[Marxism] Israel's energy bonanza

Marv Gandall marvgand2 at gmail.com
Wed Nov 6 19:49:05 MST 2013

Israel set to become major gas exporter
By John Reed in Tel Aviv
Financial Times
November 6, 2013

Israel is on the threshold of becoming a major energy power in the Middle East – with potentially game-changing consequences for geopolitics and economic relations in a volatile region – after a court decision unlocked the path to exports.

Executives at Delek and Noble told the Financial Times they are fast-tracking discussions on a range of export options for the much larger, still undeveloped Leviathan field, which lies about 30km to Tamar’s west, and holds an estimated 19tn cubic feet of gas – one of the industry’s biggest recent deepwater finds of its kind.

They are moving forward following a decision by Israel’s supreme court in late October to reject petitions brought by civil society groups and opposition politicians who questioned the right of Benjamin Netanyahu’s government to set aside 40 per cent of Israel’s gas windfall for exports without having consulted the Knesset, Israel’s legislature.

When Mr Netanyahu’s government set export policy in June, it estimated that gas sales outside Israel could bring the small, traditionally resource-poor economy a windfall of $60bn over 20 years.

“I think that now, after the Supreme Court made its ruling, the door is open,” says Gideon Tadmor, Delek Drilling chairman. “I am quite optimistic that we will fast-track the project.”

Delek and Noble are looking at a range of export options that could see total investments by the companies and their partners of $5bn to $15bn in developing Leviathan and possible pipelines or liquefied natural gas facilities needed to export its output.

The two companies say the export options they are considering include piping gas to Turkey, Greece, Jordan, the Palestinian Authority, or even Egypt, which is suffering gas shortages after the political unrest of the past two years. Delek and Noble are also deliberating over big-ticket investments in LNG, which would open up markets as far away as Asia.

“Many countries in the region, by using Leviathan gas, could reduce their electricity tariffs between 40 to 50 per cent,” says Yossi Abu, Delek Drillings chief executive. “This is a win-win situation for Israel and the neighbouring countries.”

One option they may pursue is a state of the art floating facility moored directly over the Leviathan field. Another is onshore LNG production either in Israel or in Cyprus, where Delek and Noble have rights to the Aphrodite field, and could pool its gas with Leviathan’s.

One of the most ambitious export projects being considered is an undersea pipeline from Leviathan to energy hungry Turkey, which would entail an investment of $2bn to $3bn. Noble and Delek have been sounding out potential Turkish customers and Taner Yildiz, Turkey’s energy minister, said at a conference in Istanbul last week: “Turkey is interested in Israeli gas.”

To transport Israeli gas to Egypt, Noble and Delek have studied options including reversing the flow in the Egyptian export pipeline that crosses the restive Sinai peninsula, or sending it via a new undersea pipeline to its neighbour’s two onshore LNG facilities.

Israel’s government is supportive of the notion of exporting, not only because of the royalties and revenues it will collect from the industry, but because of potential positive knock-on effects on traditionally strained relations with its neighbours.

However, Delek and Noble are reticent about the status of their negotiations because of the political sensitivities elsewhere in the Middle East around buying anything from Israel.

Political relations with Turkey have not recovered from a diplomatic fracture caused by Israel’s fatal storming of the Turkish Mavi Marmara flotilla heading to Gaza in 2010. Despite Mr Netanyahu’s apology in March, brokered by US President Barack Obama, political rhetoric on both sides remains rancorous, even if commercial relations are improving.

Inside Israel, the mood among members of the Knesset elected in January is deeply sceptical of big business and Mr Netanyahu’s rightwing government’s shepherding of the gas finds. Lingering resentments remain over the speed and manner in whichhis cabinet decided to export up to 40 per cent of Israel’s gas.

“The entire decision of the future of Israel’s natural gas was made behind closed doors, without transparency,” says Stav Shaffir, an MP with the leftwing Labour party, which supported the supreme court challenge. “It’s not a decision that can be made like that,” she says, snapping her fingers.

Delek and Noble still need to negotiate a lease for Leviathan. Another obstacle to developing the field is an antitrust probe into the two companies’ powerful position in the Israeli gas market that could potentially delay the project.

Whatever the outcome, one thing is certain: Israel’s energy independence has been transformed for years to come. At an even deeper seismic level below the gas, Noble and Delek believe offshore Israel has the potential for oil, and they plan to send a new drilling ship to begin looking for it in 2014.

More information about the Marxism mailing list