Israel's Energy Future

Just how well situated is the Jewish State compared to its aggressive neighbors?

Energy has always been the weak link in Israel’s thriving economy. Decades of digging and drilling yielded practically no hydrocarbons at all. Israel was forced to spend 5% of its GDP buying fuel from suppliers that did not have its interests at heart, and were often unreliable. At one point for instance, Israel purchased 40% of its natural gas from Egypt. But the pipeline across the Sinai has been bombed so many times there was often not enough time between explosions to get the gas flowing again. Post-Mubarak Egypt desperately needs the money to replace lost tourism revenue, but hatred of Israel trumps all.

The first brightening of this bleak picture came in 1998, when offshore drilling in Israel’s Mediterranean waters got under way. In 2000, a consortium led by Noble Energy of Houston struck commercial quantities of natural gas off the southern coast, west of Ashdod. By 2004, the Mari B field was in full production, with reserves of nearly 1 trillion cubic feet of gas. This remains the only currently producing offshore well in Israel.

But Noble Energy was convinced there must be bigger reserves waiting in deeper waters, and in 2009, diligent exploration paid off in a big way. The Tamar field, with 9 trillion cubic feet of gas, was the biggest offshore gas field found anywhere in the world that year. And the next year, Noble Energy struck it even richer with the 16 trillion cubic foot Leviathan field, further west of Haifa. That was the biggest offshore find of the decade. Together, these discoveries opened up entirely new possibilities. The Tamar field, with enough gas to supply all of Israel’s needs for decades, offered energy security, and the Leviathan field offered energy for export and billions of dollars a year in potential revenues.

Gas is scheduled to start flowing from Tamar in 2013 and from Leviathan in 2016. With the same consortium operating Mari B and Tamar and Leviathan, the Israeli government was very concerned about giving one group of companies a monopoly over its offshore gas. This monopoly has now been broken by other companies who’ve found rich pickings in the sea off central Israel. A three-dimensional seismographic survey of the Myra and Sarah fields northwest of Netanya and southeast of Leviathan has revealed 6.5 trillion cubic feet of gas waiting to be developed by a consortium led by the Israel Land Development Company.

Modiin Energy has a controlling interest in the Gabriella field in shallow water not far west of Tel Aviv, with an estimated 3.56 trillion cubic feet of gas, and the Yam Hadera field west of Hadera, with an estimated 1.4 trillion cubic feet.

Adira Energy, a Canadian company, is developing the Yitzhak field southwest of Netanya, with an estimated 989 billion cubic feet. And ATP Oil & Gas of Houston has partnered with Isramco Negev to develop the Shimshon field, with a best estimate of 2.3 trillion cubic feet.

Of course, Nobel Energy hasn’t rested on its laurels after Leviathan. It has identified 12 more prospects with 20 trillion cubic feet of potential gas in the territory covered by its licenses. And all of the fields mentioned have substantial quantities of oil waiting to be developed as well. The best estimate for the Gabriella field alone is 277 million barrels of oil.

Getting the most out of all these discoveries will take not just technical expertise and money, but strategic thinking and sound diplomacy as well. And that is what Israel has been practicing, with Greece and Cyprus in particular.

Israel has carefully cultivated its relations with Greece since early in 2010. Progress began with an unlikely but warm personal relationship between Prime Ministers Netanyahu and Papandreou. It intensified after Turkish-Israeli relations fell into a deep-freeze following the Mavi Marmara incident, and after the scope of the Leviathan discovery became clear. Face-to-face meetings between officials in Athens and Jerusalem, business and tourism delegations, sharing of intelligence, and joint exercises between the Israeli and Greek air forces all bore fruit when the Greek Coast Guard brought the 2011 version of the Gaza flotilla to a complete halt, and Israel tirelessly lobbied the EU to extend a helping hand to Greece in the face of its financial crisis.

Greece is ideally situated to serve as a hub for distributing Israeli gas to Europe, particularly since Turkey has rejected any notion of letting pipelines from Israel cross its territory. In return for giving Israel access to this market, Greece will earn much-needed revenue. Athens has yet to demarcate its Exclusive Economic Zone in the Mediterranean, largely because Turkey has threatened war whenever it tried to do so. There are believed to be big, unexplored reserves of oil and gas east of the mainland and south of Crete. With Israel firmly in its corner keeping Turkey at bay, Greece has a powerful motivation to finally declare its EEZ and fully develop those resources, taking advantage of the Israeli experience in extracting hydrocarbons from the same Mediterranean environment.

This mutually beneficial relationship is so compelling that it has survived the fall of the Papandreou government. The first official from the coalition unity government headed by Lucas Papademos to visit Israel was the Energy Minister. Giorgos Papakonstantinou, and he came eager to talk about Israeli gas and Greece. It’s worth noting that not long ago, Athens was the font of some of the most vehement hostility to Israel in all of Europe.

Pipelines from Israeli gas fields to Greece will pass through Cyprus, and here too, Israel has been busy polishing relations and facing down Turks. The formation that contains the Leviathan field extends into Cypriot waters, and Noble Energy is busily drilling there now. Ankara has insisted that Turkish-occupied North Cyprus must take a share of any gas from Greek Cypriot waters, and threatened to send its navy to block the drilling. But Israel maintained a strong naval presence nearby, and the US, EU, and Russia, none of whom recognize Turkish Cyprus, all affirmed the right of Greek Cypriots to develop their resources. After getting carried away with bellicose rhetoric, the Erdogan government found itself completely isolated. Drilling south of Cyprus has proceeded since late September without incident.

The administration of Cypriot President Dimitris Christofias has discussed a security alliance with Israel, and the Israeli air force has carried out exercises over Cypriot airspace. Cypriots in general are eagerly embracing closer ties with Israel and the prosperity coming their way with the development of gas fields, pipelines, and gas liquefaction plants.

The Arab Spring has turned into winter, with Syria a slaughterhouse, tourists in Egypt fleeing chaos and Salafists, and Islamists taking power everywhere, even in Tunisia. Meanwhile, the elements of a Jewish Spring are being quietly put into place – energy security, a new strategic position as an energy exporter, dramatically improved relations with Greece and Cyprus, the prospect of better relations with every country that will buy Israeli gas, and the satisfaction of seeing hostile countries punish themselves in their attempts to punish Israel.

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