Israel's Agreement with the Italian ENI and the Spanish Repsol

As you can read at the following Natural Gas Europe article, titled “Tamar representative in talks with Union Fenosa Gas”, September 2015, the Israeli government is ready to approve a deal between Noble Energy and Union Fenosa Gas.

“Tamar representative in talks with Union Fenosa Gas”, September 2015

http://www.naturalgaseurope.com/tamar-representative-in-talks-with-ufg-25519?utm_source=Natural+Gas+Europe+Newsletter&utm_campaign=de36a26196-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_c95c702d4c-de36a26196-307785513

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Noble Energy is the American energy company which is the main player in the Israeli gas fields Leviathan (+500 billion cubic meters of natural gas) and Tamar (+300 billion cubic meters of natural gas). Noble Energy is also the main player in the Cypriot gas field Aphrodite (150- billion cubic meters of natural gas).

Map 1 Israeli and Cypriot Gas Fields

https://www.foreignaffairs.com/articles/cyprus/2013-03-20/trouble-eastern-mediterranean-sea

Before I continue I must also give some information about the shareholders of Union Ferosa Gas, even though you can see the basics of its shareholder structure above.

Union Fenosa Gas, the company with which Noble Energy made a deal, is a partnership of the Italian ENI and the Spanish Natural Gas SDG, as you can read at the following address from the company’s website.

https://www.unionfenosagas.com/en/Conocenos/_Accionistas

The Italian public is ENI’s largest shareholder. Repsol, Sonatrach and La Caixa are the largest shareholders of the Spanish Natural Gas SDG, as you can read at the following address from the company’s website (on 22.9.2015).

“Frequently asked questions”

http://www.gasnaturalfenosa.com/en/shareholders+and+investors/shareholders+corner/1297090745185/frequently+asked+questions.html

Repsol is one of the largest energy companies of Spain, and La Caixa is one of the largest Spanish banks. Sonatrach is the state owned Algerian energy company. La Caixa is also the largest shareholder of Repsol, with the Mexican energy state owned company Pemex the second largest shareholder, as you can read at the following Financial Times article, titled “Repsol’s big shareholders call the shots in YPF settlement”, November 2013.

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Pemex, Mexico’s state oil company and Repsol’s second-largest shareholder, had made it known to the Spanish group that it favoured a quick settlement with Argentina, and earlier this month began to publicly attack Antonio Brufau, Repsol’s executive chairman, for the size of his salary.

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Meanwhile Caixabank, the Catalan lender that is Repsol’s largest investor and, through its web of stakes in Spanish companies, one of the most influential concentrations of corporate power in the country, had begun to appear at loggerheads with Mr Brufau.

http://www.ft.com/intl/cms/s/0/546ea5ae-5789-11e3-86d1-00144feabdc0.html#axzz3mRrD0c21

La Caixa is the largest bank of Catalonia, and as you can read at the following Financial Times article, titled “La Caixa: Spain’s quiet powerhouse”, April 2015, La Caixa is one of the important players on the issue of Catalonia’s independence. At the same article you can read that there are no major shareholders and Caixa is a regional bank.

“La Caixa: Spain’s quiet powerhouse”, April 2015

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In the political sphere, too, Caixa’s reach is hard to ignore. The group has played a crucial role in the government’s campaign to overhaul Spanish banking. It is also a key player in the struggle over Catalan independence, exerting pressure on both Madrid and the regional government to lower the tensions and come to an agreed settlement. Caixa is close to the royal house (it employs the king’s sister, Princess Cristina), and has established strong financial and personal links with many of Spain’s most important media outlets. It is rare to read a bad word about the Catalan group in either the Barcelona or Madrid press.

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The bank, meanwhile, has no shortage of competent executives, but none who comes close to rivalling Mr Fainé’s power. When he clashes with top managers — as happened last year with Juan María Nin, the bank’s experienced but restless former chief executive — they are swiftly let go. The foundation’s stake is so dominant that no other investor can hope to exert meaningful pressure on management. “This is a great financial power but without any constraints. Shareholders don’t have much power at the bank,” says Andreu Missé, editor of Alternativas Económicas, a Barcelona-based magazine.

