Transformed Natural Gas Geostrategy in the Eastern Mediterranean: Struggling or Cooperation with Leviathan ?
Transformed Natural Gas Geostrategy in the Eastern Mediterranean:
Struggling or Cooperation with Leviathan ?
The plans regarding the transportation of the natural gas, which is drilled from Leviathan in Israel’s exclusive economic zone, to Europe via Turkey, indicate an important milestone with regard to Turkey’s regional policies. The idea of integrating natural gas in the Aphrodite area into the system, which is located on the pipeline route and operated by Southern Cyprus, may change the existing foreign policy balances with several dimensions, especially relating to Turkey’s Cyprus policy and Turkish-Russian natural gas cooperation. This study reveals the reasons why Israel’s natural gas is not attractive for the Turkish market in terms of the obstacles to the feasibility of the plans, the difficulties in implementing the project in terms of the Cyprus problem, and the financial disadvantages of the project in terms of creating an alternative to Turkish-Russian natural gas cooperation. In the study, some false facts regarding the dependence of Turkey on Russian natural gas are also drawn to the attention of readers.
Turkey’s move aiming to restore its relations with Israel and Russia with the agreement and the letter of apology sparked speculations and cooperation possibilities. Whether there was a link between the two issues or not was discussed. Referring to the natural gas fields in Israel’s exclusive economic zone, Netanyahu stated in the press briefing relating to Turkey-Israel agreement that there could be a cooperation with the pipeline which would reach Turkey from Leviathan natural gas field. This statement had widespread repercussions in the media.
The pipeline is expected to transport around 10 billion bcm of natural gas annually. Such a big project will make a great contribution to the relations between two countries. However, Turkish media thinks that Israeli natural gas will be an alternative to Russian natural gas and thus, Turkey’s dependence on Russian gas will diminish. As it is known, the topic of the dependence on Russian gas has been resolutely treated as a risky issue in Turkish media for a long time. Energy experts argue that Turkey is overly dependent on Russia for natural gas imports and mislead the public. Perhaps they unwittingly cast a shadow upon Turkey’s relations with Russia. At the same time, they consciously or unwittingly make an effort for Turkey to prefer more costly gas sources for source diversification instead of cheap Russian gas. In order to correct this disinformation, data on Turkey’s dependence on Russian natural gas will be presented later on. When the financial statement of the project is taken into account, the parties of the gas cooperation between Israel and Turkey claim that this cooperation will also contribute to the settlement of the Cyprus issue. Moreover, it is said that building the peace in Cyprus is a prerequisite for Turkey-Israel natural gas cooperation. The fact that Noble Energy, (the USA) the operator of Israel’s Leviathan natural gas fields, has privileges in the Cyprus exclusive economic zone and in the Aphrodite natural gas field which is located 21 miles west of Leviathan, makes the project more comprehensive. It is predicted that the natural gas, which will be drilled from these fields, will be marketed jointly and will be delivered to the customer with the pipelines, which will pass through Cyprus exclusive economic zone.
Noble Energy, which has been exploring in the Eastern Mediterranean since 1988, announced that they had found natural gas in Tamar in 2009, in Leviathan in 2010, in Aphrodite (Cyprus) in 2011 and in southwest Tamar in 2013. It is obvious that the rich natural gas fields in the Eastern Mediterranean will contribute to the welfare of the countries in the region, especially Israel, and will make the region more important. It is also said that the gas, which will be drilled, can be transported to Europe via Cyprus-Greece or Turkey, beyond the needs of Israel and the countries of the region. It is also pointed out that an additional resource will be provided for the southern energy corridor of the European Union (EU).
The existence of natural gas fields in East Mediterranean caused problems while defining exclusive economic zone. Egypt and Cyprus talks caused another trouble in addition to those between Israel and Lebanon. As we know, Israel is not a party to United Nations (UN) Convention on the Law of the Sea. The convention to which Cyprus and Lebanon are parties was signed by Egypt, but the approval process has not been completed yet.
