has invested enormous sums in energy and in becoming the main hub for transporting oil and gas between the Gulf, the Caspian Sea and Europe. “Therefore they’ll try to torpedo our deals, as they did with Cyprus,” Liel said.

He also expressed dubiety that exporting gas to the Palestinians and Jordanians would pay – “It will turn out to be philanthropy,” Liel said. “They won’t pay.”

Michael Lotem, the Foreign Ministry’s ambassador for energy affairs, expressed hope that the government and Israel’s energy sector could work together to further the country’s business and diplomatic interests.

But he conceded that the government was new to energy diplomacy. “We’re learning as we go, and we’ll soon reach the crossroads where we’ll make decisions,” Lotem said.