Independent and cutting-edge analysis on Turkey and its neighborhood
Prospects of Delivering Israeli Gas to the Turkish Market

After a five-year diplomatic rift, Turkey and Israel are working to restore ties. On 16 December 2015, the two reached a preliminary agreement to re-establish full diplomatic relations, which were cut off in 2010 after an Israeli naval raid on the Turkish Mavi Marmara ship seeking to break Israel’s blockade of the Gaza Strip.[1]

The deal entails the reinstatement of ambassadors, compensations for the flotilla victims’ families, and removal of all legal claims against Israeli military staff implicated in the attack. In addition, the conciliation agreement paves the way for building a natural gas pipeline from Israel to Turkey.

Energy is widely regarded as the primary factor behind the Turkish-Israeli rapprochement. According to this logic, Ankara is seeking energy partnership with Israel due to the fear over the possibility of a Russian gas switch-off amid a deep political crisis with Moscow following the downing of a Russian warplane by the Turkish air force on 24 November 2015.[2]

Energy is widely regarded as the primary factor behind the Turkish-Israeli rapprochement.

However, this thesis does not hold true. According to Turkish Foreign Minister Mevlüt Çavuşoğlu, reconciliation talks are not new and have been held long before the relationship with Moscow started to deteriorate.[3] Actually, the rapprochement process reflects the changing security dynamics in the Middle East, especially in Syria, pushing Israel and Turkey to a closer cooperation.

In addition, contractual obligations between Russia and Turkey make gas supply disruptions highly unlikely. Moscow and Ankara are tied with long-term take-or-pay contracts for at least 10 years, violations of which will be subject to heavy indemnities.[4]

The idea of an Israeli-Turkish pipeline is not new, and has circulated since the discovery of Israel’s giant Leviathan offshore gas field in 2010. But, political tensions between the two countries have not allowed the project to be seriously considered. With the normalization of the Turkish-Israeli relations on track, the pipeline issue is back on agenda.

The project of channeling Israeli gas to Turkey envisages the construction of a 500-kilometer undersea pipeline from the Leviathan offshore field to the Turkish port of Mersin. Ankara is expected to buy around 8-10 billion cubic meters (bcm).[5] Upon availability, additional volumes of Israeli gas could be exported further to the EU via Turkey.

Commercially, the proposal of selling Israeli gas via a pipeline to the Turkish mainland looks very viable. According to preliminary calculations, the cost of the planned pipeline should not exceed 2.5-3 billion dollars.[6] It is way cheaper than other possible projects, especially in comparison with expensive LNG options. In the current era of low energy commodity prices, project cost is an extremely important factor for investors.  

[Turkey's] gas consumption is one of the fastest growing in the world, and is expected to almost double from 45 bcm in 2012 to 81 bcm in 2030.

Also, after recently frozen negotiations with Egypt, which was previously regarded as the top priority market by Israel, exporting gas to Turkey becomes the only sound decision from a financial and strategic viewpoint. Moreover, with the recent discovery of the giant Zohr gas field in the deep waters of Egypt, Cairo’s demand for Israeli gas remains highly uncertain.

Turkish market demand, on the contrary, is guaranteed. Possessing very few domestic natural resources, the country’s gas consumption is one of the fastest growing in the world, and is expected to almost double from 45 bcm in 2012 to 81 bcm in 2030.[7]

For Turkey, seeking to increase and diversify energy imports, Israeli gas should be also the cheapest option. Although it is too early to talk about precise figures, some industry sources assume a price tag of as low as 199 dollars per thousand cubic meters, which is considered very competitive on the Turkish market.[8] For comparison, Ankara pays around 490 dollars for 1,000 cubic meters of Iranian gas, 425 dollars for Russian gas and 335 dollars for Azerbaijani gas.[9]

While piping Israeli gas to Turkey represents a win-win solution for both sides from an economic perspective, geopolitics might still hinder the realization of the project. Besides demanding an apology for the Mavi Marmara incident and compensation for the victims’ families, Ankara also wants Israel to end the blockade of the Gaza strip, which has been imposed since June 2007.

Although a total lifting of the blockade is highly unlikely due to security issues, Israel might consider to significantly ease the siege on Gaza, especially for Turkey. Without mutual concessions on that matter, further rapprochement and pipeline talks will be impossible.

