The Jerusalem Post wrote in an article yesterday that an offshore transmission buoy would begin operating today, supplying liquefied natural gas to Israel. Israel’s offshore Tamar gas field won’t begin production until April, but the offshore buoy is capable of supplying 4 -5 million cubic meters per day until Tamar’s production comes online. The Israeli government estimates that this new supply channel of natural gas will save the their economy 500 million NIS ($135 million) in just the first few weeks of operation, and billions in the next few years. Energy transferred from the new natural gas supply will generate 3,000 to 4,000 megawatts per hour (30,000 – 40,000 homes). This new supply is a milestone in Israel’s 80/20 goal, to have 80% of the country’s electrical energy needs supplied by natural gas. When Israel’s recent natural gas discoveries come into production they will be capable of supplying 100% of their natural gas needs without imports and export natural gas to other markets.
(from Natural Gas Asia) Delek Drilling-LP (DEDRL) and its partners in Israel’s Tamar gas field have signed a $5 billon agreement to supply Dalia Power Energies Ltd. with natural gas for 17 years.
Bloomberg reports that Tel Aviv-based Dalia Power is building a power station using natural gas at the Tzafit site in central Israel. Once completed, the plant would supply some 8 per cent of national energy consumption, making it one of the country’s biggest privately operated power stations. Israel is encouraging the development of independent power producers to introduce competition in a market monopolized by state-owned Israel Electric Corp. “This is one of several deals that we expect to come,” said Richard Gussow, an analyst at Deutsche Bank AG in Tel Aviv.
In November of last year, South Korean giant Daewoo signed a deal with the partners in the Tamar field, (Noble, Delek Group and Isramco Inc.) to develop the Tamar gas field. Daewoo expects to produce liquefied natural gas from the field by the end of 2016. Estimates put the field to have 240 billion cubic meters of natural gas.
US Ambassador to Israel Dan Shapiro recently visited the Solitaire vessel which is laying the pipeline for the Tamar gas field in the east basin of the Mediterranean. The “Solitaire” is the largest pipe-laying ship in the world at 300 meters long and 96,000 tons. When fully operational she has a crew of 420, a pipe carrying capacity of 22,000 tons and a pipe lay speed of more than 9 km a day. This gas pipeline will travel to a pumping station on the coast of Northern Israel where it will be joined to Israel’s gas pipeline infrastructure supplying, among other needs, the nation’s electrical generating stations.
Ratio is the investment bank’s stock pick in the energy sector.
Leviathan partner Ratio Oil Exploration (1992) LP (TASE:RATI.L) is Barclays Capital’s top pick in Israel’s energy sector. The bank reiterates it “Overweight” recommendation but lowered its target price from NIS 0.74 to NIS 0.71, still a 69% upside on today’s opening price of NIS 0.41.After a four-day road show with Ratio CEO Yigal Landau and Geologist Josh Steinberg, Barclays analyst David Kaplan says that the company compares favorably with its European peers. “Even in our worst-case scenario where we drop the oil targets from our valuation entirely we still see 13% upside from the current share price,” he says. Under the most optimistic scenario, which include the oil prospects and the LNG facility, Barclay’s valuation is NIS 2.27 per share – 441% above the current share price
Kaplan says that Israel current offshore discoveries at Mari-B, Tamar, and Leviathan, are only the first in the Levant basin. While it is clear that there will be disappointing drills, he believes that current best estimate of 25 trillion cubic feet of natural gas “is still the tip of the iceberg,” citing a 2010 US Geological Survey report, which estimates 122 trillion cubic feet of gas and 1.6 billion barrels of oil in the Levant basin.
Kaplan says that Ratio, with $100 million in cash and no debt, is properly capitalized for its 2011-12 capital expenditure plan, which includes bringing in a marine operator for its Gal license (south of Leviathan), and the upcoming Leviathan 3 exploratory well and the resumption of the Leviathan 1 well to oil targets in deeper strata.
Amount of natural gas and economic implications of discovery at Mediterranean Sea site yet to be determined.
A deeper layer of natural gas has been discovered at the Tamar field, off the coast of Haifa, according to a report published on Thursday by Delek Drilling and Avner Oil Exploration.
