Israel proposes crude pipeline from Georgia to Eastern Asia
Israel may be on its way to becoming a crude oil transport bridge to the Far East.
Israel may be on its way to becoming a crude oil transport bridge to the Far East. The Eilat-Ashkelon Pipeline Company (EAPC) is leading an international initiative to channel crude oil from Jihan in southeast Turkey to eastern Asia, using its infrastructure in Israel. A consortium of energy firms and international shipping companies will manage the initiative, and a memorandum of understanding is expected to be signed within three months.
The oil would be pumped in Georgia and Azerbaijan, and be brought to Turkey by pipeline. From Turkey it will be shipped by tanker to Ashkelon, whence it would be transported by pipeline to Eilat. In Eilat, the oil wilbe be loaded onto a new set of tankers for transportation to eastern Asia.
The Ashkelon-Eilat Pipeline Company is a privately owned firm, owned jointly by Israel and the government of Iran. Tehran is currently not an active partner, and it and Israel are involved in international arbitration.
EAPC recently completed a trial run. A Turkish tanker of crude oil came to Ashkelon, and EAPC transported the oil to Eilat. A tanker owned by an international trading company awaited the shipment at the petroleum distillates port in Eilat, loaded the oil, and took it to an east Asian port. Loading of the tanker in Turkey, shipment to Israel and subsequent piping to Eilat was completed in about five days.
The project's entrepreneurs calculate that the savings to East Asian oil importers in time and costs generated by a regular transport line between Turkey and Israel could amount to $4 per ton, when compared with the cost of using the Suez Canal. Such a savings justifies investment in the project, as the cost of oil soars and growth rates in the developing nations of East Asia, and China and India in particular, continue to rise.
The EAPC aims to reach a final agreement on establishment of a regular transport line with leased 250,000-ton tankers ("shuttles") moving the oil between Turkey and Israel, and 280,000 to 320,000-ton tanker shuttles used to transport through the Red Sea to the east. Shipment through the Suez Canal is limited to tankers with a maximum capacity of 130,000 tons.
The initiative includes construction of a reservoir farm for storage of oil in Jihan, and infrastructure at Jihan port, in southern Turkey, for loading oil into tankers. The cost is expected to reach an estimated $200-$300 million, and the company is already in final stages of partnership negotiations with Turkish firms and an Indian energy company, for financing of the project. Simultaneously, the EAPC's board of directors has approved expansion of its reservoir farm on the Ashkelon coastline by 20%, at the cost of an estimated at $60-$80 million, to be self-financed by the company.
The company is currently able to pipe about 20 million tons of oil to Eilat annually. According to its business plan, construction of another pumping station, at a cost of $10 million, will double its capacity to 40 million tons of oil, thus generating tens of millions of dollars in additional revenues each year. The initiative was conceived with the completion of the BIC project, the 1,760-kilometer pipeline connecting Baku, Azerbaijan, on the Caspian Sea, to the Jihan port. The pipeline is now used to transport some 30 million tons of top quality "Azeri Light" crude oil annually, an amount scheduled to increase to about 50 million tons annually within the next few years.
Establishment of the pipeline will bring an increase of 20% in the amount of oil moving in the Mediterranean area, and is expected to result in lower prices, and attract the interest of Far Eastern countries eager to expand their sources.
Turkey also intends to lay another pipeline, between Samsun, on the Black Sea coast, and Jihan. According to the plan, the line will be set to transport an annual 60 million tons of crude oil to Jihan within two years, making the project even more lucrative. The Pipeline Company is currently considering participation in this $1.5-billion project as well, together with other international energy firms.
"This initiative will constitute a breakthrough for the global energy market and the fabric of international relations, which will place Israel as an intermediate country connecting Eurasia and the East, and make a strategic contribution to reducing dependence of the entire world and particularly Eastern Asian countries, on oil from the Persian Gulf," the chair of the Ashkelon-Eilat Pipeline Company, Oren Shachor, told TheMarker early this week. Shachor will present the initiative at the eighth annual Herzliya Conference of the Institute for Policy and Strategy. The conference, which takes place January 20-23, will deal with the balance of Israel's national security.