Mediterranean Gas Could Lower Energy Prices
Author: alkhabar Posted January 10, 2012
Dr. Mahjoub Badda, an economics expert, said he expected Israel, Lebanon and Cyprus to exploit gas resources in the eastern Mediterranean after the discovery of major gas fields off the coast. He said that Israel’s reserves, which exceed 5,000 billion cubic meters, could turn it into a competitor of the traditional oil-exporting countries by 2014, especially with regards to the European and Asian markets.
The economic expert told El-Khabar that “the competitive markets are Europe and Asia, with growth rates ranging from 5 to 8 percent every year.” But he said that “will escalate with Russia’s huge projects, ‘South Stream’ and ‘North Stream,’ which will offer more than 120 billion cubic meters of Russian gas to Europe, in addition to huge quantities of the Qatari liquefied natural gas, with a capacity reaching 77 million tons.”
Badda noted that “the gas market is biased toward the European and Asian markets and the emergence of new actors, including Israel. Therefore, the years to come will witness sharp competition with supply exceeding demand, and prices will be likely to decline—especially after the expansion of the spot free market, with the participation of Qatar and Russia.”
As for the possibility that Israel could abandon Egyptian and Qatari gas, Badda said , “Israel benefits from a preferential quotation in the sale contracts of Egyptian gas, as the price varies between 75cents and 90 cents for 1million kilocalories. [This] is a very low price compared to the free market, where the price is estimated between $3.90 and $4.10 for 1 million kilocalories. As a result, it is expected that Israel will keep its gas pipelines from Egypt, but it will use its own production of gas as a form of leverage, taking into account that its [gas production] will be sufficiently practical between 2014 and 2015.”
He added, “Israel will be facing problems with neighboring states—especially with Lebanon-—because the Tamar field overlaps with Lebanese waters, keeping in mind that Lebanon’s maritime borders have never been demarcated. However, Tel Aviv might be a troubling factor in the gas market over the next five years, and this factor will be taken into account—especially since the gas-exporting countries expect a decline in gas prices with a huge increase in the use of non-traditional gases. Thus the United States has achieved a quasi-autarky; so has Canada, and the European countries are looking to move forward in the same direction. Meanwhile, Russia is expanding [as a player] in the gas market thanks to the two giant projects ‘South Stream and North Stream,’ in addition to Qatar, which enjoys huge productivity and which markets its gas to Spain, Italy and the southern Europe states.”
Badda concluded, “If the estimations of gas reserves in Israel are true—meaning between 5 and 10 trillion cubic meters—then there will be an ambiguity because this amount represents more than the gas reserves of Algeria, at 4.7 trillion cubic meters.”
The European market is nowconsidered a competition hub for the maingas-producer states: Russia with 23 percent of the market; Norway with 19 percent ; Algeria with 10 percent ; and Qatar with 6 percent. Given the new competitors now entering the gas market, Algeria should be careful to guard its interests—especially since oil and gas exports account for 40 percent of Algeria’s revenues.
Read More: http://www.al-monitor.com/pulse/business/2012/01/dr-mahjoub-badda-to-el-khabar-th.html