Forecasts in 2011 indicate that Israel gas may be supplied to international market in 2016. In this issue, which is rekindled with the political agreement between Turkey and Israel, estimates are made that the gas will be delivered to Turkey within 3 years. This issue will take the establishment of LNG power plants in Cyprus or the establishment of floating LNG plant near gas fields’ projects off the agenda.
The reasons why there has been no concrete step so far can be summarized as:
i) Due to decreasing energy prices, in the current circumstances and with the current costs discussions whether the project is “feasible” or not and the lack of interest among investors:
In the field where the sea depth is approximately 1600 meter, it is necessary to drill at least 3000 meter. In the statements, which have been made so far, information about natural gas’ chemical component has never been mentioned. According to the gas’ chemical component, incremental cost may also come to the fore. Experienced energy experts state that along with the production cost of gas per well, transportation cost and the sale price for Turkey has not been determined yet. They also emphasize that in Tamar, the Noble-Delek partnership cannot go down from the price of $ 5.10 / mmbtu, which has been given to the domestic market in Israel, otherwise legal problems would arise on the grounds that the export will be subsidized. Moreover, it is stated that the cost of the gas will be at least 6 $/mmbtu. It can be said that Israeli gas cannot reach Turkey at competitive prices when it is considered that the delivery price of Russian gas to Thrace is 4.6 – 4.8 $ / mmbtu. With the Turkish Stream project, Russians are pointing to the fact that the price of Russian gas will decrease further with the direct gas supply to Thrace, and even Gazprom may give gas to Turkish private sector with reduced price. There are also those who claim that the Leviathan project can only be “feasible” if oil prices reach $ 100 / barrel and natural gas prices reach $ 13.5 / mmbtu.
On the other hand, some investors from USA say that the stories, which are told about the Leviathan gas, are not as good as mentioned. The Washington Institute’s “Israel’s Leviathan Gas Field: Politics and Reality” is quite interesting. In fact, Noble Energy has been in action for 15% sales in Leviathan since April.
As it will be recalled, the Noble-Delek consortium also made an effort to make a sale of 30% in Leviathan field in 2012 and commissioned HSBC for this purpose, but the attempt failed.
ii) Israel’s legislative void and legal infrastructure uncertainty:
On March 27, 2016, the Supreme Court of Israel cancelled the plan of drilling and distribution of natural gas with Noble Energy finding it contrary to law. On the objection of the opposition, the court ruled that the Israeli government’s agreement for Leviathan along with the Noble Energy and the Israeli Delek partnership were unconstitutional. The Supreme Court allowed the government for 1 year to revise the agreement. Noble-Delek reconciliation will be cancelled unless the necessary arrangements are made.
The court, on the grounds of its decision voted 1 against 4, stated that the government had no authority to promise for such a long period, referring to the guarantees given to the Noble and Delek consortium for 10 years. This decision, which is a bad surprise for Netanyahu, now confronts the government with two options: to pass a new law that involves increasing negotiation of the parliament, or to renegotiate the “10-year stabilization” clause with Noble-Delek.
iii) The Cyprus Issue:
It can be said that this is the one subject that the investors are most concerned about. In order for the gas in the Aphrodite field to be managed and exported, it is necessary to establish peace on the island (the fact that the field belongs to the entire island of Cyprus). This will also open the way for pipelines to pass through Cyprus’s exclusive economic zone. When the Turkish-Syrian peace can be established is still a question, even if it is technically possible to conclude the exclusive economic zone agreement between Lebanon and Israel, and to reach Turkey with the pipeline, which will pass through Syria’s exclusive economic zone, instead of the Cyprus option. In addition, the project will only be feasible if the Leviathan and Aphrodite fields are evaluated together. In fact, it is understood why the Cyprus option is so important when it is thought that the operator of the both fields is Noble Energy.
