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Israeli Experts Stir Gas Export Policy Debate
The opinions of two Israeli scientists on the country�s projected future natural gas demand could complicate the current debate in Israel over hydrocarbon export policy and impact a decision in coming weeks over how much natural gas will be made available for export. Reports in the Israeli media said a study had been prepared in March by two scientists at the Ministry of Energy and Water Resources, Sinai Netanyahu and Shlomo Wald, and submitted to the Zemach Committee, which is charged with preparing recommendations for the government on national natural gas policy, particularly gas exports. The study was not made public until recently. The committee presented to the government in April its preliminary recommendations, which suggested that Israel hold enough natural gas in reserve to cover the country�s demand for 25 years � a total of 420bn cu ms (14.8 trillion cu ft) by 2040. The committee is headed by the Director General of the Ministry of Energy and Water Resources Shaul Zemach (MEES, 9 April). Deliveries of Israel�s own natural gas from the Tamar field are due to arrive onshore in April 2013. Meanwhile, the country is coping with supplies from small fields like Noa and Pinnacles, and importing expensive liquids as power demand soars in the summer heat.
The release of the scientists� report follows a statement made on 10 July by the Director of Israel�s Natural Gas Authority, Shuki Stern, that the authority had reassessed its estimate for projected demand to 501 bcm through 2040. At present, Israel�s offshore gas resources, based on discoveries made by Noble Energy, amount to some 30 tcf (850 bcm).
�We believe Israel should increase its use of natural gas by 2020 and should not export gas,� Mr Netanyahu and Mr Wald said in their report. �The Natural Gas Authority�s estimates are lacking. There is a gap of 100-150 bcm between the demand projections that were presented to the committee and the most recent projections. The gas reserves are likely to last less than 40 years.� The scientists said that Israel would consume 650 bcm (22.9 tcf) by 2040 and after that the country would require 40 bcm/year. This projection means that even if Israel chooses not to export gas, it will exhaust its entire offshore reserve by 2055, the scientists said, noting that not all the reserves may be commercially extractable. �The more gas we use now, the sooner we�ll need to start importing gas or oil, or to find alternative technology,� they said, according to Ha�aretz
newspaper. �This means that quickly exhausting the reserves will leave us without electricity, while gas alternatives will be very expensive, dangerous, polluting or import-dependent.� They also stated that alternative technologies are inferior to natural gas.
Regarding future market conditions, the scientists wrote that careful consideration �should be put into determining whether Israeli gas suppliers would have advantages over their international competition, particularly in Europe, Asia and North Africa,� arguing that competitors have the advantage of economy of scale, while Israeli companies are small players. �Israel will never be a global player in the natural gas market,� they said in the report. Furthermore, they argue that gas exports will not provide Israel with a geopolitical advantage: �Israel�s geopolitical gains from exporting gas would be minimal,� they said. �In comparison, the importance of keeping this gas in strategic reserve is great.�
The discoveries in the East Mediterranean, all but one of which has been made in the Israeli offshore (one is in Cyprus), have generated considerable speculation about the region�s potential as a new gas source and what impact it may have on political relations between countries in the region. It is clear that Noble Energy, which has made six consecutive gas discoveries in the East Mediterranean (including the one in Cyprus), and its main Israeli partner, Delek Energy, is keen to monetize its discoveries. Several Israeli-led groups are either drilling or preparing to drill and they, too, will likely be looking for a return on their investment beyond the Israeli market. The government is expected to decide on gas export policy in coming weeks, and that decision will likely impact future offshore exploration and development in the Israeli offshore.
Should Israel decide not to export its gas reserves or restrict them to a facility based in Israel, as recommended by the Zemach Committee, the current view of the East Mediterranean as a new gas resource may change. Much has been made of energy cooperation between Israel, Cyprus and Greece, but that cooperation is based on the assumption that Israel would export gas.
Meanwhile, Cyprus looks to proceed with its plans to launch its own hydrocarbon industry through the creation of its own LNG facility, initially with a capacity of 5mn tons/year, whether Israel is involved or not. Talks on this issue are in very early stages and first the government must come to an understanding with Noble Energy over the delivery of Block 12 gas to the island for domestic power generation. Resources in the Aphrodite structure in Block 12 are estimated at 7 tcf (198 bcm), enough to operate one LNG train, Noble Energy has confirmed to MEES. Recent statements by government officials show that Cyprus intends to proceed in the direction of a gas exporter if all the prerequisites line up � such as strategic partners, financing and expertise. Should an LNG facility take shape in Cyprus, it would likely pose an attractive option to Israeli companies. © Copyright MEES 2012.
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