Jordan Blum
At a time when energy companies are positioning themselves for a lower-carbon world by investing heavily in natural gas, it would seem relatively easy to sell them on developing huge reserves of the cleaner-burning fuel. That is, unless those reserves are in the territorial waters of Israel.
Nearly a decade after natural gas was discovered off its coast, Israel is still struggling to enlist foreign firms to explore its vast deposits in the Mediterranean Sea, in part because oil and gas companies are wary of alienating Arab countries in which they have long done business. So far only one foreign company, Houston-based Noble Energy, is operating there. And last year, when Israel launched its first-ever auction of offshore blocks, it attracted just two bidders — a Greek company and a group from India.
This history is what brought Shay Luvshis to Houston. Luvshis, 38, is Israel’s energy consul, sent to Texas to recruit American and international oil and gas companies to explore Israeli waters in the eastern Mediterranean Sea. About year after opening an office, the Energy Ministry’s first outside of Israel, Luvshis says he and other officials have held advanced talks with Exxon Mobil, the French oil major Total and the Australian oil and gas company Woodside Petroleum, among others.
Exxon Mobil and Total declined to comment. Woodside said it regularly reviews opportunities around the world.
“If everything had gone well” in the past, Luvhsis said, “we wouldn’t be here. Israel is the new kid on the block as an emerging energy region.”
Israel has long been the odd man out, energy-wise, in the Middle East, home to some of the world’s biggest oil producers, and the subject of wisecracks about ending up in one of the few places in the region without oil. All that changed in 2009, when Noble Energy discovered natural gas in the Tamar field about 50 miles off the Israeli coast, in waters more than 5,000 feet deep. Noble followed that in 2010 with another discovery in the Leviathan field, about 30 miles southwest of Tamar.
Israel and Luvshis are now searching for the next Noble or, more precisely, the next several Nobles, a search that runs headlong into geopolitics. One large oil company, which Luvshis declined to name, refused to take a meeting with him out of fear of damaging its relations with Arab countries, most of which don’t recognize Israel. At a recent cocktail party, he said, the company’s executives admitted as much to him.
Middle East politics, however, have not been the only hurdle for Israel’s efforts to attract international energy companies. Israel’s regulatory framework for developing the gas fields is new and untested, as Noble’s experience illustrated.
Amid public uproar and litigation over who should benefit from Israel’s s natural resources, the Israeli government eventually forced Noble to reduce its ownership stake and banned the producer from participating in bidding for more offshore blocks to promote competition.
Noble earlier this year sold 7.5 percent of its holdings in the Tamar project, reducing its stake to 35 percent. It holds approximately 40 percent in the Leviathan development.
Despite the controversies and shifting regulatory climate, Noble says it is happy working in Israel. But its roller coaster ride has added another level of unease about doing business in Israel among energy companies, analysts said.
“Israel has a pretty tough sell in the current environment,” said Jim Krane, a Rice University fellow for energy studies in the Middle East. “It’s resolved now, but Noble was pretty unhappy. A lot of companies that might have been attracted to Israel were turned off by that.”
A Noble story
Noble, founded more than 85 years ago as Samedan Oil Corp., acquired its first offshore block in the Gulf of Mexico in the late 1960s. As it grew over the years, it sought to extend its success to international waters and found willing partners in Israel, including its partner in the Tamar and Leviathan field, the Delek Group, one of Israel’s largest oil and gas companies.
Noble made small natural gas discoveries in 1999 and 2000, but it took 10 more years of advances in seismic imaging technologies before Noble found the vast reserves of the Tamar and Leviathan beneath salt formations. Those finds combine for more than 30 trillion cubic feet of gas, enough to power Israel for decades.
For Noble, the fields will equate to almost 20 percent of its global production after the $4 billion Leviathan project comes online at the end of 2019. Noble’s Leviathan platform is under construction near Corpus Christi.
“It’s really the emergence of a new deep-water basin,” said Keith Elliott, Noble’s senior vice president for the Eastern Mediterranean.
But with the big discoveries came a lot of attention from politicians, regulators and the Israeli public. Suddenly, Israel was rich in energy, and for the first time, it had to wrestle with how it would develop the resource and who would benefit from it. Noble had the backing of Prime Minister Benjamin Netanyahu, but other politicians and citizens criticized the terms of the government’s contract with Noble as too generous, arguing that they essentially gave the Houston company a monopoly on the production of natural gas. Some called for the government to nationalize the oil and gas industry.
Ultimately, Noble agreed to less generous terms, divested some of its holdings and moved forward with its development of Leviathan. Noble can continue to expand within its existing blocks in Israeli waters as well as explore other sections of the Mediterranean under the jurisdiction of other nations, such as Egypt. The region looks promising. In 2015, off Egypt, the Italian oil and gas company Eni found the Zohr field, which could prove more bountiful than Leviathan.