Even if the Cyprus problem is resolved, the debate on the delimitation of the exclusive economic zones in the Mediterranean is a separate debate on how negotiations between Turkey, which is not the party to the UN Convention on the Law of the Sea, and Cyprus/ Greece, will result.
The Relation of Russia with the Leviathan
The facts that Netenyahu has met with Putin in Moscow four times in a very short time interval (the last of this meetings was in the last June), they came together in Paris once in the Climate Summit, and the Israeli President Rivlin’s Moscow visit in the last March shows the frequency of the contact between the two countries. As it can be remembered, in 2011, Putin declared Israel as a “Special country for Russia”. It was not a surprise when Putin stated that half of the Israeli population speaks Russian, and Israel is a part of the Russian culture. Collaborations exist between the two country in different high-tech fields such as agriculture, health and pharmaceutical industries, common arms production, collaborations in the aerospace industry and common production of planes. Furthermore, it is also known that the talks continue between the two countries in colourful topics such as Israel’s entrance to Eurasian Economic Community, which is led by Russia. Another interesting development is that, due to Russian involvement in Syria, Israel’s Moscow Ambassador officially wished success to Russia.
With no doubt, besides the development of bilateral relations between the two country, other topics of conversation are Russia’s policy towards Iran and selling guns to Iran, and relation of the both countries with Turkey. On the other hand, regarding the issue of gas export to Turkey, it is claimed another topic brought to the agenda was that the Russia is going to stop selling S300 rockets to Iran if Israel stops exporting gas to Turkey.
Even though the Turkish media and energy experts has not made it a topic of conversation yet, from the first day of the discovery of natural gas in the Leviathan field, the Russian companies and Gasprom shows an intense interest to the region. The effort of Gasprom for involvement in the region was even mentioned in the Protocol signed between the two countries. With the famous saying, the desire of Gasprom to “gain access to the warm waters”, reaching its had to the Eastern Mediterranean Sea and the desire to have a voice in the gas industry as a global actor, is seen as normal due to the political and economical reasons. 
In the last April, Gasprom took advantage of the fact that Noble Energy and its partners could not get finance for investment, and the legal uncertainty emerging in Israel, and submitted and offer to get 30% share of the Leviathan gas field. It is also a known fact that the Russian lobby in Israel has efforts to collaborate with Gasprom.
Is the Turkish Market Large Enough, Does It Need Additional Gas Supply?
Despite the statement of the Minister of Foreign Affairs Mevlut Çavuşoğlu in January that the developments in the Middle East and especially in Syria obliges the intimacy between Turkey and Israel, the common opinion is that the main topic in the background of the agreement of 8 June between the two countries is the energy cooperation. Especially the articles and commentaries in the Turkish media are in this direction. By bringing up the dependency of Turkey to Russia on natural gas, it is claimed that the Israeli gas will both increase the supply diversity and create price competition in the Turkish market.
At this stage, I find it useful to share the data of Turkish dependency to Russia on natural gas. Yet, the rate of our dependency is not as high as it is claimed. On the contrary, taking only public imports into account, it is observed that the share of Russia and Iran are close to each other. In the below table, the anticipated amounts of the purchase of the natural gas with the purchase agreements can be found.
The main reason for the lack of concrete steps regarding the export of the Israeli gas to Turkey, which has been on agenda since 2010, through pipelines was the tension between the two countries. Reawakening the topic due to the normalizing relations is related to the whetting the appetite of the investors and marketing of the gas. The increasing interest of the Turkish private sector actors in the region, and their effort to be investors or customers are pleasing developments. The private sector, which behaves in line with the rules of the free market, approaches to the Project from a commercial point of view. From Turkey’s perspective, except the option of the involvement of the public sector, i.e. BOTAS, it is claimed that the designated prices are not appealing for the Turkish market for the private sector. In this point, it is worrying that the dependence on the Russian gas is again enabled again under the name of resource diversification. In a period in which the demand for the gas is decreasing in Turkey, with the take-of-pay option –even though its commercial side may be controversial- the fact that BOTAS might be forced to this kind of purchase, brings some question marks to the topic. For example, it may be an interesting development if Gasprom will be on the other side of the table in the possible negotiations on the Israeli gas.