Another geopolitical obstacle on the way to piping Israeli gas to Turkey is the Cyprus dispute. To avoid Lebanese and Syrian waters, the proposed pipeline has to traverse the Exclusive Economic Zone (EEZ) of Cyprus, whose government opposes the project due to the tense relations with Ankara over the division of the island into Greek and Turkish parts since 1974.

Until the Cyprus dispute is resolved, the proposed Israel-Turkey pipeline is a non-starter.

Having said that, prospects for natural gas exports in the Eastern Mediterranean might provide incentives for addressing the Cyprus dispute and regional cooperation in general. Thus, Cyprus itself is interested in selling gas from its Aphrodite reservoir, however the field’s relatively low volumes do not justify the investment required to develop it. Building a joint infrastructure to Turkey for exporting gas from Israeli and Cypriot fields, therefore, could be a potential solution to the problem.

It is also important to note that last spring Greek and Turkish Cypriots opened the first real negotiations on reunification since 2004. Moreover, they expect to reach an agreement and put it on the upcoming referendum scheduled for May 2016. Nevertheless, the objective may be rather ambitious. A number of obstacles, especially disputes over territorial readjustments and property restitution, will likely delay any deal for at least a year. Until the Cyprus dispute is resolved, the proposed Israel-Turkey pipeline is a non-starter.

To sum up, rapidly changing geopolitical and energy dynamics in the region pushes Turkey and Israel closer to each other, paving the way for their energy cooperation. Despite the commercial viability of the Israeli-Turkish pipeline, a number of geopolitical factors, including the Gaza Strip blockade and the Cyprus dispute, hinder the realization of the project in the near future. In the medium term, however, the prospects for the proposed pipeline are quite high with Israeli gas may start flowing to the Turkish market after 2020.


[1] Isabel Kershner and Tim Arango, “Israel and Turkey agree to restore diplomatic ties,” New York Times, 17 December 2015, http://www.nytimes.com/2015/12/18/world/middleeast/israel-turkey-mavi-marmara-gaza.html?_r=0

[2] Dion Nissenbaum, Emre Peker, and James Marson, “Turkey Shoots Down Russian Military Jet,” The Wall Street Journal, 24 November 2015, http://www.wsj.com/articles/turkey-shoots-down-jet-near-syria-border-1448356509

[3] Menekse Tokyay, “Are Israel and Turkey rebuilding ties behind closed doors?,” Al Arabiya News, 1 July 2015, http://english.alarabiya.net/en/perspective/analysis/2015/07/01/Are-Israel-and-Turkey-rebuilding-ties-behind-closed-doors-.html

[4] Olgu Okumuş, “Will Turkey be able to replace Russian gas with Qatari imports?,” Al-Monitor, 4 December 2015, http://www.al-monitor.com/pulse/originals/2015/12/turkey-russia-qatar-cannot-replace-russian-gas.html

[5] Hedy Cohen, "Turkey still best bet for Israeli gas exports,” Globes, 11 December 2015, http://www.globes.co.il/en/article-turkey-still-best-bet-for-israeli-gas-exports-1001087675

[6] “Turkey plans to build a pipeline from Israel,”  Natural Gas Europe, 20 December 2015, http://www.naturalgaseurope.com/turkey-plans-to-build-a-pipeline-from-israel-27244

[7] “Turkey’s gas trading hub dream realistic: Study,” Hurriyet Daily News, 11 February 2014, http://www.hurriyetdailynews.com/turkeys-gas-trading-hub-dream-realistic-study-.aspx?pageID=238&nID=62284&NewsCatID=348

[8] “Turkey plans to build a pipeline from Israel,” Natural Gas Europe, 20 December 2015, http://www.naturalgaseurope.com/turkey-plans-to-build-a-pipeline-from-israel-27244

[9] Merve Erdil, “Turkey rejects Iran’s gas export proposal,” Hurriyet Daily News, 17 April 2015, http://www.hurriyetdailynews.com/turkey-rejects-irans-gas-export-proposal.aspx?pageID=238&nid=81214proposal.aspx?pageID=238&nid=81214

CONTRIBUTOR
Akhmed Gumbatov
Akhmed Gumbatov

Akhmed Gumbatov is the Project Manager at the Caspian Center for Energy and Environment of ADA University. His area of expertise includes oil and gas economics and politics with a particular focus on the Caspian region and the European Union (EU).

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