Israel’s natural gas revolution

Gas rigs in the Tamar field, off the coast of Israel, in June. (photo credit: Moshe Shai/FLASH90)

In the last few weeks Israel’s newly-developed natural gas industry has taken several leaps forward in export proposals.

In an ironic twist, Israel has begun pitching a massive natural gas pipeline to Europe – ironic because Europe is the center for the BDS movement promoting boycotts of Israel:

Israel has proposed that EU countries invest in a multi-billion euro pipeline to carry its natural gas to the continent, noting that the supply from Israel would reduce Europe’s current dependence on natural gas from Russia.

A proposal for the “massive” project was introduced by Israel’s Energy Minister Silvan Shalom to energy ministers from Euro-Mediterranean countries who met in Rome earlier this week, Israel’s Channel 2 reported on Thursday.

It said the project would require a multi-billion euro investment from Europe to build a pipeline from Israel’s Mediterranean cost to Cyprus, from where the gas would be carried on to Greece and Italy.

The TV report said Cyprus, Greece and Italy were all supportive of the idea, and that Israel would make a formal presentation of the project to European representatives in Brussels in three weeks’ time.

Whether this proposal will fall victim to the politicking engendered by the new elections remains to be seen. I sincerely hope such an important issue is above politics and that the proposal will be carried through.

The benefit for the Europeans lies in Israel’s stability, with the rest of the Middle East in meltdown and Russia remaining highly volatile due to the Ukrainian crisis:

It would be cheaper for Europe to work on a supply route with Egypt, but this could expose the Europeans to instability because of the unpredictable political developments in Egypt, the report noted. Similarly, a pipeline from Israel to Turkey would be less expensive, but bilateral relations rule this out so long as Recep Tayyip Erdogan, a prominent critic of Israel, holds power there.

In September, Israel signed a deal to supply Jordan with $15 billion worth of natural gas from its Leviathan energy field over 15 years. The deal was Israel’s largest collaboration with Jordan to date, and will make Israel its chief supplier. Representatives of the gas companies involved, Delek Group Ltd. and Nobel Energy Inc., were in Jordan to sign the agreement.

And a reminder of the size of Israel’s gas fields:

Israel decided last year to export 40 percent of the country’s offshore gas finds, and has since also signed a 20-year, $1.2 billion deal with a Palestinian firm. In June it signed a letter of intent to supply energy to an Egyptian facility as well.

Israel began pumping natural gas in March 2013 from the Tamar deposit — discovered in 2009 and located some 90 kilometers (56 miles) west of Haifa — which holds an estimated 8.5 trillion cubic feet of natural gas.

In addition to Tamar, in 2010 an even larger deposit, Leviathan — which boasts an estimated 16-18 trillion cubic feet of gas — was discovered 130 kilometers (81 miles) west of Haifa. It is expected to become operational in 2016.

Globes adds another interesting detail:

Shalom’s proposal comes a few weeks after the EU announced that it would contribute €1.32 million to an electrical cable between Israel and Cyprus. The cable is part of the Connecting Europe Facility (CEF) plan, which will facilitate transmission of electricity in either direction. Its capacity will be 2,000 megawatts at a distance of 1,518 kilometers: 329 kilometers from Israel to Cyprus, 879 kilometers from Cyprus to Crete, and 1,310 kilometers from Crete to Athens.

Meanwhile, closer to home, Israel is in talks with Egypt to supply them with natural gas – yet another ironic twist of history when recalling the dozens of times that Egypt’s gas pipeline to Israel was blown up by Jihadi terrorists, and also the time that Egypt canceled its contract to supply Israel with gas. From the Globes link above:

Delek Group Ltd. (TASE: DLEKG) and Noble Energy Inc. (NYSE: NBL) are in talks over a contract worth billions of dollars of natural gas, which would be sold to the Egyptian market, sources inform “Globes.”

The gas would be supplied from both Israel’s offshore Leviathan field and Cyprus’s Block 12 (Aphrodite). Delek recently reported that the estimated amount of gas in the Cypriot field had been revised upwards from 4.1 TCF to 4.5 TCF.

This would not be Noble and Delek’s first deal with Egypt. As Tamar partners they have signed a Memorandum of Understanding (MOU) to export 7 BCM annually of natural gas to the liquefying plant of Spanish company Union Fenosa at Damietta. In addition, the Leviathan partners are in advanced talks with British Gas (BG) to export 7 BCM annually to their liquefying plant in Sinai.

The Tamar partners are also in advanced talks with Dolphinus to immediately supply gas for Egyptian industry by using the pipeline set up by EMG, which formerly imported gas to Israel from Egypt.

This is all excellent news for Israel’s natural gas industry as well as for her foreign currency reserves. Who knows, with the way alliances are shifting throughout the Middle East, Israel might yet become an active member of OPEC!

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12 Responses to Israel’s natural gas revolution

  1. Linda says:

    So why does the cost of our (cooking) gas keep going up and up and up?

    • anneinpt says:

      Excellent question. Ditto re our electricity bills. Our electricity is now produced partially from natural gas and we were reassured that the price would drop. Well, the price has certainly dropped for the electric company, but we haven’t seen a penny of that.

      I think it’s a bloody chutzpah, and seriously, we citizens are much too docile. We should be on the streets protesting, blockading the gas and electric companies etc.

