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Land of Milk, Honey, and Natural Gas
The Jewish Home | JULY 21, 2022 Land of Milk, Honey, and Natural Gas
How Israel’s Natural Gas Supply is Shaping the World
By SHaMMaI SISkIND
Indeed, among the many remarkable things about Israel, one of the more peculiar aspects is its marked lack of black gold.
In the fifty years since Meir made her half-joking comment, many have pointed out that Israel’s oil-less territory was a blessing in disguise. Not having easily accessible, desirable exports in abundance is perhaps the single biggest driving factor that forced the country to become the innovation miracle that it is now. Today, when people think about brilliant, era-defining creativity, they’re not thinking about Saudi Arabia and its 260 billion barrels of proven oil reserves – they’re thinking about a small sliver of land off the Mediterranean coast.
Yet still, the lack of naturally occurring fossil fuels has been a real challenge for Israeli society throughout its short history.
From a purely economic point of view, energy costs have always been exorbitantly high in Israel compared to other countries. Currently, a gallon of gasoline in the country costs over nine dollars. The lowest the price has been in the past ten years was in late 2020, when the average was hovering around $5.25.
Similarly, when coming at it from a national security perspective, Israel has always been in a precarious situation regarding energy: The nations that possessed the lion’s share of the world’s proven oil reserves also happened to be Israel’s sworn enemies. Many still remember the global gas shortages of the 1970s, triggered when Arab nations banned the sale of petrol to countries that supported Israel during the Yom Kippur War. It is precisely events like the OPEC embargo that highlight just how much fossil fuels are inextricably bound to geopolitics – but more on that later.
For years, Israel has had to make peace with its energy dependency. But that is beginning to change.
Moshe Rabbeinu may have brought us to the one land in the Middle East without fossil fuels. But as it turns out, there were surprises lurking miles below Israel’s ocean surface. Two Decades of Israel Gas Exploration
The energy revolution currently taking place in Israel did not pop up overnight.
The story goes back over twenty years when, in 1999, Israel’s Oil Commissioner granted BG Group (a British petrol firm since bought out by a Dutch competitor) preliminary exploratory permits for deep-sea block exploration. Oceanographic scans of areas off of Israel’s coast, specifically one region some 80 miles west of Haifa, showed geological formations strongly indicative of natural gas pockets.
The initial explorations dragged on for years, and the permit granted to BG expired in 2003. Still, the private stakeholders in the venture were adamant. The evidence of gas fields in the area was too strong to simply abandon the project. They convinced the Israeli authorities to extend the permit.
Two years passed. Nothing.
By April 2005, BG had announced that it was abandoning its stake. But the following year, Texas-based exploration company Noble Energy joined the project as operator. The involvement of Noble seemed to breathe new life into the whole enterprise, and in 2006, the state license was extended to December 31, 2008.
In November 2008, less than two months before their deadline, Noble and its Israeli partners began drilling after some seismic studies were able to pinpoint a formation where there was “a 35% chance” the location contained gas. Why go ahead setting up a drill rig with a two-thirds chance of failure? Well, those same studies further indicated that if there was gas, the median estimate for the producible quantity was over 100 billion cubic meters (BCM). The risk was high, but the potential return was enormous.
Finally, in late 2008, drilling was conducted to a depth of 4,900 meters. The operation cost $92 million. But it was the one that finally bore fruit. On January 17, 2009, Noble and its partners officially announced it had tapped the Tamar natural gas field. Estimated reserves: 284 BCM.
The discovery of Tamar was certainly welcome news in Israel at the time and generated quite a bit of fanfare. But it would hardly compare to the next finding that would come soon after.
The partners were convinced Tamar was far from the only jackpot. and so, they continued searching. Less than a year after the successful drill at Tamar, Noble announced yet another gas discovery less than 50 kilometers west of the first find. The enormity of the new field was simply shocking. The new Leviathan field (the best title ever devised for a giant underwater anything) contained a whopping 630 BCM of natural gas.
From Discovery to Extraction
The average citizen reading about these findings couldn’t be blamed for getting excited. After all, this was huge – in every sense of the word.
After discovering Tamar, Noble reported it was the largest field they had ever discovered, a statement they issued a second time after discovering Leviathan. Just the amount of gas in the Leviathan reservoir was enough to make Israel completely energy independent for decades.
But as no one knew better than the policymakers and the private companies involved, finding gas wasn’t the same as getting it to the surface and into the electrical grid.
Following the Tamar discovery, Energy Minister Uzi Landau said in a statement that Israel needed to act “levelheaded and responsibly,” which was a thinly veiled warning that the long-term benefits of the discovery were far from guaranteed. Put simply, just because there were massive amounts of gas sitting in its territory didn’t guarantee it was possible to extract it.
Similar concerns were voiced following the Leviathan discovery by Gideon Tadmor, the chief executive of Delek Energy and avner Oil Exploration, partners in the venture with Noble. Tadmor voiced fears that government taxes and regulations could make the project prohibitively expensive.
“The gas may stay in the ground because we will not succeed in obtaining from banks around the world the tens of billions of shekels for developing the reservoir,” he said in an interview.
After the initial stages of assessing extractability – a process that itself took several years – the date of bringing Leviathan to production was estimated at 2017. That year came and went. Still no gas. about five years of political quagmire and legal disputes, which included everything from environmental concerns to conflicting promises to foreign developers, stalled the much-needed gas from coming online. But even the storm of Middle Eastern bureaucracy eventually comes to an end.
Finally, in 2019, Israel began to consume some of its gas bounty. Today, the Israeli grid consumes just over 10 BCM per year from the field.
Effects at Home and Abroad
With the gradual coming online of these gas resources, there have been important benefits for Israel at the local level.
