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Monday, December 19, 2011

This is huge: Israel offers to sell natural gas to India

The Economic Times (India) reports:
Israel, which suddenly finds itself flush with natural gas, has offered to export it to India. The offer was made by Israeli finance minister Yuval Steinitz to the Indian government during his visit here last week. In his conversations with finance minister Pranab Mukherjee and National Security Adviser Shivshankar Menon, Steinitz is believed to have said that Israel was looking to export gas to India.

According to sources, the two countries will be setting up committees to do a feasibility survey of the offer. The discussions are expected to intensify during a rare visit by foreign minister SM Krishna to Israel in early January.

India sources most of its natural gas from Qatar and Oman. Iran, which could have been a major supplier of LNG, cancelled a huge deal to India after it had been signed, following India's vote against its nuclear programme in the IAEA. A gas pipeline from Iran to India via Pakistan too has run aground on security considerations. Within the country, India's much hyped Krishna-Godavari gas basin has run into trouble after disagreement over pricing resulted in a drop in production. So India is in the market for big gas flows.

Israel, which had been energy deficient for decades and locked in potentially unstable energy relationships with Arab countries that have been bitterly opposed to it, stumbled on a bonanza when huge quantities of natural gas were discovered off its northern coast. Gas is expected to start flowing from the Tamar field in 2013 and from the Leviathan in 2016. Varying estimates give Israel control over some 400 bcm of gas. It promises to reduce Israel's dependence on Arab states like Egypt and Jordan and offers the prospects of billions of dollars in revenue.

Israel has already started the process of picking out export routes to Europe, through Greece and Cyprus. In the east, energy-hungry India offers the best market that is also free from political troubles for both countries.

Israel and India have grown closer in the past decade through a strategic partnership that includes defence, count-terrorism and intelligence. It has also flourished despite the fact that India has strong traditional relations with the Arab world.

India is not only energy-deficient, it is overly dependent for oil from West Asia, many countries of which are in the midst of unprecedented political ferment. The Indian growth story would be severely impacted in the event of higher energy prices, or a shortage brought about by external factors. For the past decade, Indian governments have been engaged in diversifying energy sources -- from nuclear to renewable, gas to wind, India wants it all.

This could be a harbinger for a giant geopolitical shift.

The entire reason the liberal West is so friendly towards autocratic and Islamist Arab regimes is because of energy. If the center of world energy production moves away from the sands of the Gulf, the importance of the Arab world diminishes proportionately.

And the funding for terrorists and terrorist states will also start to vanish when the energy revenue towards oil-rich Arab states goes downward.

Similarly, Israel's political status would grow as it becomes seen as a stable supplier of energy to nations who do not want to be dependent on Gulf oil - with all the strings, visible and invisible, that the Gulf states attach.

The importance of this cannot be over-emphasized. Israel's becoming an energy exporter will have immense implications for the world, and all for the better.