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Palestine Plays Regional Power Politics with Proposed Energy Deal

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Faed Mustafa, Palestine’s ambassador in Ankara, Turkey

When Faed Mustafa, Palestine’s ambassador in Ankara, expressed interest in June in negotiating with Turkey an agreement on the delineation of maritime boundaries in the eastern Mediterranean and cooperating on the exploitation of natural resources, he was repositioning Palestine in the larger struggle for regional dominance and the future of his state.

“We also have rights in the Mediterranean. Palestine has shares in oil and gas located in the eastern Mediterranean. We are ready to cooperate in these areas and sign a deal,” Mr. Mustafa said.

Mr. Mustafa did not spell it out, but Palestine would bring the Gaza Marine gas deposit, 36 kilometers off the Gazan coast, to the table. Discovered in 1999, the field, believed to have reserves of 31 billion cubic meters, remains unexplored as a result of multiple armed Israeli-Palestinian clashes, Israeli obstruction, and repeated changes in the consortium that would have ultimately exploited the field.

Palestine’s efforts to hook up with Turkey, at a time when relations with Israel have all but broken down, coincide with stepped up Israeli attempts to stymie Turkish inroads in Palestine paved by support for activists in Jerusalem and funding of historic and cultural facilities, in the wake of US President Donald J. Trump’s 2018 recognition of the city as Israel’s capital.

The Palestinian move also is a ploy to counter several steps taken by the United Arab Emirates and Saudi Arabia to confront Turkey in Jerusalem and the eastern Mediterranean, facilitate a US plan to resolve the Palestinian-Israeli conflict that endorses annexation, and influence the succession of ailing 84-year old Palestinian President Mahmoud Abbas.

Turkish President Recep Tayyip Erdogan vowed last week in a speech celebrating the change of status of Istanbul’s Hagia Sofia – originally built as a Greek Orthodox church in 537 AD, then renovated into a mosque before becoming a museum by the founder of the Turkish Republic, Mustafa Kemal Ataturk, in 1935 – to a mosque once again this month, that it would be “the harbinger of the liberation of the Al-Aqsa mosque.”

Al-Aqsa on the Harm-e-Sharif or Temple Mount in Jerusalem is Islam’s third holiest shrine. Backed by Israel, Saudi Arabia has sought to muscle its way into the Jordanian-controlled endowment that administers the Harm-e-Sharif.

A Palestine hook-up with Turkey could complicate Palestinian membership of the East Mediterranean Gas Forum, dubbed the OPEC of Mediterranean gas, that also includes Egypt, Cyprus, Greece, Israel, Italy, and Jordan. France has applied for membership in the Cairo-based grouping while the United States is seeking observer status.

Founded in January and backed by the UAE, the Forum is virulently opposed to Turkish attempts to redraw the maritime boundaries in the region on the back of an agreement with Libya. Turkey refused to join the Forum.

While it is unlikely that the Gaza field will be operational any time soon, production would reduce Palestinian dependence on Israel. Palestinian officials said early this year that they were discussing with Israel an extension of Israeli pipelines to send gas from Israeli gas fields to Palestine but that the talks, contrary to Israeli assertions, did not include development of the Gaza field.

In a twist of irony, Qatar, the UAE’s nemesis, would support a pipeline agreement by guaranteeing Palestinian payments for the gas. The Israeli pipeline along a 40-kilometer route adjacent to the Gaza border with three pumping stations would enable Gaza to operate a 400 MW power plant in a region that has, at the best of times, an energy supply of 15 hours a day.

The status of the talks remains unclear given an apparent delay of Prime Minister Benjamin Netanyahu’s annexation plans amid international condemnation and US insistence that the Israeli leader postpone his move that had been scheduled for July 1.

Qatar reportedly threatened to cut off millions of dollars in aid to Gaza, provided in coordination with the Israeli government, if the Jewish state pressed ahead with annexation.

In June, Israel  approved the transfer of US$50 million from Qatar to Gaza in a bid to dial back mounting tension with militants in the Strip that could spark renewed military confrontation as both Israel and Palestine struggle to get a grip on the coronavirus.

