Turkey and Israel about to change the Cyprus gas game?

March 26, 2013
Turkey and Israel about to change the Cyprus gas game?(CM).By Stefanos Evripidou (other) Apart from removing Turkish objections to Israeli participation in NATO exercises, the prospect of reconciliation has also “removed a big obstacle to collaboration over the development of strategic energy resources in the eastern Mediterranean”, reported the Financial Times (FT) yesterday.

The London-based paper noted that improved ties between Turkey and Israel could also affect Cyprus should greater energy cooperation result in Nicosia getting sidelined. A Turkish official told FT that reconciliation also made a possible gas pipeline from Israel to Turkey a “much more viable” idea.

The latest opinion of an advisory committee of the Israeli government is that if gas should be exported, it will have to go through Israel first. A Cypriot diplomatic source told the Cyprus Mail that reports suggest Turkey is seriously considering a pipeline between Israel and Ceyhan. “This could very well be a game-changer. There is much more (to the apology) than meets the eye,” he said.

Matthew Bryza, a former US ambassador to Azerbaijan, was quoted by FT saying that without Israel to provide economies of scale, “in the short term the Cypriots lose their ability to do a pipeline or an LNG (liquefied natural gas) option”, adding that in the longer run a Cypriot pipeline to Turkey would make most commercial sense.

According to FT, Noble Energy and Delek Energy, who are the main investors in Israel’s large offshore natural gas fields- as well as partners in Cyprus’ Block 12- have in recent weeks “sounded out possible customers in energy-hungry Turkey”. The paper noted that until now, the private sector was eager to proceed with a possible pipeline between Israel and Turkey but that the political rift between the two governments did not allow progress to be made. (MORE)


Matt Damon and the Arab oil industry team up to stop fracking

January 15, 2013

(Thinker) It seems like Matt Damon’s new anti-fracking film, “Promised Land” has some secret financers behind it. These financers would love nothing more than to stop fracking in its tracks. Why, you ask? Well because these financers are actually part of Abu Dhabi, an Arab oil emirate.
Supporting the anti-fracking movie is just their way of silencing the competition – American oil and gas producers.

Not only does Image Nation Abu Dhabi finance the “Promise Land,” but the Abu Dhabi government owns the media company that subsidizes Image Nation.

The film’s Abu Dhabi connection is significant, because the UAE is the world’s third largest oil exporter, according to 2011 figures from the U.S. Energy Information Agency. The country also holds the 7th largest proven reserves of crude oil and natural gas in the world. The UAE was ranked 17th in the world in natural gas production in 2010, according to EIA. (Courtesy of CNS news)


The fact that the UAE is one of the major producers of gas and oil is important. US natural gas producers have seen an increase in production thanks to fracking, which allows them to access once unreachable gas reserves and oil wells. This puts US natural gas producers in steep competition with the United Arab Emirates, because fracking is such a lucrative business for the US oil and gas industry.

The more the US oil and gas industry utilizes the method of fracking the more the Arab oil countries feel threatened. Not to mention the UAE loses money, which keeps their country afloat.

Matt Damon’s financers are using his movie to demean fracking. These financers hope that negative public opinion will put an end to their competition. However, one problem with such a plan is that basing something on a lie always comes back to bite you where it hurts the most.


breathing machine is involved

January 8, 2013
(Simply) The history of this part of the world shows that close associates are often the initiators of coups and army, swearing loyalty to the current government, forgets the oath. In addition to the multibillion dollar arms contracts, Russia has also invested in the oil industry in Venezuela. Russia plans to set up a consortium to develop oil fields in the country, the project involving all major Russian oil and gas companies. The project is estimated at $ 20 billion. The sources cited by Stratfor reported that the candidate favored by Chinese, Russians and Brazilians is Nicolas Maduro, while Cubans tilt more toward Chávez’s brother Adam, mainly because they don’t believe Maduro will guarantee the oil subsidies they have enjoyed so far.

Egypt On the Verge of Bankruptcy

December 31, 2012
Goldman Graph 3
By David P. Goldman, JINSA
“The country is on the verge of bankruptcy,” Egyptian opposition leader and Nobel Laureate Mohamed ElBaradei told the newspaper al-ArabiyaDec. 23. Unable to reduce subsidies that account for most of a budget deficit that now exceeds 14 percent of GDP, and unwilling to raises taxes, it seems most likely that the Muslim Brotherhood government of Mohamed Morsi will instead take the path of least resistance and allow a steady devaluation of the Egyptian pound. During the past two weeks, central bank intervention to support the pound’s value on the foreign exchange market has stopped and the currency has fallen sharply.

