PM Benjamin Netanyahu, left, with Greek PM George Papandreou in Athens earlier this month
PM Benjamin Netanyahu, left, with Greek PM George Papandreou in Athens earlier this month Photo by Reuters
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During his recent visit to Greece, Prime Minister Benjamin Netanyahu suggested to his Greek counterpart that the country purchase natural gas from Israel, but did not discuss the move with National Infrastructure Ministry officials beforehand, TheMarker has learned.

Netanyahu was thought to be referring to gas that may be found at the Leviathan offshore prospect, and suggested that a pipeline be built between Greece and Israel in order to transport the gas.

Israel has been courting Greece since ties with Turkey, once a major regional ally, deteriorated following Israel's invasion of Gaza in late 2008 and its raid in May on a Gaza-bound aid flotilla, which left nine Turkish citizens dead.

The response of Greek Prime Minister George Papandreou to the proposal is not known.

Netanyahu apparently did not consult with National Infrastructure Ministry officials before he made the offer. Ministry officials currently are trying to figure out how much natural gas Israel should keep as a strategic reserve for domestic consumption.

This wasn't the first time Netanyahu made a proposal that would advance the gas exploration companies' interests: Earlier this year, he opposed a plan by Finance Minister Yuval Steinitz to establish a committee to review whether the government should raise the taxes and royalties it charges on oil and gas discoveries. And when Steinitz did manage to form the panel, in April, appointing Prof. Eytan Sheshinski of the Hebrew University as chairman, Netanyahu interfered and kept it from convening for about a month. TheMarker reported at the time that the prime minister wanted to limit the extent to which the committee could discuss royalties, igniting a dispute between the Prime Minister's Office and the finance and justice ministries.

Pre-drill estimates suggest that the Leviathan find is twice as large as the Tamar field, to its north, where gas was recently found. Late last year, Noble Energy conducted a three-dimensional seismic survey over a three-month period covering a 4,500-square-kilometer area off Israel's coast.

The survey covered five exploration sectors: Amit, Rachel, David, Hanna and Eran, licensed to the Delek Group through Delek Drilling and Avner Oil Exploration (with a joint 45% stake ), Noble (40% ) and Ratio Yam (15% ). Noble also surveyed the Alon A and Alon B sites, licensed to Delek (53% ) and Noble (47% ), and the Block 12 exploration area in Cypriot waters, whose concession is held by Noble. The Delek Group has an option for a 30% stake in that site.

Most of the attention, however, focused on Leviathan, which extends over two of the five former Ratio Yam license areas, Rachel and Amit. It has double the area of Tamar, and it is thought to be located 5,000 meters below sea level. Noble estimates the gross mean recoverable gas from Leviathan is about 16 trillion cubic feet (453 billion cubic meters ), and the probability of geologic success is 50%, compared to a 35% pre-drilling probability assessment for Tamar.

Exploratory drilling at Leviathan is expected to take place in the final quarter of the year, but a drilling plan hasn't been drawn up yet and the money to carry it out hasn't been allocated. One reason is the exploration partnership's insistence on finding an immediate market for the natural gas under the seabed off Ashkelon. Since Tamar is expected to take care of Israel's energy needs for the next 20 to 25 years, the natural gas in Leviathan does not have an automatic market. The gas companies need to find buyers, and soon, to improve their cash flow. Geographically, the most natural market is Europe.

There are two main ways for Israel to access this market. The first is to construct an undersea pipeline to either Turkey or to Greece that would connect to planned pipelines from Turkmenistan and Azerbaijan to southern Europe and parts east. This option has the benefits of obviating the need for building land-based infrastructure or liquefying the gas. It would also bring with it the easy credit terms - or even grants - that come with European Union involvement.

The second option is to turn to the liquefied natural gas market. That would require either building a liquefying facility in Cyprus, or using Egypt's facility and then shipping the gas in tankers to customers around the world.

The current state of the natural gas market in Europe and beyond, however, jeopardizes the economic feasibility of both these option.

In a recent interview with TheMarker, Dr. Brenda Shaffer, director of the energy policy management program at the University of Haifa, ticked off several reasons why Israel shouldn't count on Italy, Turkey or Greece as a destination for its natural gas. These include straightforward economic reasons, such as a decline in consumption due to recession and the lack of a need for another source of natural gas, as well as geopolitical ones involving Russia and Iran.