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Wednesday, 6 November 2019

INGL, Poseiden sign MoU to move forward on Israel-Europe gas pipeline

Is Israel getting closer to scuppering our energy ambitions? Israel Natural Gas Lines (INGL) signed an MoU yesterday with Greek-Italian JV IGI Poseidon to look into the technical, regulatory, and other issues of constructing a natural gas pipeline to Europe, the Israeli government-owned INGL said in a regulatory filing, according to Reuters. The proposed project, which will be named the Eastern Mediterranean (EastMed) pipeline would be able to carry 10 bcm of natural gas a year. It would run from the Levantine Basin off the coast of Cyprus and Israel to the Cypriot mainland, and continue through Crete to western Greece, where it would connect with the Poseidon pipeline between Greece and Italy.

A USD 8 bn pipe dream? We noted almost exactly a year ago that Israel inked agreements with Greece, Italy and Cyprus to supply them with natural gas through a USD 7-8 bn, 2k km pipeline that will take some five years to build. The project seemed like a difficult feat that, according to a 2016 statement by former director-general of the European Commission Michael Leigh, is neither commercially nor politically viable.

Israel is pushing forward nonetheless: Reuters’ coverage noted that the project has been promoted with the backing of the EU and Israel ever since vast gas reserves emerged in the East Med. According to the EastMed pipeline project description on IGI Poseidon’s website, the preliminary FEED, or front end engineering and design documents, have already been finalized with USD 2 mn in grants from Europe. Taking this into account, and recounting reports in 2018 that the EU has already provided USD 100 mn to fund further studies, the will to make the pipeline a reality clearly still exists. Whether it will be able to transform it into a commercially-viable project and navigate the geopolitical faultlines in the Mediterranean is a different matter entirely.

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