Israel giddy over new offshore gas find

The confirmation last week of the largest underwater discovery of natural gas in a decade off Israeli shores is stirring hopes that Israel could become energy independent.

For decades, Israelis searched for energy in vain. The promised land for oil and gas, most assumed, lay elsewhere in the Middle East.

But the confirmation last week of the largest underwater discovery of natural gas in a decade off Israeli shores has made many in the Jewish state dizzy with talk of becoming a global energy power possessing reserves worth tens of billions of dollars.

Despite major export hurdles and the fact that the offshore fields represent less than 1 percent of worldwide gas reserves, the finds are being hailed as a crucial pillar for the local economy with the potential to shift the geopolitical balance relative to oil-rich Middle Eastern neighbors like Saudi Arabia.

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"Israel has always been seen as a desert country that scratches out a living first by agriculture and then by high tech, but never an economic powerhouse, and always dependent on outside sources for energy,’’ says Gerald Steinberg, a political science professor at Bar Ilan University. "This changes those conditions significantly.’’

Energy independence?

Last Wednesday, the exploration venture between Houston-based Noble Energy and Israel’s Delek Energy Systems Ltd., announced that its Leviathan underwater field contained some 18 trillion cubic feet of gas. Less than two years ago, the partners found 8 trillion cubic feet of gas in the near by oil field of Tamar.

Energy experts say the natural gas from Leviathan and Tamar is enough to supply Israel’s domestic market for decades, eliminating a dependence on foreign energy sources. That’s a sea change from the 1970s, when Israel was hemmed in by an economic boycott of Arab countries and forced to rely on expensive and unpredictable oil purchases on the international spot market.

Delek owner Yitzhak Tshuva quickly declared "a day of celebration for all of us. The state of Israel is an energy independent country."

A global exporter of gas?

The finds are substantial enough that they have also fueled speculation that there will be enough gas left over to export to Mediterranean neighbors like Italy and Greece.

The Israeli financial daily Globes suggested that countries as far away as South Korea and Japan might be interested in purchasing the gas reserves, giving the Jewish state newfound economic and political leverage.

Just how far reaching are the potential changes for Israel?

"For most of Israel’s history it has potentially been an energy-starved country. These discoveries are really manna from heaven. Having its own supply of natural gas will give Israel long-term energy security,’’ says Brenda Shaffer, a professor of political science at Haifa University who focuses on energy politics.

Over the past decade, Israel began transitioning from coal- to gas-powered electricity power plants – a shift that will continue through 2020. The discovery of Leviathan and Tamar will reduce its dependence on neighboring Egypt as a supplier. Having a large supply of natural gas just off its shores will lower energy prices for industrial and household consumers.

Not an 'international game changer'

Still, Ms. Shaffer says she doesn’t consider the find "an international game changer."

The dimensions of the gas fields are modest on an international scale: reserves in neighboring Egypt and in Nigeria are four and 10 times bigger, respectively.

And there are obstacles to overcome.

The finds have touched off tension with Lebanon, which argues that the fields extend under the undetermined border area between the two countries. They have also sparked a bitter fight inside Israel about how much royalties and tax revenue the government is entitled to.

Also, exporting gas is much more difficult than oil because it requires the construction of expensive pipelines or plants to liquefy gas for shipping. Analysts estimate that it will cost up to $10 billion to build the necessary export infrastructure, a project that will require many years to complete. Only a discovery of oil could turn Israel into an exporter relatively quickly.

"There are many offshore and onshore gas projects in the world, but they are not developed because there are no available markets,’’ says Amit Mor, chief executive of Echo Energy Ltd. "Although the findings are of major importance for the domestic market, they don't place Israel as a major energy power. We are still not Saudi Arabia.’’

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