Israel, from gas to stability

Israel, from gas to stability

Rita Lofano
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If supported by a suitable system of infrastructure, this energy source could "contribute, at least in part, to the stability of the Middle East. The hope is that in the future the area will be as quiet and peaceful as Europe"


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Israel is a key country in the Eastern Mediterranean region, especially since the discovery of the Leviathan gas fields, whose estimated reserves amount to approximately 622 billion cubic meters. It is one of the main gas fields in the Mediterranean and, with its strategic position, is intended to supply gas to several countries in the region and Southern Europe. Moreover, if the Leviathan is one of the largest gas reserves in the world, the region “is largely unexplored and new discoveries are expected ” assures Israel’s Minister of Infrastructure, Energy and Water Yuval Steinitz, speaking at CERAWeek, one of the world’s most important energy conferences, emphasizing the role of gas as a source of stability. In an area as contentious as the Middle East, natural gas may drive other countries to work together with the common goal of making this area an energy hub, thereby promoting the return of economic and political stability. The Minister, interviewed by Oil, also commented on the discovery of Zohr: “This is a very important discovery for Egypt, but it is not enough even to meet only Egypt’s need…this is why the prospect of exporting Israeli gas to Egypt or via Egyptian LNG terminals to Europe, or elsewhere, remains relevant,” emphasized Steinitz on the impact that the supergiant gas field discovered by Eni may have on the Leviathan. Below, the main issues raised during his speech at Houston are discussed.

 

Gas as a possible element of harmony

It is no secret that the Middle East is not the most convenient and easy neighborhood on the face of the earth. But the countries that I mention are already cooperating with each other to a certain level. I mean the economic relations between Israel and Turkey are very strong. Also, the relations with Cyprus and Greece. We have good diplomatic relations with Jordan and Egypt. And I think that if we will be able either to supply gas to some of our neighbors or, maybe better still, if the east Med basin becomes a significant source of gas to Europe, and we have to combine our efforts together (and we are already coordinating to a certain level between Israel, Cyprus, Egypt and Greece), this might help some of the countries of the region including Israel economically, and it might also serve stability in the region. The overall estimate is that in this triangle between Cyprus, Israel and Egypt, the joint economic waters of those 3 countries, you might end up with 10,000 billion cubic meters (bcm) or the equivalent of several hundred trillion cubic meters (Tcf), 350-400 Tcf. So this potential looks very significant. It was unexplored, this region. It was unexplored so far, and if this will take place and we will combine our efforts, Egypt, Israel, Cyprus, Greece and hopefully also Turkey, I think it might serve stability, at least in part of the Middle East. And you know, I just mentioned the most stable and moderate and democratic countries in the region. And if you see, you know, the sad events, the horrible turmoil and bloodshed in Syria, in the Syrian Civil War, in Iraq, in some other parts of the Middle East, I think that cooperation between Israel and its neighbors in supplying gas, exporting gas to Europe, either through Egypt or through Turkey or building a pipe that will serve Israel, Cyprus and Egypt together towards Europe, of course I think this might serve our economy and also might serve stability, at least in this part of the Middle East which is relatively stable so far. but let’s hope it will remain stable and prosperous in the future.

 

Pipelines look towards Europe

We are examining 3 options, 3 pipes. One pipe will go from Israel, from Israeli economic waters, to Egypt, either for domestic demand in Egypt or through Egyptian LNG, which are now empty in the Egyptian delta, to Europe. The other pipe will go from our economic waters or gas fields to Turkey; and through Turkey to the Turkish market and also to Europe. And we are now examining together. […] So we have a little summit in the Eastern Mediterranean, Israel, Cyprus and Greece, and those are the size of the Eastern Mediterranean. And we are examining seriously the possibility and the feasibility of a very long pipeline, gas pipeline, going from Israeli economic waters through Cyprus to the Greek mainland, and through Greece to connect ourselves to the European market. Europe needs much more gas in the future. Some fields in the North Sea are already on the verge of depleting. And the Israeli gas fields can be used for replacement in the next 20-25 years, especially if we connect ourselves by pipe and not just by energy to the European market. What we have done recently, you know, we had to update our regulation system, all of the regulations. But you have also, one day, to conclude the regulatory phase, and that is what we have done in the last few months. We concluded the new unified and inclusive government natural gas policy, and we gave a 10-year stability commitment that we are not going to make more dramatic changes. And now we think that the atmosphere and the conditions might invite and attract new players.

