26 Oct, 2020
JERUSALEM WEATHER

A pipeline originally built to carry Iranian crude oil has been clouded in secrecy for four decades but the normalization agreement between the United Arab Emirates and Israel may get the black gold flowing again from Eilat to Haifa.

The original pipeline from Eilat to Haifa was constructed in 1959 in the wake of the 1956 Suez crisis. Its goal was to safeguard the flow of oil in case Egyptian President Gamal Abdel Nasser decided to close the Suez Canal again. Following the completion of the pipeline, the Eilat Ashkelon Pipeline Company (EAPC) was originally formed in 1968 as a joint venture between Israel and pre-revolution Iran to transport crude oil from Iran to Europe.

The project is lucrative because of the high cost of transiting the Suez Canal. The canal is also limited in size.  Supertankers docking in Israeli ports have a capacity of double the size of oil tankers that can fit through the canal.  Known as VLCCs, or very large crude carriers, the ships can transport as much as 2 million barrels of petroleum. The 150-year-old Suez Canal is only deep and wide enough to handle so-called Suezmax vessels, with just half the capacity of a VLCC. One-way passage through the Suez Canal for a single Suezmax can cost $300-400,000. Crude oil can be transported 158 miles from the Red Sea to the Mediterranean via the 42-inch pipeline at a relatively low cost and in high volume. A parallel 16-inch pipeline carries gasoline or diesel. The company operates two oil ports and two oil terminals with a total storage capacity of 3.6 million cubic meters for crude oil and oil products. The services provided by the company, in addition to pipeline transit of crude oil, include long term terminal storage and crude oil blending. The bidirectional reverse flow project in 2003 allowed for the flow to be reversed, meaning oil can now flow southwards instead of only northwards, as originally conceived when Israel consumed Iranian oil. The idea behind the project is to transport crude oil from Russia, Central Asian republics and the Caucasus over the Black Sea and the Baku-Tbilisi-Ceyhan pipeline to Southern Asia and the Far East at a competitive price.

The Iranian revolution in 1979 stopped that aspect of the project.

Now known as the Europe Asia Pipeline Co., the recent normalization agreement with the United Arab Emirates puts this pipeline in the forefront and could possibly turn Israel into a major hub for the transfer of oil between regions. An article in Foreign Policy stated that other members of the Gulf Cooperation Council, most likely Bahrain and Oman, are likely to make use of the pipeline.

The pipeline company’s CEO, Izik Levi, says his goal is for the pipeline to capture somewhere between 12-17% of the oil business that now uses the Suez. It is expected that this will affect the relationship with Egypt that derives significant revenue from the oil passing through the canal.

The major obstacle until now has been the secrecy its clients must maintain due to boycotts enforced by Saudi Arabia, the UAE, and other oil-producing Arab nations. Tankers acknowledging their docking in Israel would be barred from future loadings in the Persian Gulf, effectively destroying their business. Many resorted to extreme measures including turning off their transponders, repainting, reflagging, reregistering, and faking their docking records.