Even with the relatively small amount being consumed by the country, the economic advantages of local fossil fuels are being felt.
As Europe and much of the world are experiencing skyrocketing energy costs, Israelis have barely felt an impact.
Down the road, there will be other major benefits. Underwater natural gas fields are industry-creating discoveries. The Leviathan Project, as it’s come to be known, is desperately trying to fill recruitment slots from rig workers to computer technicians. There is no doubt the project will continue to create jobs at a significant scale. There’s also the opportunity to potentially shift much of the country’s energy consumption from petrol to natural gas and thereby slash the cost of living. of natural gas came pouring through from Leviathan some three years ago.
A global pandemic left the public and private sectors distracted for the better part of two years. A chaotic administration change in the U.S. brought an about-face to much of Washington’s policy positions (especially on energy-related matters), and for the first time in eighty years, a real war has broken out in Europe in which one of the belligerents happens to be the third largest oil producer in the world.
The conflict has triggered a profound energy crisis in Europe, one which Russia is using as leverage against its Western foes. While different countries on the continent are feeling Putin’s energy squeeze differently, the crisis as a whole is exemplified by the situation in Germany.
Germany is tied to Russia’s oil more than most. The foundation of the country’s economy is heavy industry, and German factories are huge consumers of fossil fuels. In late June, after Russia reduced supplies by 60 percent, Berlin triggered the second stage of its national gas emergency plan which puts the nation just one step away from gas rationing. In Germany today, there is a widespread recognition of the folly of their energy policies in recent years. The move away from nuclear energy in the wake of the Fukushima incident in 2011, and an increasing emphasis on renewables, has made Berlin more and more reliant on Russian fuel over the past decade. As Germany’s Economy Minister Robert Habeck said
To take one area, Israel can begin shifting to Natural Gas Vehicles, or NGVs, that run on compressed natural gas (CNG). While this may be considered a fringe option in some other places on Earth (NGVs in the U.S., for example, account for only 0.06 percent of all cars), if Israel has the appropriate fuel on hand, it could present a viable alternative.
At the governmental level, the natural gas industry is already proving a windfall for state revenue. According to current estimates, export proceeds alone will produce annual taxation of $2.5 billion.
But even beyond the immediate gains for Israel, the mega gas fields off the coast of Haifa could have massive repercussions at the international level. In fact, many of these effects have already begun to emerge. in a recent interview, the choice to make the country dependent on Russian energy was a “grievous mistake.” Now Germany, along with the rest of Europe, is caught between a rock and a hard place: Russia is the West’s new Bad Guy and has to be opposed at all costs, yet the very stability of Europe is completely reliant on Russia.
Against this backdrop of global upheaval, all the while, Israel’s gas exploration and development continued to grow.
In early January 2020, the EastMed Pipeline accord was signed in Athens by the leaders of Greece, Cyprus, and Israel. The dictates of the deal was to create a pipeline that would funnel Israel’s natural gas through Greece and into Europe via Italy and other offshore mediums. The deal was largely put on hold when Covid broke out and further impeded when the Biden administration decided the environmental costs of the project were too high. However, last month the so-called East
The Jewish Home | JULY 21, 2022 Med Pipeline deal got a second chance at life, albeit in a slightly different form.
In mid-June, Israel, Egypt and the European Union signed a memorandum of understanding in Cairo on a major pipeline co-op. The project will see Israel export its natural gas to Egypt, which already possesses facilities to liquify it, and from there to the EU.
Simultaneous to the Cairo meeting, Turkish and Israeli officials began negotiations on a similar project to funnel gas through Turkish territory. Turkey is already a major regional energy hub, bringing gas to Europe from azerbaijan, Iran, and Russia. With Europe less than excited to consume Russian fuel these days, Turkey is anxious to find another energy supplier it can act as middleman for. This makes the prospect of a lucrative natural gas deal extremely attractive to Ankara. Now, with relations with Jerusalem thawing in recent months, the political climate is perfect to pursue such a collaboration.
At the same time as the diplomats wheel and deal, Israel’s gas resources are also growing. Two additional gas fields discovered a few years after Leviathan was tapped are now finally coming online. Extraction from the two fields, dubbed karish and Tanin respectively, is set to begin in the coming months. While the quantities of karish and Tanin are small compared to the fields discovered twelve years ago – containing altogether a
Israel, Egypt, and the EU signing a natural gas deal
“mere” 100 BCM – the availability of additional resources has enabled Israel to pursue more export projects.
Israel in the Middle
The fact that these deals constitute a purposely designed alternative to Russian fuel is hardly a secret.
Earlier this month, the German Foreign Ministry stated it was shifting much of its resources to the intake of natural gas.
“Germany is importing LNG (liquid natural gas), as much as we can,” said Germanies ambassador to Canada Sabine Sparwasser. “We are building, and again at extraordinary speed, we will have two LNG ports. We didn’t have any of them at the beginning of this year, and we will have two floating [offshore] LNG ports on the German coast by the end of the year.”
While Israel’s energy quantities cannot compete with Russia’s, what they are sufficient for is providing a medium-term alternative to Putin as well as an important supplement to Europe’s energy strategy for years to come.
This story is by no means over. There is still a war waging in Europe, one that can escalate at the drop of a hat. Turkish, EU, and Israeli diplomats are still hammering out important details of pipeline deals that will take time to implement even once their finalized.
But in the meantime, one thing to consider is the extraordinary flow of events that occurred over so many years that produced the fortuitous situation Israel finds itself in today: From the discovery of gas fields of unprecedented size and scope over a decade ago, to a modern-day Europe desperate to transition to an energy alternative, and a Middle East that is more and more willing to collaborate with a country they once considered a mortal enemy.