The impact of the newly discovered reserve has not yet been analyzed nor released in full. The significance of the newly discovered structure will depend on the amount of natural gas at Tamar and on the estimations of additional layers in other areas of the Mediterranean Sea that have not yet been discovered.
The new reserve, ‘Layer D’, was discovered beneath ‘Tamar 3′, and is said to be up to 25 meters wide.
According to the report, Noble Energy – the American partner leading the consortium – is gathering data on Layer D and analyzing the implications of the extent of the reserves at Tamar. It is currently not possible to determine the size and economic implications of the newly discovered reserve.
Noble owns 36% of Tamar, while Isramco Negev owns 28.75% and Delek Group, controlled by Yitzhak Tshuva, has a 31% percent stake through two units with equal shares of 15.6% each, Avner Oil Exploration and Delek Drilling.
The Tamar site is the largest natural gas discovery in Israel and plans on selling natural gas to Israel in 2013.
The Lebanese proposal of its maritime border with Israel that is currently under dispute does not include the Tamar and Leviathan gas prospects.
The Jerusalem Post reported this week on an assessment from the Swiss based financial services giant UBS, that a significant oil find could have a greater impact to Israel’s economy than the recent massive natural gas discoveries offshore.
UBS analysts, Roni Biron, Ziv Tal and Reinhard Cluse wrote in a report on the Israeli gas and oil sector that: “Our calculations suggest that, in the event of success, oil could potentially deliver a boost to GDP growth, the budget and the external balance that might potentially be even bigger than the impact from natural gas.
“This would also imply a larger appreciation potential for the shekel and an even greater requirement to manage the resulting macroeconomic challenges through a carefully managed sovereign-wealth fund.”
Simply put, UBS analysts are saying that discovering oil could mean more to Israel’s economy, trade balance, domestic budget, value of the shekel and long term national wealth than the recent gargantuan offshore natural gas finds that will make Israel both import independent and a major exporter. Not to mention (they didn’t) that being oil and gas independent would add significantly to Israel’s national security.
The UBS analysts reminded readers that the Leviathan and Tamar fields were the world’s largest gas discoveries in the past decade, that Tamar would be sufficient for all of Israel’s domestic needs, making Leviathan available for 100% export. They reported, “natural- gas exports from the Leviathan field will begin in 2017 at almost $3 billion per year, before rising to almost $6 billion in 2020.”
$6 billion per year from natural gas exports – that’s significant! What’s more significant is that the UBS report was about how a oil could have a greater impact.
In a March 11, 2011 Jerusalem Post article Dore Gold, president of the Jerusalem Center for Public Affairs and former Israeli ambassador to the UN stated that Israel’s newly discovered fossil fuel reserves could ‘revolutionize the global energy sector’.
Dor stated in the article, “Libyan oil accounts for less than 2 percent of world oil production, yet the revolt against Muammar Gaddafi has managed to shoot up the price of oil to more than $100 per barrel in the last month.”
The article goes on to report that, at the same time Israel holds the world’s third largest oil shale deposits and, because Israel’s Tamar gas field is capable of supplying the country’s domestic natural gas fields for the next twenty years, 100% of the gas harvested from the Leviathan field (estimate at twice the volume as Tamar) could go to export markets.
What does this mean? As Middle East oil supply from Arab countries becomes more expensive and more politically contentious, Israel’s energy exports from existing and pending discoveries should be coming online.
Bottom line: Israel energy exports in the near future could very well change the political and economic landscape in the Middle East. With Arab political regimes falling apart at the seams and oil prices spiking with the evening news, the fact that the only stable democratic government in the region and America’s best friend (yes, it’s still true) in the Middle East may very soon be one of the world’s energy exporters is a comforting thought. Go Israel!
Back in December I wrote “Egyptian Gas Deals Threaten Tamar Exploration” and a reader asked (I paraphrase), “What does Egypt have to do with oil and gas in Israel?”
As we’ve watched a revolution in Egypt unfold from our TV screens in the last two weeks, we now know the answer to our reader’s question … plenty!
