Israel’s Historic Development in Energy

An historic development has marked Israel’s energy scene in recent months. In January 2009, a large natural-gas reserve was discovered at the Tamar 1 drilling site (90 kilometers west of the Haifa shoreline), and in late March there was a report of a natural-gas discovery at the Dalit 1 drilling site (60 km. west of the Hadera shoreline). The potential of this site is still being examined.

These discoveries come on the heels of other discoveries of natural gas in the Mediterranean off the coast of Israel, starting with the discovery of the first large reserve in 1999, west of the Ashkelon shoreline. The amount of gas at Tamar 1 is estimated to be at least three times the amount discovered in the past off Ashkelon and Ashdod (the Yam Thetis site), and the value of the gas is assessed at some $15 billion.

On January 18, 2009, following the companies’ reports of the gas discovery at Tamar 1, national infrastructures minister Binyamin Ben-Eliezer informed the government: “We are witnesses to an historic as well as formative moment for the Israeli energy market.” He added: “If drilling at the Tamar site actually produces the amounts quoted, then Israel’s dependence on other supplies will decrease, though not disappear altogether.”

Natural gas is created by bacteria from organic matter and is a mixture of different gases, with methane being its chief component. The source for much of the organic matter in our region is primeval sediment from the Nile River deposited in the Mediterranean. There are also large natural-gas deposits off the Egyptian shoreline and the Gaza Strip in the sediment course of the Nile.

The new discoveries of gas off of Israel’s coast are made possible by innovative deep-sea drilling technologies, but their cost is high. For example, the depth of Dalit is around 1,200 meters, and the drilling is planned to reach a depth of some 3,700 m. The estimated cost of the drilling operation stands at $50 million.

Natural gas is the cheapest energy product on the Israeli market. Compared to other fuels such as mazut, diesel and coal, it burns relatively cleanly and emits fewer pollutants and hothouse gases. Building power stations operating on natural gas is relatively cheap; they need relatively little space, and they can be built anywhere, unlike coal-burning power stations that must be built on the shore – a densely populated and expensive area.

The advantages of using Israeli gas compared with using imported kerosene or gas lie in the direct income generated to the country’s Treasury as a result of royalties and taxes and a contribution to Israel’s balance of payments. The Israeli gas revolution also intensifies the search for natural gas and fuels in Israel and thereby contributes to employment in the energy sector.

The major drawback of using natural gas compared with kerosene and coal is the difficulty involved in its storage and transportation in containers in its natural state. The cheapest and most efficient way to market it to consumers is by an infrastructure of gas pipes. Therefore, the development of the gas market depends on the parallel development of three components: searching for gas, delivering the gas and consuming the gas.

Nonetheless, it is possible to turn natural gas into a liquid (LNG) at condensing installations, which would allow the product to be moved without a network of pipes. Israel is preparing to operate LNG installations starting in 2015.

The National Infrastructures Ministry estimates that there will be a gap of some years between the time the Tamar 1 site is fully developed, and ready to supply gas, and the expected depletion of the gas at the Yam Thetis site in 2012. In the interval, Israel would, to a large extent, depend on Egyptian gas and might even suffer a natural-gas shortage.

The discovery of gas at the Dalit 1 site is likely to change this forecast, if the anticipated amounts are indeed there. In light of the data on Dalit 1 and its proximity to existing infrastructure for transporting the gas by sea (presently serving the Yam Thetis site), it would be possible to begin moving gas from the site as early as 2012. This would close the expected gap between the depletion of the Thetis Sea site and the start of supply from Tamar 1, and even meet the rising demand expected to occur by the new gas-based power stations.

Local natural gas is important in reducing Israel’s energy dependence. More than most nations in the world, the State of Israel has a clear interest in reducing its dependence on the imports of critical resources, including energy. Most of Israel’s energy sources are located in remote areas, the supply routes are narrow and limited and it has experience (after the Yom Kippur War) with oil being used as a weapon.

Furthermore, Israel is liable to suffer from disruptions to its energy supply resulting from events not necessarily connected to the Arab-Israel conflict. Like other countries, for example, Israel suffered an oil shortage during the Islamic Revolution in Iran, which caused skyrocketing prices and supply difficulties.

Egypt is Israel’s only source for imported natural gas, although in the past, importing gas from Russia through Turkey and the Palestinian Authority was considered. The considerations motivating Israel and Israel Electric to purchase Egyptian gas included the large gas reserves in its territory, the desire to vary the country’s gas supply sources, initiating competition between the Egyptian and the Israeli suppliers, and political considerations (the natural-gas agreement is one of the hallmarks of peace). These considerations remain valid.

Nevertheless, because of the increasing dependence on gas by Israel’s electric system, a critical infrastructure for any Israeli economic activity and growth, and the resistance of the Egyptian opposition to exporting gas to Israel, the long-term viability of this particular supply channel is questionable.

One such challenge occurred in November 2008, when a Cairo court rendered the gas agreement signed with Israel in 2005 void as a result of a petition submitted by the opposition, which protested the low price of the gas in Israel. The regime appealed the decision and the ruling was reversed, but at the same time raised the cost (in an agreement made on February 22, 2009).

In the course of the public debate about the sale of gas to Israel, the Egyptian regime made it clear that the supply of gas to Israel was a function of the peace agreement between the two nations and that Israel was not asking for preferential terms compared with Egypt’s other customers.

In any case, according to media reports, after the discovery of the Tamar gas field, EMG (the Egyptian gas supplier) said it was not worried about the implications of the discovery because, on the basis of projections of the National Infrastructures Ministry, the Israeli gas market would need both the quantities of gas guaranteed it by the Egyptians and the gas from Tamar.

As far as the Palestinians are concerned, it is in Israel’s best political interests to develop Palestinian gas fields. However, the continuing conflict, the Hamas takeover of the Gaza Strip and the discovery of gas in Israel reduce the possibility of taking advantage of these reserves in the foreseeable future.

In conclusion, the discoveries of natural gas will supply the Israeli energy market with relatively cheap and environmentally friendly energy. They vary Israel’s energy sources and are in line with Israel’s interests in reducing its dependence on energy from external sources. Nonetheless, it is important to accelerate the rate of development of other alternatives to oil and coal, and in particular to develop the field of renewable energy. (INSS)

The Institute for National Strategic Studies (INSS) is a policy research and applied strategic learning organization within the National Defense University, serving the US Department of Defense, its components and interagency partners.

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