Central bank intervention in support of the pound is shown clearly on the chart of daily values for the Egyptian pound’s exchange rate against the U.S. dollar during the year to date. The spikes in the exchange rate reflect central bank activity. The sharp drop in the pound’s exchange rate during the past two weeks reflects an absence of central bank intervention.
In the advent of last week’s referendum on a proposed new Islamist constitution, the Morsi government postponed negotiations for a $4.8 billion loan from the International Monetary Fund, out of fear that the austerity measures required by the IMF would elicit a wave of political opposition. As Andrew Bowman wrote in the Financial Times:
The loan is conditional on some very unpopular tax increases and fuel subsidy cuts to reduce the deficit to 8.5 per cent during the financial year starting July 2013. The government is loathe to take these on at this moment in time with its authority fragile and new elections looming in 2013. Indeed, when it tried to introduce new taxes on consumer goods a few days before the constitutional referendum, it removed them within a few hours following public outcry. Its loan request has been postponed until January and the delay may entail renegotiation.
The Morsi government’s failure to secure the IMF loan also jeopardizes other expected loans, including a $500 million credit from the African Development Bank. This is a crisis of governance, of the sort I analyzed on this site in September. Morsi cannot get a popular mandate without reneging on essential economic reform measures, but he cannot obtain the financing that Egypt requires to avoid bankruptcy if he reneges on reform.
That leaves Egypt’s central bank with cash reserves of just $7.1 billion (out of total reserves including gold of $15 billion), enough to cover just over two months’ worth of the country’s $36 billion annual trade deficit, equivalent to about 16 percent of Egypt’s GDP. Against this enormous trade deficit, Egypt has
1) Tourism revenues that peaked at $12.5 billion in 2010 before falling to only $9 billion in 2011, and now may be running as low as $6 billion a year, according to one estimate in the Egyptian press;
2) Suez Canal revenues of somewhat less than $5 billion a year; and
3) An indeterminate volume of workers’ remittances, estimated at anywhere between $7.7 billion and $18 billion;
4) Whatever Egypt can borrow, which at the moment is essentially nothing.
Remittances almost certainly have risen since 2009, when the central bank estimated the flow at $9.5 billion, although a major source of those remittances-the 2 million Egyptians working in Libya-dropped sharply after the Libyan civil war. 1.7 million Egyptians work in Saudi Arabia, 500,000 in Kuwait, and 500,000 in Jordan. Their repatriated earnings are in many cases the main support of their families at home.
Egypt’s dependence on remittances, though, makes a devaluation of the Egyptian pound an especially dangerous exercise. As long as Egyptians overseas expect the national currency to keep falling, they are likely to delay sending money home as long as possible. That in turn will worsen the central bank’s foreign exchange position and make devaluation more likely, in a vicious circle. It seems clear from the earlier intervention pattern that the Egyptian central bank hoped to prevent devaluation. Since the collapse of the IMF loan negotiations, though, it may have concluded that it has no other alternative.
The position of Egypt’s foreign workers, moreover, is fragile. King Abdullah of Jordan warned at a private meeting (cited by the news siteAI-Monitor) that Jordan might use the 500,000 Egyptians now working in in his country as “bargaining chips” against the Muslim Brotherhood, which he denounced as part of a “new extremist alliance” in the Arab world. Jordan’s monarchy has been under pressure from the Muslim Brotherhood during the past year, and it seems clear that the Hashemites will not sit on their hands. A major Jordanian complaint is the interruption of piped Egyptian natural gas, at an estimate cost to the Jordanian government of 5 billion Jordanian dinars. The same pipeline through which Egypt supplied Israel also met four-fifths of Jordan’s gas requirements.
According to a Dec. 17 report in Egypt’s Official Gazette, cited by theEgypt Independent, Egypt will import gas from international companies in Qatar at a cost of U.S. $14 per million BTUs. Qatar’s government sells gas at $9 per million BTUs, and Egypt is contractually obligated to sell gas to Jordan at $5.50 per million BTUs. The unfavorable terms suggest that something else is at work: Egypt may be overpaying for Qatari gas to amortize Qatar’s $2 billion emergency loan to the country’s central bank last fall. Qatar has given the Morsi government indispensable support. Announcement of this loan Aug. 12 coincided with President Morsi’s dismissal of the old-line Egyptian military leadership, and the funds have allowed Egypt to maintain wheat stockpiles at adequate levels during the past several months. It appears, though, that Qatar’s aid comes with a price tag, and that Egypt’s import costs will rise as a result.
The country’s foreign exchange reserves, meanwhile, are so squeezed that banks are refusing to provide financing for food imports (other than wheat bought directly by the government) because importers have not had access to hard currency to pay their arrears, the Food Industries Association warned Nov. 27. The importers’ association warns that food imports may drop by 40 percent during coming months as a result.
Morsi’s hold on political power is fragile after the mass protests that preceded this month’s constitutional referendum and the opposition’s unwillingness to concede legitimacy to the government’s narrow victory. Prior to the referendum, Morsi showed himself unable to reduce subsidies or raise taxes in order to control a domestic budget deficit and a trade deficit that are both running at close to a sixth of GDP. If he takes the path of least resistance and allows the Egyptian pound to depreciate severely, as the local market evidently expects, it may be difficult for the hard-pressed Egyptian pound to find a stable bottom, for reasons noted earlier: fears of devaluation will delay remittances and provoke capital flight, worsening the central bank’s already dire cash position.
The danger is that Egypt will descend into banana republic-like inflation, but without the bananas. We have witnessed many cycles of devaluation and inflation in Latin American countries, but all of those cases involved food exporters. Egypt by contrast imports half its food.
The government’s likely response will be to employ state controls in a heavy-handed but haphazard fashion: imposing foreign exchange controls, rationing essential items, raiding alleged speculators, and stirring up have-nots against supposed haves. If the opposition is unable to unseat Morsi, he is likely to lead Egypt to an extreme degree of statism-a sort of North Korea on the Nile.
It is not clear where he can turn. President Morsi is at a stalemate in discussions with the international financial organizations. The Gulf States are even more hostile to the Muslim Brotherhood than before Egypt’s political crisis, and less inclined to help. Even Qatar, it appears, is extracting payment for its previous help on a cash-and-carry basis through the energy market. The most likely outcome will be austerity through devaluation rather than tax increases or subsidy cuts, with deleterious consequences for the already-failing Egyptian economy. On the strength of the available evidence, we would have to answer our question of September-”is Egypt governable?”-in the negative.
David P. Goldman, JINSA Fellow, writes the “Spengler” column for Asia Times Online and the “Spengler” blog at PJ Media. He is also a columnist at Tablet, and contributes frequently to numerous other publications. For more information on the JINSA Fellowship program, click here.