Some Palestinian analysts see the pipeline deal as an attempt by the Palestine Authority (PA) to enhance its influence in Gaza and undermine Hamas – its Islamist rival that controls the Strip – by a significant contribution to a surge in the power supply and a dramatic reduction of the cost of electricity. The risk, these analysts say, is that the pipeline would increase Palestinian dependence on Israel.

Economist Nasr Abdel Karim argued that Israel would only allow enhanced flows of gas, including from the Gaza field, if it leads to an even deeper split between the territory and the West Bank.

“Israel will not allow the Palestinians to benefit from the gas field for economic and political reasons. Israel might allow this in one case — if this plan is part of a bigger project to develop Gaza’s economy so that it splits from the PA and the West Bank,” Mr. Abdel Karim said.

Author’s note: An initial version of this story was first published in Inside Arabia

Dr. James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and the author of The Turbulent World of Middle East Soccer blog, a book with the same title, Comparative Political Transitions between Southeast Asia and the Middle East and North Africa, co-authored with Dr. Teresita Cruz-Del Rosario and three forthcoming books, Shifting Sands, Essays on Sports and Politics in the Middle East and North Africaas well as Creating Frankenstein: The Saudi Export of Ultra-conservatism and China and the Middle East: Venturing into the Maelstrom.

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The hydrogen revolution: A new development model that starts with the sea, the sun and the wind

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“Once again in history, energy is becoming the protagonist of a breaking phase in capitalism: a great transformation is taking place, matched by the digital technological revolution”.

The subtitle of the interesting book (“Energia. La grande trasformazione“, Laterza) by Valeria Termini, an economist at the Rome University “Roma Tre”,summarises – in a simple and brilliant way – the phase that will accompany the development of our planet for at least the next three decades,A phase starting from the awareness that technological progress and economic growth can no longer neglect environmental protection.

This awareness is now no longer confined to the ideological debates on the defence of the ecosystem based exclusively on limits, bans and prohibitions, on purely cosmetic measures such as the useless ‘Sundays on which vehicles with emissions that cause pollution are banned’, and on initiatives aimed at curbing development – considered harmful to mankind – under the banner of slogans that are as simple as they are full of damaging economic implications, such as the quest for ‘happy degrowth’.

With “degrowth” there is no happiness nor wellbeing, let alone social justice.

China has understood this and, with a view to remedying the environmental damage caused by three decades of relentless economic growth, it has not decided to take steps backwards in industrial production, by going back to the wooden plough typical of the period before the unfortunate “Great Leap Forward” of 1958, but – in its 14thFive-Year Plan (2020- 2025)-it has outlined a strategic project under the banner of “sustainable growth”, thus committing itself to continuing to build a dynamic development model in harmony with the needs of environmental protection, following the direction already taken with its 13th Five-Year Plan, which has enabled the Asian giant to reduce carbon dioxide emissions by 12% over the last five years. This achievement could make China the first country in the world to reach the targets set in the 2012 Paris Climate Agreement, which envisage achieving ‘zero CO2 emissions’ by the end of 2030.

Also as a result of the economic shock caused by the Covid-19 pandemic, Europe and the United States have decided to follow the path marked out by China which, although perceived and described as a “strategic adversary” of the West, can be considered a fellow traveller in the strategy defined by the economy of the third millennium for “turning green”.

The European Union’s ‘Green Deal’ has become an integral part of the ‘Recovery Plan’ designed to help EU Member States to emerge from the production crisis caused by the pandemic.

A substantial share of resources (47 billion euros in the case of Italy) is in fact allocated destined for the “great transformation” of the new development models, under the banner of research and exploitation of energy resources which, unlike traditional “non-renewable sources”, promote economic and industrial growth with the use of new tools capable of operating in conditions of balance with the ecosystem.

The most important of these tools is undoubtedly Hydrogen.

Hydrogen, as an energy source, has been the dream of generations of scientists because, besides being the originator of the ‘table of elements’, it is the most abundant substance on the planet, if not in the entire universe.

Its great limitation is that in order to be ‘separated’ from the oxygen with which it forms water, procedures requiring high electricity consumption are needed. The said energy has traditionally been supplied by fossil – and hence polluting- fuels.

