Gas Talks Proceed With Turkish Companies Despite Political Impasse

ISTANBUL (Reuters) -

Just days after Turkish Minister of Energy and Natural Resources Taner Yildiz remarked that “Turkey is interested in Israeli gas,” details are emerging about active negotiations.

Turkey’s Zorlu Energy is in talks with Israeli firms over the potential for a pipeline to carry Israeli natural gas to Turkey, industry sources say, but the political rift between the two former allies is holding up progress.

Turkey, dependent on imports for almost all of its energy, is looking to diversify away from expensive Russian gas and could become a customer as well as providing a transit route to other markets, particularly Europe.

“Turkey is a very suitable route for Israeli gas. I can even say it is the most suitable,” said Omer Yungul, chief executive of Zorlu Holding, the owner of Zorlu Enerji.

Industry and diplomatic sources said the Zorlu Group, which already holds an indirect stake in an Israeli power plant, is in talks with private Israeli companies over a possible pipeline deal.

Yungul did not confirm the talks, but said Zorlu Energy’s existing investments in Israel have given it a head start.

Zorlu Energy holds a 25% stake in Dorad Energy, which is building a 875-megawatt gas-fired power plant in Ashkelon. Yungul said the first unit of the plant would come on line by February 2014.

Other Turkish companies including Turcas Petrol are also interested in a pipeline project, officials on both sides have said.

Such a project could be worth $3.5 billion, according to Amit Mor, an Israel-based consultant who is familiar with the talks. It would entail construction of an undersea section to Turkey’s southern coast and a link to central Turkey.

“The export of Israeli gas to Turkey via a pipeline or in compressed natural gas form in marine tankers are the most economically viable options for exporting large gas volumes from the region,” said Mor, chief executive of Eco Energy Financial and Strategic Consulting.

He added that it would be possible to allocate about 8 billion cubic meters of gas per year to supply growing demand in the Turkish market. Zorlu’s Yungul and industry sources say the quantity could go up to 10 billion bcm in the event of a deal.

As much economic sense as it would make, a pipeline through Turkey is still at the mercy of politics.

“Of course the most feasible route for Israel to export its gas is Turkey. The private sector is holding talks about this, but political steps must be taken,” a government source said, referring to the stalled negotiations over the Mavi Marmari incident in 2010.