Israel’s Rise to Energy Superpower Under Way

Israel’s Rise to Energy Superpower Under Way

by: Peter C. Glover and Michael Economides Posted date: April 04, 2013

By Peter C Glover and Michael J. Economides

Israel’s transformation from a land of milk and honey into a land awash with oil and gas money is under way. When the country’s offshore Tamar field finally started pumping domestic natural gas to Ashdod on the last day of March 2013, it meant that Israel was no longer in the thrall of its Arab neighbors for gas imports. And it also signaled the beginning of what could be an Israeli energy superpower status.

However, don’t take my word for it. Take the words of Russia’s Vladimir Putin or, much more significant, his recent actions.  Shaken by the success of the US shale gas revolution and the threat to Russia’s stranglehold on European gas supplies that a prospective eastern Mediterranean supply carries, Putin’s Kremlin has, in recent months, feted Israel as never before. In February this culminated in Russia’s Gazprom signing a landmark deal giving Russia a major stake in the future distribution of massive Israeli gas resources.  It is also likely to be just an entree deal now that Moscow has a place at the Israeli energy table.

In early 2012, Noble Energy, the US partner of the major Israeli energy companies, announced a new find of 1.2 to 1.3 trillion cubic feet of gas in the Tamar prospect. Noble is confident that there may be up to a dozen more such gas discoveries to be made in the Tamar field. Yet the Tamar and Dalit offshore Israeli gas fields are just the beginning. Others are showing signs of significant quantities of gas, including the Aphrodite 2 field, 100 miles from Haifa. But the enormous Leviathan gas field overshadows them all.  Leviathan is estimated to have twice the amount of gas of Tamar and should come online between 2016 and 2018. But Leviathan and Tamar also hold out the further tantalizing prospect of significant amounts of oil.

Then there is Israel’s eastern Mediterranean partner, Cyprus. In February 2013, the Israeli energy companies Delek and Avner signed an agreement to acquire a 30 percent stake in exploration rights off the southern coast of Cyprus. With equally large gas prospects around Cyprus, the eastern Mediterranean basin is on the path to becoming a major player in global energy production, and soon. All this has not been lost of the energy giants as the Russia Gazprom deal, which includes a commitment to build a floating LNG terminal off Cyprus, makes clear. That hub will convert Israeli and Cypriot gas for onward transmission to Europe or Asia.

For all its mounting gas and oil discoveries, Israel has been having trouble in attracting the investment of the energy majors who fear the threat of their energy investments in Arab states. But that is changing. Recently the French energy major Total signed an exploration contract to explore two blocks of southern Cyprus. In February, Woodside Petroleum, Australia’s second largest oil and gas producer announced it would pay as much as $2.3 billion for a stake in Israel’s giant Leviathan field. All of this is highly significant as it signals a very real change in the geopolitics of the region.

But it’s not just enormous reserves of natural gas that is set to see the Star of David rising to global energy prominence offshore. Israel has oil too – and a world class amount of it. Most importantly, as well as the great potential for oil finds in its deep offshore reservoirs, Israel is set to develop a major shale oil prospect the Shefla Basin, south-east of Jerusalem.

It’s where David slew Goliath. The Valley of Elah lies thirty miles to the south-west of Jerusalem. The World Energy Council estimates that Israel’s Shefla Basin shale oil deposits could yield a cool 250 billion barrels.  To put that in perspective, it’s a figure that would catapult Israel into the elite with the world’s third-largest proven oil reserves, just behind Saudi Arabia and Venezuela.  Such is the significance of the amount of oil in the Shefla Basin that it didn’t take long for big hitting private investors, including Jacob Rothschild and Rupert Murdoch, to take a major stake in Genie Oil and Gas, the parent company of Israel Energy Initiatives who are running the project.

In February, the state owned Israel Natural Gas Lines announced that it was seeking $1 billion to fund new pipelines. Whilst developing a vital energy infrastructure has become a priority for Israel, the security implications are only too well understood. But if OPEC’s members, already feeling the heat of the US shale gas and oil revolution, feel inclined to consider military action it could only be in the form of utilizing proxy terrorist groups. Anything else would mean taking on a possible grand alliance of Israel, Russia, Greece and Cyprus. Equally, the rise of an energy-driven non-Muslim alternative powerbase in the Middle East offers a serious counterpoint to help offset the growing Islamist threat posed by the growing instability in North Africa.

Neither do the ramifications of the Israeli-led energy developments end there. Some Arab states are already breaking ranks. The fledgling state of South Sudan, which sits on top of around 80 percent of Sudan’s oil reserves, signed a new deal in January to keep Israel supplied with oil while developing its own reserves.  Jordan too is reportedly in secret talks to buy some of Israel’s Tamar gas to power a potash plant on the Jordanian side of the Dead Sea. The State Oil Company of Azerbijan (SOCAR) has also turned to Israel as a “proving ground” to help its own development as a major energy producer. Last Autumn, the Caspian Drilling Company, a subsidiary of SOCAR, bought a five percent stake in Israel’s small Med Ashdod oil field. It proposes to utilize the deal to draw on growing Israeli technical expertise. Israeli’s reputation for high-tech expertise is already a recognized phenomenon.  As one of Israel’s oil pioneers, Tovia Luskin, has pointed out, Israeli tech could “solve the world’s energy crisis if red tape doesn’t tie it up”.  Luskin wants to use some of the revenue to fund a university as a global center of excellence able to train engineers in oil exploration and energy management. Until the bureaucratic issues – how much does the Government take in revenues – are resolved in Israel that vision remains on hold however. But the point is nevertheless well made: Israel is in prime position to give a lead in a new era of Middle East energy developments.

Even so, the impact of the coming rise of Israel as a regional energy superpower plainly heralds significant and imminent changes in the Middle East, and beyond. First, for the fast-diminishing tyranny that is OPEC. Second, in the geopolitical re-alignment the new eastern Mediterranean energy alliance represents. Third, the literal shift of power away from the world’s oil and gas ‘tyrannies’ that the new energy realities – including Israel’s rise to energy superpower status – represents for the democratic world.

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