Al Jazeera reported on Saturday. “Egypt gas pipeline attacked“. Israel gets about 40% of its natural gas from Egypt, from the Egypt gas pipeline. Fortunately, the terrorists blew up the side that supplies gas to Jordan rather than Israel. Unfortunately, Egypt shut down the gas pipeline to Jordan and Israel until they could quell the terrorist activity … which may be awhile. That means 40% of Israel’s natural gas requirement isn’t getting to Israel right now. According to a UPI report out today, that’s costing Israel $1.5 million per day in ‘alternate’ energy sources.
Al Jazeera reminded readers: “Israel is realising that their good friend (Mubarak) is on his way out, and they are not sure who is on the way in.”
Forbes’ Chris Barth asked the question in his Monday blog: “Will Egypt Protests Boost Israel’s Budding Energy Market?” Barth says:
“As protests in Egypt continue, investors are pondering the future of Israel’s energy supply, with one eye on Cairo and the other on Israeli energy companies. Although Israel has been quickly moving toward a more diverse energy structure, however, it still relies on Egypt for a full quarter of its energy needs, mainly natural gas delivered via the Arish-Ashkelon section of the Arab Gas Pipeline. Indeed, existing contracts with Egypt seem to prevent any large-scale shakeups in Israel’s energy imports, even in the face of recent domestic natural gas discoveries. Despite what has been a nerve-wracking month for energy-minded Israeli investors wary of instability, the state’s reliance on Egyptian gas doesn’t look to be going away any time soon.”
Israel’s gas supply from Egypt has been cut off by the unrest and terrorist bombings in Egypt. It’s long term gas supply from Egypt is jeopardy, depending on whatever form of government comes up on top after the revolution. No more gas from Egypt – that’s bad news for Israel, right?
Maybe not. In the short run it certainly hurts now; but in the long run, Israel, I believe, will be much better off.
Remember what I said in December’s article? “Egyptian gas deals threaten Tamar exploration.” The sweetheart gas deal Israel has had with Egypt for the last thirty years as a stipulation of the Camp David Peace Treaty (40% of Israel’s natural gas imports) means that actually producing the gas discovered inside Israel’s territory has been slowed or even threatened because Israel prefers cheap Egyptian gas to paying the price of getting Israeli gas to market. Why build Israeli infrastructure when we can get Egyptian gas for a few shekels less?
I’ll tell you why – sometimes ‘cheap’ isn’t so cheap. The Egyptian sweetheart gas deal won’t last forever – as far as we know, we could be witnessing its death on Cairo’s Tahrir Square right now. With not-so-friendly neighbors surrounding her and political turmoil rebooting the Israel ‘friendly’ Egyptian government, it’s a pretty good bet that the foreseeable future of ‘cheap’ Egyptian gas for Israel may be ticking down.
For Israel, energy isn’t just an economic issue it’s a national security issue. If Israel has a domestic energy source available she’d better start developing the infrastructure to bring it to market. Relying on the neighbors for natural gas doesn’t seem like such a good long term strategy anymore … even if it’s cheap.
Four Israeli firms have signed agreements to import Egyptian gas under a 20-year contract valued at between $5 billion and $10 billion, the Ampal-American Israel corporation said on Monday.
It said in a statement that Israel Chemicals, Dead Sea Works, Oil Refineries and OPC Rotem signed agreements to supply 1.4 billion cubic meters of gas over two decades, with an option to more than double that volume to 2.9 billion cubic meters.
The contract was signed with the Israeli-Egyptian East Mediterranean Gas, in which Ampal-American Israel Corporation has a 12.5% stake.
The gas supplies, which will fuel three private power plants, should start between the first and second quarters of next year, the statement said.
EMG has signed a number of agreements with Israeli firms since 2005, and the new contracts will boost the volume of Egyptian gas imports to 6 billion cubic meters worth $19 billion.
The Israeli business daily Globes said that the new contracts were a blow to companies involved in gas exploration in the Tamar fields off the port of Haifa in northern Israel, where reserves are estimated at 8 billion cubic meters.
The Texas-based Noble Energy is involved in that project.
Infrastructure Minister Uzi Landau on Sunday sent a letter to Prime Minister Benjamin Netanyahu warning that Israeli firms might give up on the Tamar field and instead turn to Egypt for gas supplies.
