Israel on its way to joining “the energy-rich super-elite”

Posted on March 31, 2011

"Don't worry. I know where I'm going!"

G-d says to Israel, “…let them suck honey out of the crag, and oil out of the flinty rock.” – Deuteronomy 32:13

It is no longer mere speculation that Israel is sitting on top of a vast supply of oil and natural gas. The question is not if, but when Israel will be able to take advantage of this seemingly miraculous turn of events. Israel as an energy superpower has gone from incredible to plausible to inevitable.

I’ve posted here and here about Israel’s energy-rich future. These stories become all the more interesting as we witness the turmoil in the Middle East, and the soaring of energy prices around the world.

You may already be familiar with the massive Leviathan and Tamar gas fields off the coast of Israel. They have been noted as among the world’s biggest recent gas finds. The Tamar field alone would meet Israel’s own domestic needs for decades to come, and the even bigger Leviathan field could all go towards export.

Ching, ching…
As I noted here, Israeli ambassador to the UN, Dore Gold, wrote recently in the Jerusalem Post that:

“All the undersea gas fields together have about 25 trillion cubic feet of gas, but the potential for further discoveries is considerably greater, given that the US Geological Survey estimates that there are 122 trillion cubic feet of gas in the whole Levant Basin, most of which is within Israel’s jurisdiction. After the Leviathan discovery these numbers could go up further.”

Now that the gas fields off of Israel’s coast is reality and already in the stages of development – in fact, ahead of schedule, with Tamar expecting to deliver its first sales in 2013 – eyes have turned to the huge deposits of shale that rests like a coagulated sea of oil underneath Israel.
Peter Glover writing in the Energy Tribune writes (below) states:

“As if the sudden emergence of Israel on the natural gas stage was not enough, a new plan to develop Israel’s significant shale oil and gas deposits south-west of Jerusalem could put Israel alongside the energy-rich super-elite.”

The article cites Harold Vinegar, the former chief scientists of Royal Dutch Shell, who has:

“…devised an ambitious plan that would, if successful, turn Israel into one of the world’s leading oil producers. Now chief scientist for Israel Energy Initiatives (IEI), Vinegar maintains that the 238 sq km Shefla Basin holds the world’s second largest shale deposits outside the United States, from which around 250 billion barrels of oil – about the same as Saudi Arabia’s proven reserves, could be extractable. IEI estimates the marginal cost of production at between US$35 and US$40 per barrel. That, says Vinegar, would be cheaper than the US$60 or so per barrel it would cost to extract crude oil in more hospitable locations such as the Arctic, and even favorably with the US$30-US$40 in Brazilian deepwater.”

Now, before all the environmentalcases start in with their knee-jerk  kanipshin fits, Dore Gold explains that while oil shale mining used to be a dirty business that used up tremendous amounts of water and energy, the technologies being developed for Israeli shale, will be able to separate the oil from the shale safely and cleanly, and that these techniques will actually produce water, rather than use it up.

For a country like Israel where water is a constant concern, this is great news.

So when might the “land of milk and honey” be able to add oil to its list? Harold Vinegar says IEI, which is owned by the American telecom giant IDT Corp, anticipates starting commercial production by 2020. It would likely begin with only about 50,000 barrels a day, a fraction of the 270,000 what Israel currently consumes, but a significant step in the right direction.

No expert am I, but it seems to me that if this were made a top priority, the time table could be moved up, and the amount of oil extracted raised considerably. If the development of the Tamar and Leviathan fields could move ahead of schedule, so could the Shefla Basin shale fields.

Lastly, although most attention seems to go towards Tamar and Leviathan, and now the huge potential locked up in Israel’s immense shale fields, a new study that is also currently underway near Israel’s Hula Valley is showing “significant” onshore shale-gas potential, as I posted about here. So, perhaps more good news is on the horizon.

If the world could put its hate-on for Israel back in its pants for a minute, they might see that this news could prove among the best the world has heard in decades.

For one, Jordan has even bigger shale deposits than Israel, which means Israel’s neighbor could gain handsomely by Israel’s success.  Israel would no doubt be glad to share it’s expertise and technology with this semi-peaceful neighbor. It would provide loads of jobs for their 70% Palestinian population, and such cooperation would drastically lessen the chance of future flare-ups.

Secondly, a future Israel, as a free, democratic and now oil-rich nation, and not a member of the OPEC den of thieves should also be a welcome addition by all countries who are sick and tired of being held hostage to OPEC.

Imagine what a different world it would be in the U.S., Canada, and Israel developed their immense reservoirs of shale oil and natural gas. The free world might actually deserve the appellation – ‘free’.

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Energy Tribune - Mar. 30, 2011 – First it was two major offshore natural gas field discoveries. Now it’s an ambitious plan to exploit Israel’s massive shale oil deposits in the Shfela Basin. The gas finds alone will make the country self-sufficient in natural gas for decades and debut Israel as a key regional energy exporter. The latter, if successful, would quite simply catapult Israel into the energy superpower league.