In fact, in order to produce ‘clean’ hydrogen from water, it must be separated from oxygen by electrolysis, a mechanism that requires a large amount of energy.

The fact of using large quantities of electricity produced with traditional -and hence polluting – systems leads to the paradox that, in order to produce ‘clean’ energy from hydrogen, we keep on polluting the environment with ‘dirty’ emissions from non-renewable sources.

This paradox can be overcome with a small new industrial revolution, i.d. producing energy from the sea, the sun and the wind to power the electrolysis process that produces hydrogen.

The revolutionary strategy based on the use of ‘green’ energy to produce adequate quantities of hydrogen at an acceptable cost can be considered the key to a paradigm shift in production that can bring the world out of the pandemic crisis with positive impacts on the environment and on climate.

In the summer of last year, the European Union had already outlined an investment project worth 470 billion euros, called the “Hydrogen Energy Strategy”, aimed at equipping the EU Member States with devices for hydrogen electrolysis from renewable and clean sources, capable of ensuring the production of one million tonnes of “green” hydrogen (i.e. clean because extracted from water) by the end of 2024.

This is an absolutely sustainable target, considering that the International Energy Agency (IEA) estimates that the “total installed wind, marine and solar capacity is set to overtake natural gas by the end 2023 and coal by the end of 2024”.

A study dated February 17, 2021, carried out by the Hydrogen Council and McKinsey & Company, entitled ‘Hydrogen Insights’, shows that many new hydrogen projects are appearing on the market all over the world, at such a pace that ‘the industry cannot keep up with it’.

According to the study, 345 billion dollars will be invested globally in hydrogen research and production by the end of 2030, to which the billion euros allocated by the European Union in the ‘Hydrogen Strategy’ shall be added.

To understand how the momentum and drive for hydrogen seems to be unstoppable, we can note that the Hydrogen Council, which only four years ago had 18 members, has now grown to 109 members, research centres and companies backed by70 billion dollar of public funding provided by enthusiastic governments.

According to the Executive Director of the Hydrogen Council, Daryl Wilson, “hydrogen energy research already accounts for 20% of the success in our pathway to decarbonisation”.

According to the study mentioned above, all European countries are “betting on hydrogen and are planning to allocate billions of euros under the Next Generation EU Recovery Plan for investment in this sector”:

Spain has already earmarked 1.5 billion euros for national hydrogen production over the next two years, while Portugal plans to invest 186 billion euros of the Recovery Plan in projects related to hydrogen energy production.

Italy will have 47 billion euros available for “ecological transition”, an ambitious goal of which the government has understood the importance by deciding to set up a department with a dedicated portfolio.

Italy is well prepared and equipped on a scientific and productive level to face the challenge of ‘producing clean energy using clean energy’.

Not only are we at the forefront in the production of devices for extracting energy from sea waves – such as the Inertial Sea Waves Energy Converter (ISWEC), created thanks to research by the Turin Polytechnic, which occupies only 150 square metres of sea water and produces large quantities of clean energy, and alone reduces CO2 emissions by 68 tonnes a year, or the so-called Pinguino (Penguin), a device placed at a depth of 50 metres which produces energy without damaging the marine ecosystem – but we also have the inventiveness, culture and courage to accompany the strategy for “turning green”.

The International World Group of Rome and Eldor Corporation Spa, located in the Latium Region, have recently signed an agreement to promote projects for energy generation and the production of hydrogen from sea waves and other renewable energy sources, as part of cooperation between Europe and China under the Road and Belt Initiative.

The project will see Italian companies, starting with Eldor, working in close collaboration with the Chinese “National Ocean Technology Centre”, based in Shenzhen, to set up an international research and development centre in the field of ‘green’ hydrogen production using clean energy.

A process that is part of a global strategy which, with the contribution of Italy, its productive forces and its institutions, can help our country, Europe and the rest of the world to recover from a pandemic crisis that, once resolved, together with digital revolution, can trigger a new industrial revolution based no longer on coal or oil, but on hydrogen, which can be turned from the most widespread element in the universe into the growth engine of a new civilisation.

