Israel just inked a preliminary deal that would construct the world’s “longest and deepest” underwater pipeline on record—an audacious project that would, via Cyprus and Greece, give it access to Italy and the rest of the European natural gas market. The FT reports:
Israel and Cyprus are promoting their gas reserves as an alternative to Russia and the North Sea, the EU’s two main gas suppliers. The bloc is trying to reduce reliance on Russian energy and North Sea reserves are depleted.
Ankara won’t be happy. Israel was considering piping its natural gas through Turkey on the way to the broader European market. Nor, obviously, will Russia, which has long enjoyed the benefits of having one of the only significant overland gas supply lines into Europe. European countries have been agitating for alternative supplies in recent years, and their best bet on that front has thus far been imports of liquified natural gas. But LNG is expensive—indeed, both Israel and Cyprus had been eying the construction of LNG export terminals before settling on this proposal—so a pipeline option would be both a boon to the continent as well as a shot across Gazprom’s bow.
The FT article doesn’t hold back on its skepticism, citing various industry analysts who say the proposal is more likely to remain a pipe dream than give birth to any pipeline. The projected completion date is 2025, and these sorts of endeavors rarely tend to run ahead of schedule or under budget. Furthermore, all this supply, in large part released by America’s fracking breakthroughs, is driving global gas prices down, making the odds on big energy infrastructure bets like these even longer. “The [Israeli] government would be better served growing the domestic market and finding solutions to make gas flow to Egypt, Jordan and Turkey,” one analyst told the FT.
Nevertheless, it’s clear that the potential upside of access to the large and stable European market still gets people excited; after all, one of the important outcomes of Vladimir Putin and Recep Tayyip Erdogan patching up their relationship last year was that Russia and Turkey resumed making noises about developing a joint pipeline project themselves. Seeing how these two energy megaprojects fare—or if they even get off the ground—will tell us a lot about the shape of things to come.