Israeli controlled Leviathan gas consortium seek to enter Cyprus energy market

Israel Leviathan Offshore Gas Field

A new twist in the complex political and economical saga of Israel’s offshore gas fields is sure to set off rumours around the world.

The partners in the Leviathan gas field - Israel's Delek Drilling, Ratio, and Avner Oil, and U.S.-headquartered Noble Energy - announced this week that they were going to bid on a $3 billion Cypriot tender, to supply Cyprus with 0.7-0.95 billion cubic meters (BCM) of gas a year for 10 years from late 2016 or early 2017.

The announcement for the tender comes after a long period of speculation as to which of the regional markets the Leviathan consortium was going to choose to deal in. Tentative talks were underway with representatives from Egypt, Turkey and even distant Asian and South American markets. While these options have not been ruled out, the recent announcement seems to indicate that a choice has been made. Cyprus, a member of the European Union, has marketed itself as a major supplier of liquefied natural gas (LNG), and has attracted large investments from EU countries eager to loosen dependency on Russian gas supplies in light of the political situation there. Cyprus is in need of the offshore Israeli LNG supplies, since the volume of gas they have promised investors is more than the country can provide on its own.

The tender closes on 21 August, by which the bidders must have the necessary financial backing and have obtained the regulatory permits required. If the tender is won, the Israeli gas will used by the Vasilikos Power Station, a new power plant built by Cyprus’s Electrical Authority, currently uses diesel fuel as a stopgap until a gas terminal can be built in Cyprus.

The companies operating in the nearby Tamar gas fields, several of whom are also part of the Leviathan consortium, recently signed two large international deals: a $500 million contract with Arab Potash Company and the Jordan Bromine Company, and another $1.2 billion contract with the Palestinian Authority. They also have a $14 billion deal with Israel Electric Corporation. Together, Tamar and Leviathan have the potential to turn Israel into a major energy supplier worldwide, and boost the Israeli economy. As well as the international political implications of every tender and contract that the two groups enter, discussions abound in internal Israeli civil society about the implications on the local economy, how much gas should be used in Israel and how much should be exported, and how to allow the taxes that Israel is earning from the sales of the LNG to benefit the people of Israel.