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Jordan, Israel, and Palestine in Quest of Solving the Energy Conundrum

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Gas discoveries in the Eastern Mediterranean can help deliver dividends of peace to Jordan, Israel, and Egypt. New energy supply options can strengthen Jordan’s energy security and emergence as a leading transit hub of natural gas from the Eastern Mediterranean. In fact, the transformation of the port of Aqaba into a second regional energy hub would enable Jordan to re-export Israeli and Egyptian gas to Arab and Asian markets.

The possibility of the kingdom to turn into a regional energy distribution centre can bevalid through the direction of Israeli and Egyptian natural gas to Egyptian liquefaction plants and onwards to Jordan, where it could be piped via the Arab Gas Pipeline to Syria, Lebanon, and countries to the East.  The creation of an energy hub in Jordan will not only help diversify the region’s energy suppliers and routes. Equal important, it is conducive to Jordan’s energy diversification efforts whose main pillars lie in the import of gas from Israel and Egypt; construction of a dual oil and gas pipeline from Iraq; and a shift towards renewables. In a systematic effort to reduce dependence on oil imports, the kingdom swiftly proceeds with exploration of its domestic fields like the Risha gas field that makes up almost 5% of the national gas consumption. Notably, the state-owned National Petroleum Company discovered in late 2020 promising new quantities in the Risha gas field that lies along Jordan’s eastern border with Iraq.

In addition, gas discoveries in the Eastern Mediterranean can be leveraged to create interdependencies between Israel, Jordan, and Palestine with the use of gas and solar for the generation of energy, which, in turn, can power desalination plants to generate shared drinking water. Eco-Peace Middle East, an organization that brings together environmentalists from Jordan, Israel and Palestine pursues the Water-Energy Nexus Project that examines the technical and economic feasibility of turning Israeli, Palestinian, and potentially Lebanese gas in the short-term, and Jordan’s solar energy in the long-term into desalinated water providing viable solutions to water scarcity in the region. Concurrently, Jordan supplies electricity to the Palestinians as means to enhancing grid connectivity with neighbours and promoting regional stability.

In neighbouring Israel, gas largely replaced diesel and coal-fired electricity generation feeding about 85% of Israeli domestic energy demand. It is estimated that by 2025 all new power plants in Israel will use renewable energy resources for electricity generation. Still, gas will be used to produce methane, ethanol and hydrogen, the fuel of the future that supports transition to clean energy. The coronavirus pandemic inflicted challenges and opportunities upon the gas market in Israel. A prime opportunity is the entry of American energy major Chevron into the Israeli gas sector with the acquisition of American Noble Energy with a deal valued $13 billion that includes Noble’s$8 billion in debt.

The participation of Chevron in Israeli gas fields strengthens its investment portfolio in the Eastern Mediterranean and fortifies the position of Israel as a reliable gas producer in the Arab world. This is reinforced by the fact that the American energy major participates in the exploration of energy assets in Iraqi Kurdistan, the UAE, and the neutral zone between Saudi Arabia and Kuwait. Israel’s normalization agreement with the UAE makes Chevron’s acquisition of Noble Energy less controversial and advances Israel’s geostrategic interests and energy export outreach to markets in Asia via Gulf countries.

The reduction by 50% in Egyptian purchase of gas from Israel is a major challenge caused by the pandemic. Notably, a clause in the Israel-Egypt gas contract allows up to 50% decrease of Egyptian purchase of gas from Israel if Brent Crude prices fall below $50 per barrel. At another level, it seems that Israel should make use of Egypt’s excess liquefaction capacity in the Damietta and Idku plants rather than build an Israeli liquefaction plant at Eilat so that liquefied Israeli gas is shipped through the Arab Gas Pipeline to third markets.

When it comes to the West Bank and Gaza, energy challenges remain high. Palestine has the lowest GDP in the region, but it experiences rapid economic growth, leading to an annual average 3% increase of electricity demand. Around 90% of the total electricity consumption in the Palestinian territories is provided by Israel and the remaining 10% is provided by Jordan and Egypt as well as rooftop solar panels primarily in the West Bank. Palestinian cities can be described as energy islands with limited integration into the national grid due to lack of high-voltage transmission lines that would connect north and south West Bank. Because of this reality, the Palestinian Authority should engage the private sector in energy infrastructure projects like construction of high-voltage transmission and distribution lines that will connect north and south of the West Bank. The private sector can partly finance infrastructure costs in a Public Private Partnership scheme and guarantee smooth project execution.