Elliott said Noble has no hard feelings. Rules, regulations and business practices of the U.S. oil and gas industry have developed over more than 100 years, he noted, while Israel is just getting started.
“It can be kind of frustrating for us,” Elliott acknowledged. “But that they were able to get through that whole process in five years is pretty phenomenal.”
Looking forward
Luvshis and his team also had a rocky start in Houston. Just two days they arrived, Hurricane Harvey made landfall, forcing their evacuation to Dallas and contributing to delays that kept them from getting their office in Greenway Plaza really running until the beginning of 2018.
Since then, Luvshis, who worked eight years in Economy Ministry before becoming Israel’s first energy consul last year, has pushed ahead with efforts to convince oil and gas companies to invest in Israel’s nascent industry. Those efforts received a boost in June, when Israel and the U.S. Energy Department agreed to establish a joint Center of Excellence in Energy, Engineering and Water Technology, to develop, share and disseminate technologies in areas important to the energy industry, including fossil fuels, cybersecurity, and energy storage and efficiency.
This collaboration with the U.S. industry should be bolstered by a sturdy, certain regulatory regime put in place for the development of Israel’s energy resources, Luvshis said. Israeli officials believe another 75 trillion cubic feet of gas is waiting to be discovered in its territorial waters, as well as several billion barrels of crude oil.
Israel plans to put another 20 or so offshore blocks up for auction in November. It has also sweetened the deal for foreign energy companies by allowing them to export more of the natural gas they produce in Israel.
Earlier this year, for example, Delek and Noble signed a $15 billion deal to sell natural gas to Egypt. Noble also has its on eye of two liquefied natural gas processing plants in Egypt, which would allow Noble to export more of the natural gas produced in the region.
In addition, Israel is developing the $7 billion Eastern Mediterranean gas pipeline, nicknamed East Med, that would run to Western Europe through Cyprus and Greece. Ultimately, it could reduce the European dependence on natural gas from Russia, a major concern given the West’s tense relations with the government of President Vladmir Putin.
“It’s a very ambitious project,” Luvshis said. “A couple years ago when we talked about this project, people thought we were hallucinating because it sounds like a dream.”
For now, Luvshis faces the reality of selling the energy story of his home country. He sees it as a long-term prospect but added that the time could be ripe for U.S. oil and gas companies to look overseas with commodity markets healthy again. After all, he said, there are more oil and gas fields than just the booming Permian Basin in West Texas.
“Prices are rising, and companies are looking for other opportunities beyond the Permian and the unconventional shale,” he said. “Israel is very keen to promote the arrival of new oil and gas companies. We want competition.”
Collin Eaton contributed to this report.
SOURCE
Nearly a decade after natural gas was discovered off its coast, Israel is still struggling to enlist foreign firms to explore its vast deposits in the Mediterranean Sea, in part because oil and gas companies are wary of alienating Arab countries in which they have long done business. So far only one foreign company, Houston-based Noble Energy, is operating there. And last year, when Israel launched its first-ever auction of offshore blocks, it attracted just two bidders — a Greek company and a group from India.
This history is what brought Shay Luvshis to Houston. Luvshis, 38, is Israel’s energy consul, sent to Texas to recruit American and international oil and gas companies to explore Israeli waters in the eastern Mediterranean Sea. About year after opening an office, the Energy Ministry’s first outside of Israel, Luvshis says he and other officials have held advanced talks with Exxon Mobil, the French oil major Total and the Australian oil and gas company Woodside Petroleum, among others.
Exxon Mobil and Total declined to comment. Woodside said it regularly reviews opportunities around the world.
“If everything had gone well” in the past, Luvhsis said, “we wouldn’t be here. Israel is the new kid on the block as an emerging energy region.”
Israel has long been the odd man out, energy-wise, in the Middle East, home to some of the world’s biggest oil producers, and the subject of wisecracks about ending up in one of the few places in the region without oil. All that changed in 2009, when Noble Energy discovered natural gas in the Tamar field about 50 miles off the Israeli coast, in waters more than 5,000 feet deep. Noble followed that in 2010 with another discovery in the Leviathan field, about 30 miles southwest of Tamar.
Israel and Luvshis are now searching for the next Noble or, more precisely, the next several Nobles, a search that runs headlong into geopolitics. One large oil company, which Luvshis declined to name, refused to take a meeting with him out of fear of damaging its relations with Arab countries, most of which don’t recognize Israel. At a recent cocktail party, he said, the company’s executives admitted as much to him.
Middle East politics, however, have not been the only hurdle for Israel’s efforts to attract international energy companies. Israel’s regulatory framework for developing the gas fields is new and untested, as Noble’s experience illustrated.
Amid public uproar and litigation over who should benefit from Israel’s s natural resources, the Israeli government eventually forced Noble to reduce its ownership stake and banned the producer from participating in bidding for more offshore blocks to promote competition.
Noble earlier this year sold 7.5 percent of its holdings in the Tamar project, reducing its stake to 35 percent. It holds approximately 40 percent in the Leviathan development.