Caixa’s remarkable structure and unusual breadth of ambition are both rooted in the same thing — the bank’s former status as a caja, or regional savings bank. Cajas were set up to provide basic financial services to local savers and businesses, and to help economic development by recycling their profits in their region. More often than not, there was a close relationship between local caja bosses and politicians.

http://www.ft.com/intl/cms/s/0/4b3340f6-d63d-11e4-b3e7-00144feab7de.html#slide0

Israel’s agreement with ENI, Repsol and La Caixa would be very helpful for Israel, if it goes ahead of course. Spain has built Europe’s largest LNG facilities, in order to be able to receive liquefied natural gas and provide Europe with an alternative to the Russian natural gas. Spain is buying natural gas from non-Russian sources. Qatar is Spain’s main LNG supplier and that makes Spain very aggressive towards Israel. Israel’s agreement with La Caixa and Repsol will make Spain somewhat aggressive towards Israel.

I am not saying that Spain will change her orientation towards Qatar, because Qatar has 25 trillion cubic meters of natural gas while Israel has only 1. But in absolute terms the 1 trillion cubic meters is a huge amount. Europe consumes about 500 billion cubic meters of gas every year. The German-Russian pipeline Nord Stream 1, has a transfer capacity of 55 billion cubic meters of Russian natural gas to Germany every year. Theoretically Israel could supply this pipeline with gas for almost 20 years. I hope I gave an idea of the volumes involved. Even though I cannot say how much the Spanish foreign policy will change if this agreement goes ahead, but it would soften towards Israel, even if only by a bit.

Italy on the other hand, was counting on the South Stream pipeline, because the Russians had given the Italians a large stake in the South Stream. Vladimir Putin and Sylvio Berlusconi were the “fathers” of the South Stream. That made Italy less dependent on Qatar, and Berlusconi was a very pro-Israel politician. But now the South Stream pipeline has been cancelled and the Italian-Russian relations will be tested. See “The Clouds Over the Italian-Russian Relations”.

https://iakal.wordpress.com/2015/09/17/the-clouds-over-the-russian-italian-relations/

However the strain in the Italian-Russian relations does not have to affect the Italian-Israeli ones if ENI imports natural gas from Israel. Especially now that ENI discovered a very large gas field in Egypt i.e. the Zohr (800+ billion cubic meters of natural gas).

Map 2 The Egyptian Natural Gas Field

 http://static2.businessinsider.com/image/55e341bb9dd7cc22008b6eae-480/zohr-gas-map.jpg

Map 3

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Again I am not saying that this deal will make the Qatari influence in Italy disappear. Qatar is investing billions in Italy. Under the leadership of Mateo Renzi this influence should be even greater. Qatar is heavily funding the European left and center left parties, and you have seen what Mateo Renzi did with the immigrants when he was elected in 2014, and what Alexis Tsipras did in Greece when he was elected in 2015. They both flooded their countries with immigrants. The Arabs and the Turks are doing their best to see Islamism rising in Europe. But if ENI imports natural gas from Israel it is guaranteed that Italy will see Israel in a more positive way. Maybe less positive than Qatar but any gains should be welcome by the Israelis.

What I do not know is how the deal between ENI, Repsol and La Caixa will affect the relations between Israel and Russia. Israel gave a part of Tamar to Gazprom, the Russian state-owned giant, in order to have some Russian support, as you can read at the following Wall Street Journal article, titled “Gazprom Signs Deal to Market Israel's Tamar LNG Project”, February 2013. It is a sure thing that the Russians will not like Israel’s deal with ENI and Repsol, but it is very difficult to keep everybody happy, and that is true for everybody and not only Israel.

“Gazprom Signs Deal to Market Israel's Tamar LNG Project”, του Φεβρουαρίου 2013.

http://www.wsj.com/articles/SB10001424127887324338604578328231939157040