  2. There is more irony here than substance. The EU is contemplating sanctions against israels developing settlements,probably motivated more by anti-Semitism than any legitimate issue and may result in “cutting off its nose to spite its face,” in any respect, however, expect substantial “pushback” from the Palestinian/anti-Israeli bigots and failure of the rest of the world to identify, let alone, to condemn it.

    • anneinpt says:

      If you mean we should expect pushback from the anti-Israel crowd against Israeli natgas, then I think you will be mistaken.

      The Europeans are cynical and materialistic above all else, even above their antisemitism, and there’s no way they would prefer to subsist with volatile fuel imports when there is a safe alternative via Israel.

      Business above all else!

      • If it is clear that “business rules” and trumps other anti-Semitic interests then why, when clearly the economic power of Israel now and graphically demonstrated by it’s beneficial use for Palestinians between1967and the first intifada,we still have Israel demeaned and marginalized and /or excluded from NATO, the Iranian nuclear negotiations, the EU, the U.N., human rights organizations continually engaged in malicious “war crimes” investigations, the BDA movement and in so many other instances? Israel is not a demon nation as these examples would have one believe. Israel is a Jewish nation and therefore, for the anti-Semitic, intolerable. “Pushback” will not succeed because, as Israel has so effectively demonstrated – business rules – but in proving Israel can “rule” she exposes the ugly face of it’s adversaries as it will be exposed in this instance.

        • anneinpt says:

          My theory is that Israel is “demeaned and marginalized” as you put it because until now Israel did not have any great economic benefit to offer, while the Europeans wanted and needed Arab oil. Yes, Israel has many clever inventions and huge advances in biomedicine but that is a relatively recent development. The Arab inspired anti-Israel attitude is well ingrained and was anyway a welcome pose in the antisemitic Europe of old.

          And then came the Arab Spring, Iran, ISIS, jihadis, terrorism, and the complete realignment of the Middle East. Suddenly Israel looks a whole lot more attractive, and has hydrocarbons to boot. I’m sure the antisemitism is only slightly veiled, but for the moment it is all working to our mutual benefit. And maybe some of that positive attitude towards Israel will rub off and remain.

  3. DemocracyRules says:

    An Israeli Goldmine

    Yes, there is much irony in this, and history is littered with irony.

    But it turns out it is possible to actually mine irony and turn it into gold. Black gold. Texas tea.

    Near Jerusalem is a reservoir of 250 billion barrels of oil that is awaiting extraction by horizontal drilling and fracking.

    Almost certainly, there are more undiscovered petroleum reserves, especially as new recovery technology continues to develop.

    Israel needs money, lots of money. To become autonomous of the US. To build a stronger military, better health care, better universities, better felafels. To make Israeli brains even stronger and better.

    International commercial relations strongly influence strategic relations. This has worked against Israel in the extensive oil trade between Arab countries and Europe. It’s a key reason why Europe is ‘pro Palestinian’.

    Time to reverse the flow of goodwill. Israel is a far better business partner than Arabs, Turks, or Russians are.

    Search term:
    Israel petroleum

    • anneinpt says:

      Hi Democracy Rules, thank you for your thoughtful comment and welcome to my blog. I just realised that what I wrote in answer to Elliott above is more or less what you said in your above comment: that business will trump antisemitism in Europe since Israel is now the one with the oil, or rather the gas, in hand. A supreme irony given our history.

      Let’s hope that Israel can extract her oil reserves with ease and establish new strategic and commercial partners.in Europe and the Far East, and thus change our strategic outlook for the better in the near and long term.

      • Dirk Diggler says:

        The technology is there to get to heat the sands and get the oil out. The price of oil is not there now, not at around $65 US. No matter, since Israel can use the oil for themselves (lessening the need for nuclear) until the price rises. The real play is with the gas. Europe is tired of being shoved around by Gazprom.

  4. Reality says:

    my question (apart from why our own gas &electricity keeps on getting more expensive with dire threats of electric cuts during any heatwave) is would Israel use this leverage against the Europeans,Jordan,Egypt if need be.You can be sure they will threaten us with breaking the contract each time we don’t do as they see fit

    • anneinpt says:

      It certainly would give Israel plenty fo leverage but we’d have to use it carefully, because there is still competition out there.

      I can’t see the Europeans boycotting our fuel though – what would they use instead? They’d have to be really badly pissed off to do so, and for all their bluster over settlements, it’s just bluster when it comes to business.

      In 1973 the Arabs threatened a boycott of oil sales to the West if they didn’t fall into line re Israel. But the Middle East has changed and so have fuel needs. Besides anything else, gas is “greener” than oil and less polluting, therefore preferable in any case.

  5. Dirk Diggler says:

    The Leviathan gas field is indeed a monster for several reasons:1) The reserves are huge and have been adjusted upwards; 2) Europe has been wanting to stick it to Gazprom for years; 3) Putin (Gazprom) wants in on the action, and this can be used as leverage someday; 4) The revenue will be huge, and this in effect is a way to balance the budget by selling gas to the same schmucks that are anti-Israel now (they hate Gazprom more); and 5) Because of the relationship with Nobel, the US will have an interest in protecting the platforms and pipeline from terrorist attacks.

    Israeli oil is another story. Oil has to be extracted from the sands, and with the current price so low the profits have been mostly taken away. Of course, the Saudis have kept production up for a few reasons–Iran in one– and this could change in the future.

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