OPINION: Israel’s approval of a deal with Cyprus and Greece to build the $7 billion East Mediterranean gas pipeline is a boost for the project — but big obstacles remain.
Tel Aviv’s Energy Minister Yuval Steinitz unveiled the decision one day before Chevron said it will acquire Noble Energy, operator of the huge Leviathan gas field off Israel whose resources currently underpin the 1900-kilometre pipeline.
Chevron — with more financial, political and technical clout than Noble — could help progress the East Med project and accelerate talks with ExxonMobil, Eni and Total, whose significant gas finds off Cyprus could feed the pipeline that will run to Italy via Greece.
Chevron’s involvement may also influence how the US administration deals with Turkey, which opposes the line and whose actions — drilling off Cyprus, declaring illegal maritime boundaries and becoming involved in Libya’s civil war — have heightened regional tensions.
Another fundamental challenge for East Med’s proponent IGI Poseidon is that the project is not viable at current European gas prices.
So how else could Israel get its gas to Europe?
Liquefied natural gas is one idea but another possibility previously studied by Tel Aviv was to build an offshore pipeline to Turkey from where gas could enter Europe via existing infrastructure.
This seems a cheaper option, but would require adept diplomacy to progress, because it would be seen as rewarding Turkey's President Recep Tayyip Erdogan for his regional belligerence.
East Med's backers must hope for European gas price revival.
(This is an Upstream opinion article.)