Qatar Helps Muslim Brotherhood Come to Power, Muslim Brotherhood Buys Qatari Gas at 3 Times the Price

December 21, 2012
(frontpagemag.com) Egypt is going from a gas exporter to a gas importer and it will be buying Qatari gas at the highest possible price. Whatever money Qatar invested in the Arab Spring is about to be repaid at a very healthy profit.
Egypt has announced that it has changed from a gas-exporting to a gas importing country based on a decision issued by the Petroleum Minister that went into effect on 17 December.
Petroleum expert Medhat Youssef said the decision was “unprecedented,” especially as Egypt would import gas from international companies in Qatar, not the Qatari government. The import price is expected to reach US$14 per 1 million thermal units, whereas the government sells gas to factories for no more than $4.
The Egyptian government exports gas to Jordan at $5.50 per one million units, while Qatar exports it at more than $9, Youssef said, arguing that Egypt administers its petroleum supply poorly and should reconsider prices. (MORE)

Natural gas pipeline from Egypt to Israel re-opens

October 24, 2011

(EOZ) From Ma’an:

The flow of natural gas from Egypt to Israel has resumed after a cut of several months due to repeated militant attacks, Israel’s National Infrastructure Ministry said on Sunday.
It said gas began to flow in reduced quantities on Thursday night to test the system, before a resumption of full levels.
Egypt’s Sinai desert pipeline which connects to Israel has been attacked by militants six times this year, and an Israeli official said the state has not received gas through the pipeline since a bombing in July.
Egypt supplies 43 percent of Israel’s natural gas, which generates 40 percent of Israeli electricity.
National Infrastructure Minister Uzi Landau said in April that his country would have to find alternatives if the Egyptian gas exports did not resume.