Landau said that the recent publication of a formal report recommending a sharp increase in royalties collected by the state on gas discoveries had created a “climate of uncertainty.”
The government-commissioned report recommends that royalties be nearly tripled to 60% once the companies involved in exploration and exploitation have recovered their initial investments.
Will Israel become a major exporter of natural gas in the near future? Most likely. How about an oil exporter? Maybe. Is there any chance of Israel joining OPEC (Organization of Petroleum Exporting Countries)? With Iraq, Iran, Saudi Arabia, Kuwait and Venezuela on the membership committee, probably not.
But the reality is that Israel has already made the largest natural gas discovery – ever – in the Mediterranean and the largest discovery worldwide in 2009. Of course those figures were based on the initial Tamar gas field reserve estimates of 5 trillion (that’s ‘trillion’) cubic feet. Since then the Tamar estimates have jumped to 8.7 trillion cubic feet. But wait, there’s more! The Leviathan field, discovered after Tamar, is estimated to hold an astonishing 16 trillion cubic feet of natural gas. The piece of news offshore operator Noble Energy isn’t ready to make too public yet is that they believe that underneath the natural gas fields, there could be oil. That’s the story offshore.
Onshore, Givot Olam claims the field below their Meged #5 well may hold 1.5 billion barrels of oil (we’ll find out how real that estimate is next month). By the way, the Meged #5 has been pumping oil in the midst of the latest arguments over how big the field may or may not be. Zion Oil & Gas, just yesterday, spudded (began drilling) their Ma’anit-Joseph #3 well. This is Zion’s third attempt to discover commercial quantities of oil in the Ma’anit structure. The first two wells were frustratingly close; they actually extracted oil from the Ma’anit-Rehoboth #2 test well. Zion isn’t going into the Ma’anit-Joseph #3 blind; based on results from the first two wells and their best science, this well will be at the location and depth they need to be to hit commercial oil.
Bottom Line: Israel is not waiting for a major hydrocarbon discovery – it’s already happened – the largest natural gas discovery worldwide in 2009 (of course that was when they believed they only had 5 trillion cubic feet in the Tamar field and before the Leviathan discovery). The Tamar field is 90 kilometers (56 miles) offshore and Leviathan is 130 kilometers (81 miles) out to sea. Producing the offshore gas (bringing to market by building pipelines to onshore facilities) will take a few years (up to five). But it will happen. It’s a pretty good bet that all of Israel’s domestic natural gas needs (that includes electricity) will be fully supplied and that more than a few European and the Japanese households (at least) will be heating their morning tea with Israeli natural gas in the next decade. Up until 2009 nobody imagined that Israel could supply her own needs, let alone become a world exporter of natural gas. In 2019 it will be a major Israeli export.
Is oil far behind? I don’t think so. If oil and gas is discovered onshore in the near future, it will most likely beat the offshore gas to market. If a lot of oil is discovered – beyond Israel’s domestic needs – oil is much easier (and quicker) to export than natural gas.
Little old Israel, a major energy exporter – imagine that! Of course Israel has accomplished a lot of things in the last sixty-plus years the world never imagined. That may be because the world doesn’t know it’s Bible as well as it should. About 2,700 years ago Israel (the northern kingdom) was decimated by her enemies (ancestors of some of the same enemies Israel has today) and many in Israel were taken as captives back to conquering Assyria. Later the Babylonians conquered Assyria, but Israel remained captives in exile, away from their home land. In this dark time an Israeli living in exile, his name was Yechezk’el, saw a vision of his people’s future. He saw dry bones coming together to form a nation of people, he saw a wasteland spring to life and become a garden. Yechezk’el’s (we westerners use the name Ezekiel) vision of dry bones became reality on May 14, 1948 when Israel, after 1,900 years of exile, became a nation. In 1948, the Land of Israel wasn’t too different from the ‘wasteland’ Ezekiel saw in his vision. Today the ‘wasteland’ has become a garden. In Ezekiel’s vision G-d made a promise to the Land of Israel: “I will settle people on you as in the past and will make you prosper more before.” (Ezekiel 36:11)
A nation of people from dry bones … wasteland springing into gardens … a nation in exile for 1,900 years returning to its homeland and prospering today more than in any time in history … imagine that!