July 21, 2011

Fueling Israel's Future

By Alex Joffe

Are abundant natural resources a blessing, or a curse? This is the sort of question that economic theorists love to play with, usually concluding that, depending on other factors, they can be either or both. Israel, thus far burdened with a crippling dependency on imported oil and gas, has had astonishing success in developing its human resources—so much so that it has flourished economically even in the current global recession. Would it have done even better with adequate sources of domestic energy? Or worse? A formerly theoretical dilemma is poised to become a pressingly practical one.

Trillions of cubic feet of natural gas have been discovered in several titanic fields off Israel's coastline. They promise both an abundance of domestic energy, as much as 200 years' worth by some estimates, and the possibility of the country's becoming a major energy exporter. The total value of the gas is currently worth close to a half-trillion dollars. On the macro level, and from the point of view of ensuring the country's national security, the prospective boon is almost unimaginably beneficial. The question, as always, is what is entailed in realizing it, and how to mitigate any attendant social and political costs.

Begin with the issue of where to locate a gas terminal. Israel's coastline is 170 miles long, the site of several cities and numerous competing uses, including ports, water-desalinization and sewage-treatment plants, military operations, and recreation. Thanks in part to ecological changes in the Nile delta (themselves the long-term effects of the Aswan high dam built in the early 1960s), the coastline is also being eroded and becoming more vulnerable to storm damage. Millions of Israelis, Jews and Arabs, vie for access to the few parks and undeveloped beaches on the seafront.
One pressing issue is strategic. Gas-receiving terminals include the infrastructure to process raw natural gas and remove contaminants, as well as storage tanks and links to distribution systems. They may also include facilities to create liquefied gas for transportation and storage by radically reducing its volume. Such facilities have the explosive potential of small nuclear weapons. In Israel's case, any such facility will also automatically become a major target for adversaries ranging from Hamas to Iran. Already the single pipeline carrying natural gas from Egypt to Israel and Jordan has been repeatedly attacked since the fall of the Mubarak regime, and the electrical-power stations at the two coastal towns of Hadera and Ashkelon have been targeted by, respectively, Hizballah and Hamas rockets.
If the strategic implications of locating a gas terminal are significant, the domestic aspects are almost equally problematic. One plan would have placed the terminal at Dor, just south of the Hadera power station, effectively cutting through a beachfront kibbutz, nature reserve, and major archaeological site. Another proposal would expand the existing gas terminal at Ashdod, which serves a smaller offshore field. In both cases, those affected would be among the less powerful sectors of Israeli society, kibbutzniks and residents of outlying cities. (For both strategic and domestic reasons, there is no chance the terminal will be located anywhere near north Tel Aviv or its affluent suburbs.) And in both cases the sites have already been targeted by rockets.

More recently a proposal has emerged to locate a floating liquefied natural-gas terminal a few miles off the shore of Hadera, in what would amount to a giant ship that could temporarily move out of range of missile and other security threats. Australia is building a similar facility 120 miles off its western coastline, at a cost of $10 billion. In Israel, the state will of course remain responsible for its citizens' security, but the size of the price tag inevitably raises the vexing question of who will pay for the infrastructure, and who will enjoy the proceeds.
The Israeli and American companies that have invested hundreds of millions for exploration stand to reap a windfall of billions. In January, the Israeli cabinet overwhelmingly approved taxing oil and gas profits at between 50 and 62 percent, effectively doubling the tax rate under which exploration had been launched. The new rates are in line with those in most Western countries, but the change prompted a complaint from the U.S. State Department about the deleterious retroactive effect on American investors. For their part, some Knesset members have been railing angrily about "greedy tycoons." Prime Minister Benjamin Netanyahu has promised that the state's share will be allocated toward education and security, but these debates can only become more heated, and more polarized, as time goes on.
No less fraught are the regional and international implications. Israel's gas discoveries have prompted negotiations with Cyprus regarding the delineation of the two countries' maritime borders and exclusion zones. Some entrepreneurs are talking about an undersea pipeline heading toward Europe. And, as has been well reported, there have been threats from Lebanon, which has already accused Israel of stealing "its" offshore natural gas.
Just south of the national park at the imposing ruins of Roman and Byzantine Caesarea, including the remains of the ancient aqueducts that supplied much-needed fresh water, and of the modern town of Caesarea that is home to some of Israel's elite citizens, lies the Hadera power station. Its smokestacks dominate the horizon; a jetty protrudes offshore to carry coal from cargo ships.
The view from Caesarea beach thus already offers a juxtaposition of old—very old—with new infrastructure, as well as of the conflicts and divides that characterize Israeli society internally and its relations with its neighbors without. One can only hope that, with agility and political wisdom, the Jewish state will successfully navigate its course between the blessing and the curse of immense amounts of fuel, and the forms of power that come with it.
Alex Joffe is a research scholar with the Institute for Jewish and Community Research.

The Natural Gas Solution  Shlomo Maital,  Jerusalem Post.  What are the options for processing and utilizing Israel's bonanza?  SAVE

Protecting the Pipeline  Amiram Barkat,  Globes.  Terrorist attacks concentrate on production facilities and, still more, on transportation and distribution networks—a reason to locate as much infrastructure as possible offshore.  SAVE