Not surprisingly domestic excitement over Israel’s prospective new energy status is palpable, with the state’s energy insiders barely able to contain themselves, and with good reason.

Levantine riches

Speaking at the CERAWeek conference in Houston in early March 2011, CEO Charles Davidson, chairman of Noble Energy which, with Israeli partners Delek Group and Ratio Oil, made the Tamar natural gas discovery, announced that the $3 billion investment in the Tamar field will supply the Israeli domestic market for decades. Currently appraised at 8.4 trillion cubic feet (Tcf) Tamar is expected to deliver its first sales in 2013.

But what really drew the attention of potential suitors for Israeli natural gas was the announcement of the discovery of the Leviathan natural gas field as 2011 dawned. Lying to the north-west of Tamar, Leviathan holds around a further 16 Tcf, almost all of which could be slated purely for export. According to businessman Yitzhak Tshuva, part owner of Leviathan, its gas too will be ready for production by 2013, well ahead of schedule. But even at a combined total of 25 Tcf, Tamar and Leviathan only represent around a fifth of the 122 Tcf the US Geological Survey estimates lies in the Levantine Basin, much of which falls within Israeli jurisdiction.

Just how Israel’s vast reserves are to be monetized is yet to be seen. Already anational debate is raging in Israel over the royalties from the revenue and taxes that petroleum firms should pay the state. In the few years since the state’s changeover from oil to gas powered electricity generating plants Israel is already believed to have saved around $5 billion in revenue. With the state’s unique geological position however, Israel’s options for selling the gas include Europe, China or even India. In terms of development, a partnership with Cyprus tying in its gas fields and co-operating on building subsea gas pipes makes sense. And Greece has proposed becoming a distribution hub for eastern Mediterranean gas throughout Europe.

As if the sudden emergence of Israel on the natural gas stage was not enough, however, a new plan to develop Israel’s significant shale oil and gas deposits south-west of Jerusalem could put Israel alongside the energy-rich super-elite.

Vinegar’s Oil Plan

Harold Vinegar, the former chief scientists of Royal Dutch Shell, has devised an ambitious plan that would, if successful, turn Israel into one of the world’s leading oil producers. Now chief scientist for Israel Energy Initiatives (IEI), Vinegar maintains that the 238 sq km Shefla Basin holds the world’s second largest shale deposits outside the United States, from which around 250 billion barrels of oil – about the same as Saudi Arabia’s proven reserves, could be extractable. IEI estimates the marginal cost of production at between US$35 and US$40 per barrel. That, says Vinegar, would be cheaper than the US$60 or so per barrel it would cost to extract crude oil in more hospitable locations such as the Arctic, and even favourably with the US$30-US$40 in Brazilian deepwater.

IEI, owned by the American telecom giant IDT Corp, anticipates starting commercial production by 2020, producing 50,000 barrels a day initially. While that figure is a fraction of the 270,000 barrels per day Israel currently consumes, Vinegar maintains it is a further key step toward achieving energy independence. Vinegar proposes thermal recovery for Israeli shale oil.

The IEI shale oil project has already attracted serious interest from investors. In November last year, Jacob Rothschild and media mogul Rupert Murdoch bought an $11million stake in Genie Oil and Gas, the division of IDC that is the parent company of IEI. Genie’s advisory board also includes former vice-president Dick Cheney and hedge fund investor Michael Steinhardt. But it seems development funding is likely to be no bar to the Shefla project. Vinegar states, “Funding is not needed for the pilot and demonstration, although once we are getting 50,000 barrels per day, we would want to have a partner. We have been approached by all the majors.”

Not that it’s likely to be all plain sailing for the Shefla shale development. The size of the geological resource still needs to be confirmed. Environmental concerns and issues over whether the technology will work in situ also need to be addressed. But when it comes to the commercial long-term viability of the project, Vinegar believes it is validated, predicting, “the price of oil is going to continue rising” and “by 2030, will be around $200 per barrel.”

Land of energy promise

All of which could amount to a significant geopolitical power shift for the troubled wider region. First and foremost the clutch of new gas and oil initiatives would secure Israel’s longer-term energy security. Second, the social upheaval of neighboring, energy-producing, Arab states may also soon find governments in the West embarking on their own domestic shale revolutions – becoming less energy-dependent on Middle East oil and gas. For Israel, it would also mean there could be no repeat of the economic ransom to which the country was held in the 1970s when a pan-Arab energy embargo forced Israel to turn to the expensive and unpredictable international energy market.

The full extent of Israel’s subsea natural gas and onshore shale oil deposits will likely be confirmed over the coming year. But the old joke that Moses got it wrong, turning left and settling for ‘milk and honey’ instead of turning right and getting the oil, is already redundant. Israel is looking every bit a land of energy promise after all.

RELATED POSTS ON ISRAEL’S BRIGHT FUTURE:

• Tiny Israel to become oil, gas, and solar energy Goliath
• Spengler: Israel to become regional superpower by end of century as population hits 24 million
• New data: Israel may have 3rd largest deposit of oil shale in the world
• Another big energy find in Israel’s future?

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