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| Photo credit: MARC ISRAEL SELLEM / THE JERUSALEM POST |
The story of Israel’s natural gas industry begins in the late 1990s. Dr. Eli Rosenberg, a geologist, identified the potential existence of a gas field some 30 km. west of Ashkelon.
At the end of 1999 the Noa-1 exploratory drilling site penetrated a sand layer rich in gas, opening up a new era in cultivating Israel’s natural resources.
Not that there weren’t previous attempts to do so.
Offshore drilling attempts began as early as the 1970s, but they were all economic failures. In order to confirm the data from the Noa drill site, the Mari B-1 drill site was initiated about half a year later, where gas was discovered in commercial quantities. Around four years later Mari-B was connected to the onshore national transmission network, and it became the first maritime field to supply gas to Israel, a venture that significantly changed the local energy sector. The quantities of gas discovered off the Ashkelon coast were not very large, and for the most part the gas was used by the Israel Electric Corporation in its gas turbines to produce electricity.
The dramatic shift in Israel’s energy sector came in 2009-10, following the discovery of two enormous gas reserves – Tamar and Leviathan. For the first time in the Levant basin, two exploration drills were made for the purpose of gas exploration at a depth of 4,500 meters below the salt layer, deep in Israeli waters. The huge gas discoveries led to a series of successful drillings, and additional gas reserves were found: Tanin, Karish, Dolphin, Dalit, Tamar West and Aphrodite, which is located in the exclusive economic zone (EEZ) of Cyprus and near the border of Israel’s EEZ.
The quantities of gas found in Israel’s economic waters, particularly in the two largest reserves of Tamar (311 b.cu.m.) and Leviathan (621 b.cu.m.), had an astonishing impact on Israel’s economy. For the first time in our history, natural gas was found in quantities that would not only provide for Israeli needs for decades, but would also enable Israel to become a gas exporter.
To date, Israel’s natural gas consumption stands at around 8 b.cu.m. per year, and forecasts by the Energy Ministry predict a demand of some 420 b.cu.m. by the year 2040. The scope of natural gas found in Israel exceeds 1,000 b.cu.m., with an even greater potential for additional quantities.
THE DISCOVERY of natural gas has had tremendous benefits for the Israeli economy. It has been a factor in reducing energy costs and the cost of living, enriched government coffers and made a significant contribution to public health by reducing the emission of pollutants and greenhouse gases in Israel.
Another major benefit is the fact that the gas is found in the regional geopolitical arena.
Israel defines its political and security objectives according to the threats and opportunities it faces. The ultimate goal is to enhance positive trends and reduce the negative. One option for achieving these objectives is cooperation with pragmatic Arab nations that are also coping with non-state organizations located in nearby and distant geographic areas.
Cooperation with other nations in the region can be implemented (and is being implemented) in a number of spheres: military, intelligence, humanitarian, economic, communications and more. One of the more meaningful tools that has been dramatically reinforced in recent years is the possibility of generating long-term regional economic collaboration using Israel’s natural gas.
The energy industries of neighboring countries in the Eastern Mediterranean region, as well as Turkey, have undergone many changes in recent years. On the one hand, the demand for energy is expected to increase sharply because of the growth rates in these countries and the rise in populations. On the other hand, the discovery of natural gas in the eastern part of the Mediterranean Sea dramatically changes the regional supply of energy.
One of the most important energy alliances in the region is currently being forged between Israel and Egypt, with which Israel signed a peace treaty in 1977. Egypt is going through its biggest energy crisis of the past few decades. The main reason for this crisis is its inability to satisfy the domestic Egyptian demand for natural gas.
Why? There is no shortage of natural gas reserves in Israel, and the Egyptian reserves are twice those of the Israeli sector. However, one of the problems Egypt faced was that gas prices were too low and therefore international companies avoided making new investments in the petroleum sphere. Add to this the lack of political stability since the fall of the Mubarak regime, and the result – an undeveloped energy economy.