Despite the controversies and shifting regulatory climate, Noble says it is happy working in Israel. But its roller coaster ride has added another level of unease about doing business in Israel among energy companies, analysts said.
“Israel has a pretty tough sell in the current environment,” said Jim Krane, a Rice University fellow for energy studies in the Middle East. “It’s resolved now, but Noble was pretty unhappy. A lot of companies that might have been attracted to Israel were turned off by that.”
A Noble story
Noble, founded more than 85 years ago as Samedan Oil Corp., acquired its first offshore block in the Gulf of Mexico in the late 1960s. As it grew over the years, it sought to extend its success to international waters and found willing partners in Israel, including its partner in the Tamar and Leviathan field, the Delek Group, one of Israel’s largest oil and gas companies.
Noble made small natural gas discoveries in 1999 and 2000, but it took 10 more years of advances in seismic imaging technologies before Noble found the vast reserves of the Tamar and Leviathan beneath salt formations. Those finds combine for more than 30 trillion cubic feet of gas, enough to power Israel for decades.
For Noble, the fields will equate to almost 20 percent of its global production after the $4 billion Leviathan project comes online at the end of 2019. Noble’s Leviathan platform is under construction near Corpus Christi.
“It’s really the emergence of a new deep-water basin,” said Keith Elliott, Noble’s senior vice president for the Eastern Mediterranean.
But with the big discoveries came a lot of attention from politicians, regulators and the Israeli public. Suddenly, Israel was rich in energy, and for the first time, it had to wrestle with how it would develop the resource and who would benefit from it. Noble had the backing of Prime Minister Benjamin Netanyahu, but other politicians and citizens criticized the terms of the government’s contract with Noble as too generous, arguing that they essentially gave the Houston company a monopoly on the production of natural gas. Some called for the government to nationalize the oil and gas industry.
Ultimately, Noble agreed to less generous terms, divested some of its holdings and moved forward with its development of Leviathan. Noble can continue to expand within its existing blocks in Israeli waters as well as explore other sections of the Mediterranean under the jurisdiction of other nations, such as Egypt. The region looks promising. In 2015, off Egypt, the Italian oil and gas company Eni found the Zohr field, which could prove more bountiful than Leviathan.
Elliott said Noble has no hard feelings. Rules, regulations and business practices of the U.S. oil and gas industry have developed over more than 100 years, he noted, while Israel is just getting started.
“It can be kind of frustrating for us,” Elliott acknowledged. “But that they were able to get through that whole process in five years is pretty phenomenal.”
Looking forward
Luvshis and his team also had a rocky start in Houston. Just two days they arrived, Hurricane Harvey made landfall, forcing their evacuation to Dallas and contributing to delays that kept them from getting their office in Greenway Plaza really running until the beginning of 2018.
Since then, Luvshis, who worked eight years in Economy Ministry before becoming Israel’s first energy consul last year, has pushed ahead with efforts to convince oil and gas companies to invest in Israel’s nascent industry. Those efforts received a boost in June, when Israel and the U.S. Energy Department agreed to establish a joint Center of Excellence in Energy, Engineering and Water Technology, to develop, share and disseminate technologies in areas important to the energy industry, including fossil fuels, cybersecurity, and energy storage and efficiency.
This collaboration with the U.S. industry should be bolstered by a sturdy, certain regulatory regime put in place for the development of Israel’s energy resources, Luvshis said. Israeli officials believe another 75 trillion cubic feet of gas is waiting to be discovered in its territorial waters, as well as several billion barrels of crude oil.
Israel plans to put another 20 or so offshore blocks up for auction in November. It has also sweetened the deal for foreign energy companies by allowing them to export more of the natural gas they produce in Israel.
Earlier this year, for example, Delek and Noble signed a $15 billion deal to sell natural gas to Egypt. Noble also has its on eye of two liquefied natural gas processing plants in Egypt, which would allow Noble to export more of the natural gas produced in the region.
In addition, Israel is developing the $7 billion Eastern Mediterranean gas pipeline, nicknamed East Med, that would run to Western Europe through Cyprus and Greece. Ultimately, it could reduce the European dependence on natural gas from Russia, a major concern given the West’s tense relations with the government of President Vladmir Putin.
“It’s a very ambitious project,” Luvshis said. “A couple years ago when we talked about this project, people thought we were hallucinating because it sounds like a dream.”
For now, Luvshis faces the reality of selling the energy story of his home country. He sees it as a long-term prospect but added that the time could be ripe for U.S. oil and gas companies to look overseas with commodity markets healthy again. After all, he said, there are more oil and gas fields than just the booming Permian Basin in West Texas.
“Prices are rising, and companies are looking for other opportunities beyond the Permian and the unconventional shale,” he said. “Israel is very keen to promote the arrival of new oil and gas companies. We want competition.”
Collin Eaton contributed to this report.
SOURCE