I think it is a safe bet that there will be more attacks on the pipeline in the near future.
Israel seems to be fast-tracking the use of gas fields in the Mediterranean, which are still a couple of years away.


THE TECHNOLOGY DRIVEN OIL BOOM? This surge in domestic production would leave Iran, Kuwait and the Arab emirates combined in the rear-view mirror”

July 16, 2011
A US oil boom — unless greens abort it – By ARTHUR HERMAN

Just a year after the BP oil spill, America is on the verge of a new golden era of oil exploration and production — unless President Obama and his environmentalist friends get their way.

This surge in domestic production would leave Iran, Kuwait and the Arab emirates combined in the rear-view mirror.
The US drilling boom rests on a technique called hydraulic fracturing, or fracking, to open shale-oil reserves. It’s why wells are springing up in places like North Dakota, California and Pennsylvania, with thousands of new jobs in their wake.
Fracking has also opened up supplies of natural gas, sending prices plummeting. Now, even New York’s regulators have recommended lifting the state’s ban on the fossil-fuel gold rush that’s pushed North Dakota’s unemployment rate to 3.2 percent — the lowest in the nation.
The irony is that Obama had hoped higher oil prices would make us all drive electric cars and install backyard windmills. Instead, they’re making it profitable for US companies to expand the hunt for new reserves and to use fracking to reopen old ones.
Just last month, Exxon-Mobil announced the discovery of a vast field in the Gulf of Mexico, with as many as 700 million barrels waiting to be tapped. Other companies are using fracking to return to the Texas basin, the center of US oil production in the 1930s — which will mean millions in investment and thousands of jobs for that state. Montana and North Dakota are sitting on a shale-oil formation that could yield nearly 4 billion barrels.
Not many Americans realize we are already the world’s No. 3 oil producer, at 7.5 million barrels a day. The coming boom should add another 1.5 million by 2015. That’s closing in on Saudi Arabia’s daily total.
And oil-shale rich Canada could surpass Iran’s barrel-per-day output in a few years — so we’re looking at a major shift in the geopolitics of oil.
Easy-to-find oil is running out in the Mideast. After deliberately wrecking a multibillion-dollar deal with BP, Russia — the world’s biggest oil and gas producer — is looking more and more like a bad bet for foreign investors. If you want to make money in the oil biz, America will be the place to go.
But the environmental lobby is bent on preventing it — waging an all-out war on fracking, claiming (against all evidence) that it contaminates ground water. The ideologues hope to use memories of the BP spill and a more recent one on the Yellowstone River to dam up all exploration and pipeline construction.
Never mind that fracking goes on thousands of feet below groundwater sources, and that Obama’s moratorium on offshore drilling did more damage to the Gulf economy than the BP spill ever did — or that the Yellowstone accident has affected an area of less than 10 miles on the edge of a national park of 3,500 square miles.
The promise of prosperity and jobs was enough to get even a blue state like New York to ignore the green lobby’s fearmongering. But Obama may yet derail the boom.
The president has had the oil industry’s two most important tax incentives — the percentage-depletion allowance and the deduction for intangible-drilling costs — in his cross hairs for a long time.
Both help oil and drilling companies recoup the heavy capital investment they need to look for oil, even when they turn up nothing. The White House argues that we must end both “tax breaks for Big Oil” to close the budget deficit.
This is nonsense. Manhattan Institute oil guru Robert Bryce notes that the entire value of the industry’s tax advantage comes to $4.4 billion a year. The notion that scrapping tax abatements that have been around since the 1920s will put a dent in a deficit of $1.4 trillion is laughable — and dangerous.
Besides, those few billions in savings would be washed away in rising oil prices if the impending rebirth of the US oil industry is aborted.
So there’s more at stake in the debt-ceiling impasse than just how we pay for our government. It’s also about whether America will dictate its own energy and economic future — or whether it’s left in the hands of sheiks, dictators and the EPA.

Arthur Herman is a visiting scholar at the American Enterprise via ibloga.blogspot.com