Beyond any doubt, the progression in the region reveals the necessity of the development of Turkey-Israel relations and triple collaboration between Turkey-Israel and Russia. Even though the former American diplomat Matthew Bryza believes that the overcoming any obstacles is a must for Israel to export natural gas to Turkey, the point that needs to be urged upon the most is the question whether there is a commercially valid Project on the table or not.
Even though there is not a commercial alternative that can replace the Turkish market in the near future, the inclusion of the Eastern Mediterranean gas to EU’s southern corridor through Turkey and Turkey’s transformation to a centre that this gas merchandise in, will be significant achievements.
Aydın Sezer, Co-Founder and Co-President of Turkey-Russia Research Centre (TURAM)
 According to Jewish mythology, a water monster living in deep seas and described in the Torah as ‘Deep waters boil kile a boiler’. It is also the name of a natural gas bed in the exclusive economics zone of Israel.
 Noble Energy was the first operator to discover natural gas resources offshore both Israel and Cyprus and discovered more than 40 Tcf of natural gas resources in the Levant Basin. http://www.nobleenergyinc.com/exploration/recent-discoveries-130.html
 The gas needs to be multiplied by 36.33 to reach the price of BCM.
 Israel’s Leviathan Gas Field: Politics and Reality, http://www.washingtoninstitute.org/policy-analysis/view/israels-leviathan-gas-field-politics-and-reality
 Noble Seeks To Sell Off 15 Percent Of Leviathan Gas Field, http://oilprice.com/Latest-Energy-News/World-News/Noble-Seeks-To-Sell-Off-15-Percent-Of-Leviathan-Gas-Field.html
 US-Israeli group looking to sell stake in massive gas field, http://www.timesofisrael.com/us-israeli-group-looking-to-sell-30-stake-in-offshore-leviathan-gas-field/
 The Israel Parliament approved the granting of Leviathan’s operation to the Noble-Delek consortium in August 2015. Under the agreement, the consortium for the rapid completion of the project had provided forcible and regulatory guarantees that tax and export quotas would not change for 10 years under the name of ‘stabilization material’.
 “.. According to various assessments, the bottom line of such an agreement would be that Israel will not sell natural gas to Turkey and, in return, Russia won’t supply S-300 anti-aircraft missiles and other advanced weapon systems to Iran and other regional enemies of Israel”
 March. 8, 2013 a new deal by Russia’s Gazprom to market Israeli liquefied natural gas shows that Moscow is again emerging as a player in the strategic region. The 20-year LNG contract between Gazprom subsidiary Gazprom Marketing and Trading Switzerland and Levant LNG Marketing Corp. also provides a major boost for Russia’s drive to rebuild its Cold War influence in the Middle East that collapsed with the demise of the Soviet Union. This is an important milestone for strengthening Gazprom’s position in the global LNG market (Source: UPI)
 The commentator in an article: “Russia’s new Middle East energy game” reports that the Tamar deal is just for starters. The Kremlin is playing a much bigger game. Gazprom is already eyeing a role in the development of Israel’s gigantic Leviathan gas field. With its estimated 25 tcf of gas Leviathan is due to come on-stream by 2016. And the eastern Mediterranean bonanza is potentially huge. The US Geological Survey estimates the eastern Mediterranean Levant Basin contains around 123 tcf of gas and 1.7 billion barrels of oil.
“Russia’s new Middle East energy game” http://www.thecommentator.com/article/3048/russia_s_new_middle_east_energy_game
 Russia wants share in Israeli gas http://www.globes.co.il/en/article-russia-wants-share-in-israeli-gas-1001119921
 Prospects of Delivering Israeli Gas To The Turkish Market, http://turkishpolicy.com/blog/10/prospects-of-delivering-israeli-gas-to-the-turkish-market
 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