 

The effect of low oil prices

Many people consider this a very difficult time for the development of new fields or the exploration for new fields, because of the very low oil and gas prices [...]. I think you can view it in 2 different ways. One is okay, it is difficult. Prices are low, let’s wait. The other way to look at it, the more optimistic way, is this is an opportunity here. Because if you have a very large field like Leviathan, and you have to invest several billion dollars, it will take 4 years until it will start to produce. Then also, development costs went down by 20-30%, but you will produce and export gas for the next 20 or 30 years. So you can look at it also as the right time to develop. You know, it is like the stock market. When the market is going down, many people are exiting the market. But those who are able still to invest might say this is the right time. Costs are lower than before, and this is also for the development of gas and oil fields. And in the future, we can see the benefit of current investments. So we are trying to remain optimistic. The development of Leviathan, I think already started, we already see concrete plans. And we are going to reopen our economic waters for future discoveries in a few months from now. And we think that the prospect of exporting gas, not just to the vicinity but to Europe from the Eastern Mediterranean, from the economic waters of Israel, Cyprus and Egypt, looks very promising.

 

The challenges for reducing emissions

What we are doing, first, nowadays % years after we started producing natural gas, already close to 60% of our electricity, as I mentioned before, is based on natural gas. It was 50%, but just 2 months ago I instructed the Israeli Electric Company to shift another 15% from coal to gas, to natural gas, this year. We are putting very heavy taxation on cars according to the pollution. And we are even going to give very strong incentives now for cars, especially trucks and transportation, on natural gas. And I hope that we will be able to reduce emissions. But I think that the most important thing still if we want really to preserve our little world, we have to mention ourselves that the cleanest energy is the energy that is not being used - that was actually saved. And here we know a lot of Research and Development (R&D) and a lot of innovation. […] On innovation, Israel is not a dwarf. Actually, we are number one in the world in startups per capita, technological startups per capita. In total, the figure is second only to the United States. And just to give you the context, in little Israel there are more technological startups than the rest of the European Union altogether. Now so far, we did not focus enough on renewable energy and saving energy. But we are going to give a lot of incentives to R&D and to innovation in these fields in the future. And I think that, you know, we already have some agreements with our American friends, with the US Secretary of Energy Ernest Moniz, about working together or giving incentives to the private sector from both sides; and for academia, the universities from both sides, the research institutions, to work together on this. And of course with other countries, like Canada, Australia or hopefully also Mexico, in the future. […] Maybe it is not that popular to speak about reducing energy in general. But I think that the world is growing and economies are growing. And the best thing will be not just to see how we can adopt cleaner kind of energies like natural gas or renewable energies but also how can we reduce, or at least restrict, the use of energy altogether. For this we need real innovations. And here I am confident that, together with my colleagues in other countries, Israel can and will try to make a serious contribution to this in the future.

 

Electrical interconnections in the area

Currently, we do have an agreement with Cyprus to connect the Israeli electric grid with the Cypriot electric grid, and later on, the Cypriot electric grid with the Greek electric grid. So far, you know, Israel is an energy or electric island. Cyprus is also an electric island. And what was one of the decisions in the last summit of these three countries in Nicosia was to connect the grid with the undersea, underwater cable between Israel, Cyprus and Greece. This will be for the benefit of the three countries. I hope that in the future, we shall see a different and more stable Middle East and then of course, it will be for the benefit of all sides to connect the electric grid [...]. So far, we are speaking about connecting gas supply to Jordan and to Egypt, and as I said before, also through Egypt. And this is also something quite new in the region. And let’s hope that in the future, the Middle East will be quiet and placid. You know, like Europe: also Europe in the past, 100 years ago, Europe was a very difficult place; two world wars, and then at least Western Europe, Central Europe became placid and very cooperative. I hope that one day—the sooner the better—this will be also the situation in the Middle East.


See the OMC 2015 Special