Meeting in Nicosia among four energy ministers: Cyprus, Greece, Israel and Italy

The world’s longest underwater pipeline from Leviathan to Italy will allow Israel to export gas to Europe.

A memorandum of understanding for the laying of an underwater gas pipeline from Israel to Europe will be signed on Tuesday in the Cypriot capital Nicosia.

The energy summit in Cyprus on Tuesday will be attended by Israel’s Minister of National Infrastructures, Energy and Water Resources Yuval Steinitz and his counterparts from Cyprus, Greece, Italy and the EU. The last such energy summit was held in Israel in April when the sides signed a declaration to move forward with the project.

Israel’s Ministry of National Infrastructures, Energy and Water Resources says that the pipeline will be 2,000 kilometers long and will be completed by 2025.

Greece based IGI Poseidon has been investigating the economic feasibility of the project with research support from the EU.

The planned pipeline will connect Israel’s Leviathan gas field and run via Cyprus’s Aphrodite gas field through the waters of Crete, mainland Greece and Italy. The initial estimate of the cost of the pipeline, which will be able to convey 12-16 billion cubic meters (BCM) of gas annually, is $6 billion. If further large fields are found in Israel or Cyprus, a double pipeline conveying 30 BCM annually could be laid.

Such a project will involve complex engineering to lay the pipe at a depth of 3.3 kilometers underwater in the deepest sections between Greece and Cyprus. Any subsequent damage will be extremely difficult to repair.

Another potential obstacle is the economic feasibility. Gas prices were $5.4 per thermal unit over the past year, while average price of gas contracts signed in Israel were $5.3 per thermal unit. To justify the cost of laying the pipeline, a price $2-3 higher per thermal unit will have to be charged.

The project could become more profitable if Israel finds additional major gas fields, thus lowering costs. Last month, Israel’s Ministry of National Infrastructures, Energy and Water Resources received bids for tenders for the latest round of gas licenses. The only bids were from a consortium of Indian government companies and Energean, which already operates the small Israeli offshore Karish and Tanin fields.