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The United Arab Emirates (UAE) and Israel signed an historic peace and trade deal last month. For decades Muslim nations, which include but are not limited to Arab nations, have boycotted and snubbed Israel in trade and tourism. It was so bad in the 70s with an oil embargo that Israel had only a handful of allies to help them buy oil. The strain also caused Israel to develop in new ways, in solar and natural gas exploration.
A new deal in the wake of a blooming love story between Israel and the UAE has led to a landmark oil deal allowing UAE crude oil to be transported through the Indian Ocean and Red Sea by tanker, then shipped by pipeline through existing infrastructure in Israel. From there the oil can be shipped to Europe and other nearby locations, removing dangerous elements like the Taliban and the Houthis in Yemen out of the story overland, though piracy is still an issue. Read about the sinking oil tanker off the coast of Yemen which could cause a spill 5 times the size of the Exxon Valdez.
Still with the risks of destroying the Red Sea and terrorism to pipelines that could be launched by Hezbollah proxies in Sinai and Gaza, Israel and the UAE thought it would be a good idea to create an oil pipeline project connecting the Arab Gulf to Israel for the first time.
The new deal will be managed through a company called Red-Med Land Bridge based in the UAE and it is actually a JV between several companies: Petromal, the oil and gas arm of Abu Dhabi conglomerate National Holding, Lubber Line, an international company specializing in infrastructure and energy investments, and AF Entrepreneurship, an Israeli company owned by Israeli business executives Yona Fogel and Malachi Alper, which develops and operates projects and ventures in the energy sector.
Red Med will work with Israel’s Europe-Asia Pipeline Co. (EAPC) to transport the oil from the UAE up through Israel at its Red Sea port up to Haifa, which is an important energy transport hub to Israel and the rest of Europe.
In the deal, with numbers not announced, Med Red will transport oil from the Gulf state and Eastern markets to the West and vice versa, via pipelines linking the Mediterranean to the Red Sea, as part of new commercial agreements between the two countries.
The agreement “offers oil producers and refiners the shortest most efficient and cost-effective route to transport oil and oil products from the Arabian Gulf to the consumption centers in the West, and provides access for consumers in the Far East to oil produced in the Mediterranean and Black Sea regions,” EAPC offered in a statement.
Storing and processing crude oil in Israel?
EAPC will provide management services of the infrastructure, enabling transmission, and storage of the oil and oil products.
The UAE is one of OPEC‘s third-largest oil producer — and Israel have struck a number of business deals after signing a peace agreement in Washington on Sept. 15. The prime minister of the United Arab Emirates arrived in Israel on Oct 20 this week to consolidate trade deals and tourism highlights which will include visa-free entry to both countries.
A high level UAE delegation arrived in Israel on Oct. 20 to sign other commercial agreements in agriculture, tourism and hopeful energy projects that are more renewable in scope.
The world is still addicted to oil but we can bank on the very progressive Arab Gulf emirates to lead the way in renewable energy and with Israel as an innovation partner, I believe history can be made. Israel still only produces a small amount of its energy needs using solar energy, about 5% but its intentions are there to increase this number, even though it’s almost impossible to get installation deals signed given the messy and conflicting nature of its ministries and committee.
Just recently a large wind farm project slated to be built on a UNESCO bioreserve was axed. They said the noise pollution and damage to the birds would be too great. Nature lovers and activists are well educated in Israel and it will interesting to see how they react to an oil pipeline deal, given oil spills do happen in Israel, destroying delicate wildlife. This oil spill in the Negev Desert in 2015 will take years to clean up. And this oil spill in the Red Sea port Gulf of Eilat almost destroyed the almost dead coral reef.
The environment minister Dov Henan said at the time: “During the deliberations of the subcommittee on oil dangers in the Gulf of Eilat, we discovered an alarming picture of neglect and an inability to cope. Unless the laws are changed to better regulate the petroleum industry an oil disaster in Israel is only a matter of time.”
The pipeline plan and potential for Israel
The Israeli company EAPC already has about 200 mies of oil bi-directional pipelines installed has pipelines installed with a capacity to carry 30 million mt of crude/year from Eilat to Ashkelon. The Eilat Oil Port company can accommodate tankers up to 350,000 dwt, with a storage capacity of up to 1.4 million cu m. The Ashkelon Oil Port can receive tankers up to 250,000 dwt and has a storage capacity of up to 2.3 million cu m.
Israel consumes 10.5 million mt/year of oil, according to its energy ministry. Meanwhile the UAE with a production capacity of 4 million b/d, sells most of its oil to Asia, according to S&P. The country sells mainly refined oil products over to Europe, and these are transported via tankers that travel up the Red Sea through to the Suez Canal and then onto Europe through the Mediterranean.
The Israeli pipeline was built, believe it or not, in a JV with Iran in 1968, but after the radical Islamic Revolution in 1979, Iran went back to the Dark Ages and Israel lost its energy partner. The company changed its name from the Eilat-Ashkelon Pipeline Co. to EAPC last year in 2019.
The EAPC will help Gulf oil companies bypass the Suez Canal, the manmade canal built by Egypt in the 60s to link the Red Sea to the Mediterranean Sea, expanding trade from the east to the west but also allowing in damaging invasive species like these jellyfish.
We can assume now that Israel has struck a deal with Chevron for its natural gas, that the EAPC may be able to provide infrastructure services in those areas to Europe such as natural gas, liquified petroleum gas, oil products and coal.
The EAPC is a good alternative to the Suez in that it is limited by tanker size, and the pipeline that exists in Egypt, the SUMED, only carries oil products in one direction from the Red Sea to the Sisi Kerir on the Mediterranean Coast. Sending a tanker to ship oil around the Cape of Good Hope is more expensive and slower.
EAPC offers an alternative to the Suez Canal, which is limited by tanker size, and the SUMED pipeline in Egypt that only carries oil in one direction — from the Red Sea terminal at Ain Sukhna to Sidi Kerir on the Mediterranean. And sending crude around the Cape of Good Hope is much slower and more expensive.
As the Israel-UAE peace deal opens up trade between Bahrain and soon other Arab nations, Israel is also proposing an oil pipeline deal with Saudi Arabia. Every oil producing nation is looking to shorten its distance to travel to its market in Europe and Israel is a good option.
EAPC chairman Erez Kalfon said about Saudi oil to Israel, “This is an historic agreement that will increase cooperation between EAPC and regional and international players. This agreement undoubtedly has great importance for the Israeli economy both economically and strategically and it involves long-term joint investments.