Fiscal challenges however outweigh infrastructure challenges with most representative the inability of the Palestinian Authority to collect electricity bill payments from customers. The situation forced the Palestinian Authority to introduce subsidies and outstanding payments are owed by Palestinian distribution companies to the Israeli Electricity Corporation which is the largest supplier of electricity. As consequence 6% of the Palestinian budget is dedicated to paying electricity debts and when this does not happen, the amount is deducted from the taxes Israel collects for the Palestinian Authority.

The best option for Palestine to meet electricity demand is the construction of a solar power plant with 300 MW capacity in Area C of the West Bank and another solar power plant with 200 MW capacity across the Gaza-Israel border. In addition, the development of the Gaza marine gas field would funnel gas in the West Bank and Gaza and convert the Gaza power plant to burn gas instead of heavy fuel. The recent signing of a Memorandum of Understanding between the Palestinian Investment Fund, the Egyptian Natural Gas Holding Company (EGAS) and Consolidated Contractors Company (CCC) for the development of the Gaza marine field, the construction of all necessary infrastructure, and the transportation of Palestinian gas to Egypt is a major development. Coordination with Israel can unlock the development of the Palestinian field and pave the way for the resolution of the energy crisis in Gaza and also supply gas to a new power plant in Jenin.

Overall, the creation of an integrating energy economy between Israel, Jordan, Egypt, and Palestine can anchor lasting and mutually beneficial economic interdependencies and deliver dividends of peace. All it takes is efficient leadership that recognizes the high potentials.

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The EV Effect: Markets are Betting on the Energy Transition

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The International Renewable Energy Agency (IRENA) has calculated that USD 2 trillion in annual investment will be required to achieve the goals of the Paris Agreement in the coming three years.

Electromobility has a major role to play in this regard – IRENA’s transformation pathway estimates that 350 million electric vehicles (EVs) will be needed by 2030, kickstarting developments in the industry and influencing share values as manufacturers, suppliers and investors move to capitalise on the energy transition.

Today, around eight million EVs account for a mere 1% of all vehicles on the world’s roads, but 3.1 million were sold in 2020, representing a 4% market share. While the penetration of EVs in the heavy duty (3.5+ tons) vehicles category is much lower, electric trucks are expected to become more mainstream as manufacturers begin to offer new models to meet increasing demand.

The pace of development in the industry has increased the value of stocks in companies such as Tesla, Nio and BYD, who were among the highest performers in the sector in 2020. Tesla produced half a million cars last year, was valued at USD 670 billion, and produced a price-to-earnings ratio that vastly outstripped the industry average, despite Volkswagen and Renault both selling significantly more electric vehicles (EV) than Tesla in Europe in the last months of 2020.

Nevertheless, it is unlikely this gap will remain as volumes continue to grow, and with EV growth will come increased demand for batteries. The recent success of EV sales has largely been driven by the falling cost of battery packs – which reached 137 USD/kWh in 2020. The sale of more than 35 million vehicles per year will require a ten-fold increase in battery manufacturing capacity from today’s levels, leading to increased shares in battery manufacturers like Samsung SDI and CATL in the past year.

This rising demand has also boosted mining stocks, as about 80 kg of copper is required for a single EV battery. As the energy transition gathers pace, the need for copper will extend beyond electric cars to encompass electric grids and other motors. Copper prices have therefore risen by 30% in recent months to USD 7 800 per tonne, pushing up the share prices of miners such as Freeport-McRoran significantly.

Finally, around 35 million public charging stations will be needed by 2030, as well as ten times more private charging stations, which require an investment in the range of USD 1.2 – 2.4 trillion. This has increased the value of charging companies such as Fastnet and Switchback significantly in recent months.

Skyrocketing stock prices – ahead of actual deployment – testify to market confidence in the energy transition; however, investment opportunities remain scarce. Market expectations are that financing will follow as soon as skills and investment barriers fall. Nevertheless, these must be addressed without delay to attract and accelerate the investment required to deliver on the significant promise of the energy transition.

IRENA

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