Israel considers increasing gas exports to Jordan

Published May 13th, 2015 - 09:35 GMT

Due to the low expected demand for natural gas in Israel, and the desire to strengthen relations with eastern neighbor Jordan, the Israeli government is considering excluding Jordan from its overall export quota. The plan was revealed by the team of Israel regulators that met yesterday with representatives of Noble Energy Inc. (NYSE: NBL) and Delek Group Ltd. (TASE: DLEKG). The significance of the plan is that the natural gas partners will be able to export more gas.

Last September, the Leviathan partners signed an agreement with the Jordanian Electric Power Company (JEPCO) to export $15 billion worth of natural gas over 15 years. The leviathan partners are due to export 3 to 4 billion cubic meters (BCM) of gas each year for a total of 45 BCM.

Israel and Jordan had already been expected to sign the final contract but the decision by the Israel Antitrust Authority head David Gilo to change the monopolistic structure of Israel's natural gas sector has reshuffled the deck, and the contract with Jordan remains to be signed. The Jordanian economy which desperately needs energy is not bound to buy from Israel, and meanwhile there have been talks to buy gas from the Palestinian's Marine field, 35 kilometers off the coast of Gaza.

Israel's regulators including ministry of finance officials and the National economic Council all understand that they must act quickly to save the deal with Jordan. Thus at the meeting with Delek and Noble Energy, they spoke about raising Israel's natural gas export quota, with Jordanian exports exempt from the quota.

Israel's gas export quotas were set by the Tzemach Committee, which decided that Israel should keep 450 BCM for domestic use and could export NIS 500 BCM. But after stormy public protests, the government lifted the amount of gas Israel would keep for itself to BCM 540.

These recommendations are based on forecasts for natural gas demand in Israel up to 2040. But while the original forecast was that Israel would have consumed BCM 501 by 2040, this prediction has now been lowered to BCM 460. The lower demand has been a major factor in the government's current rethink on gas export quotas.

By Hedy Cohen


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