In the last six years the condition of Egypt’s gas industry has deteriorated, and although the demand for natural gas has risen dramatically, the development of infrastructures for developing the gas has been frozen and older reserves are being depleted. Since 2009, the production of gas in Egypt has been cut back by almost one-fourth, and the crisis has only worsened during the past two years. Due to the serious shortage, Egypt has stopped exporting gas; among other things, the supply of gas to the country’s two liquefaction facilities has stopped. This discontinuation in the flow of gas has caused tremendous losses to the international energy companies maintaining these facilities, and these companies are now searching for a solution for producing liquid natural gas, one that would provide a stable, reliable, high-quality and longterm solution – such as Israel’s gas.
Since Abdel Fattah el-Sisi rose to power in Egypt, he has been working resolutely to bring Egypt’s economy out of its crisis by drastically improving the operating conditions for international gas companies in Egypt, and has considerably raised the price of gas received by the international companies for its production, a price of up to $5.88 per unit of gas. The positive outcomes for Egypt were not long in coming. Within a period of several months international companies signed agreements for gas and petroleum exploration and development at a scope of more than $20 billion. This increased activity is also reflected in recent months, among other things, in the discovery of the vast Zohr gas reserve.
It is still not clear what the scope of the Zohr reservoir may be, but speculation is that the size is several hundred b.cu.m., similar to the Leviathan reservoir.
While the discovery of the Zohr reserve does not alter the current need by companies operating the Egyptian liquefaction facilities to import Israeli gas, the discovery of the reservoir, not far from the economic waters of Israel and Cyprus, has generated great interest in the potential for gas and oil in the region. The regional potential is enormous and in the future it is likely to be an important factor in the supply of gas to Europe, whether by expanding the liquefaction facilities in Egypt or by laying an underwater pipeline to Europe.
ANOTHER INTERESTING option for exporting gas from Leviathan is Turkey.
Turkey has no significant independent sources of natural gas, and it imports almost all of the natural gas it uses (98%). In 2013, Turkey used approximately 46 b.cu.m. of natural gas, and since the start of the millennium its consumption of natural gas has jumped about 233%. Most of Turkey’s gas comes from Russia (60%) and Iran (20%).
Turkey and Russia have a complicated relationship, but one that is essential for both sides: Russia depends on Turkey as a transit country for various commodities, and Turkey relies on energy from Russia. Recently, given the civil war in Syria and the conflict of interests between the two nations, their relationship has soured.
Until now, Turkey’s status as an “observer” of developments in the regional energy market have led it to sign purchase agreements for the supply of gas that are unfavorable compared to central or western European countries. Current assessments are that Israeli gas is a relatively cheaper option for the Turkish economy. Turkey’s desire to vary its gas sources might, with sensible diplomacy, bring about the signing of an agreement to supply gas from Leviathan and thereby contribute to renewed relations between the two countries.
Another regional partner to the energy alliance developing between countries in the area is Jordan, although Jordan has no significant domestic energy resources and relies on imports to supply its needs. Until 2011, Jordan relied on the Arab Gas Pipeline to important roughly 3 b.cu.m. of gas per year into the kingdom. Like Israel, due to the revolution in Egypt and destruction of the gas pipeline in Sinai, Jordan has been forced to buy more expensive fuels in to fulfill its energy needs. The damage to the Jordanian economy due to the switch to expensive fuels is estimated at around $1.5 billion a year. To date Jordan is anxiously awaiting the regulatory arrangements that would enable development of Israel’s Leviathan reserve, which would provide the kingdom with natural gas.
The large quantities of gas found in recent years in the deep waters of the eastern Mediterranean Sea, the tremendous potential in the region, and the shortage of gas in Egypt and Jordan have opened up a window of opportunity for countries in the region to strengthen commercial and economic ties and establish peaceful relations between them. In a reality where we are witnessing and are constantly surprised by extremist organizations around us, it is morally imperative for Israel and its more moderate neighbors to intensify their relationships. The energy resources discovered in the region may be one of the major keys for this, and could make a tremendous contribution that would benefit all of the region’s inhabitants.
The writer is a natural gas industry expert.
The Jerusalem Post Diplomatic Conference, a prestigious forum where some 400 ambassadors, ambassadorial spokespeople and military attachés from around the world will convene, takes place at the Waldorf, Astoria Hotel in Jerusalem on Wednesday, November 18. The conference, featuring an array of speeches from Israeli newsmakers, including Prime Minister Benjamin Netanyahu, will be broadcast live on Jpost.com.
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