COUNTDOWN TO A NEW ERA
Last October, the largest infrastructure project in Israel’s history set sail from Corpus Christi, Texas and has come to rest at the Tamar natural gas field, some 90 km off Israel’s Mediterranean northern shore.
Weighing in at 34,000 tons, the platform will be able to process 1.2 billion standard cubic feet of gas per day. Gas from the platform will be conveyed via pipeline 150 km south to the Mari B platform and from there to a gas terminal on shore. The platform is scheduled to come online in the spring of 2013. A multi-billion dollar agreement between Tamar and the Israel Electric Company has been signed and sealed.
Tamar’s partners, Noble Energy Inc, the Delek Group, Isramco Negev 2 and Alon Natural Gas Exploration Ltd, have begun counting down to what is believed by many to be the dawn of a new era of energy independence for Israel. Tamar is just the beginning. Estimated to be twice as large as Tamar, the Leviathan gas field holds the promise of turning Israel from an energy importer to an energy exporter.
AN ABBREVIATED HISTORY
Natural gas was first discovered off Israel’s southern shoreline in 1999. That first discovery, the Noa field, was deemed to be commercially insignificant but an adjacent field, Mari-B, was developed and began supplying natural gas to recently converted Israeli power plants in 2004. This field, which is rapidly depleting, was never viewed as the primary provider of Israel’s gas needs. Tamar was discovered in January 2009 and is estimated to hold enough reserves to supply Israel for fifteen years. Leviathan, one of the largest gas finds in the past decade anywhere, was discovered at the end of 2010 and although still being appraised, is estimated to hold reserves of 17 Trillion Cubic Feet (TCF), enough to secure Israel’s energy independence for generations. Smaller discoveries have subsequently been made in the Levant Basin which extends from the Jordan River to Turkey and offshore towards Cyprus. In 2010 the U.S. Geological Survey estimated that the Levant Basin could yield as much as 1.7 billion barrels of recoverable oil and 122 TCF of natural gas. Given the assessment of the US Geological Survey, many believe that other major discoveries are yet to come.
FOCUSING ON THE FUTURE
Since the two discoveries, Israel has been going full throttle to prepare for the windfall. Amidst controversy as to how the spoils will be split, the Israeli government is busy setting strategic policy and preparing the infrastructure for gas production. A bill to set up a sovereign wealth fund, modeled after the Norwegian fund, is on its way towards Knesset ratification. The purpose of the fund is to avoid the so-called Dutch Disease, the possible economic disruption that sudden natural resource windfalls have been known to cause.
An inter-ministerial committee headed by Shaul Zemach, Director General of the Ministry of Energy and Water Resources, was appointed to set clear policy guidelines, particularly regarding the possible export of liquid natural gas. The committee analyzed projected gas supply and demand over a horizon of 25 years and issued its report last fall. The Zemach Report forecasts that under relatively conservative assumptions regarding gas production and relatively liberal assumptions regarding future demand (which includes fueling transportation with natural gas rather than petrol), Israel will be able to have its cake and eat it too. Israel can comfortably supply its own needs and still export substantial quantities of natural gas. The committee recommended setting an initial quota of 450 Billion Cubic Metres (BCM) for domestic consumption, leaving up to an estimated 500 BCM for export. The report also recommends that all gas fields, regardless of export activities, be connected to the Israeli pipeline.
Israel Natural Gas Lines is a government-owned company charged with setting up and operating the infrastructure for gas treatment and transmission. Israel’s current gas transmission network comprises two receiving terminals, 385 km transmission lines, 11 pressure reduction and metering stations and 19 block valve stations. According to development plans, by 2014 INGL will have extended the transmission network by some 234 km. INGL is currently in the process of tendering a number of projects to enhance the network. This past November the ribbon was cut on a submerged turret loading buoy, which enables gassing ships to upload natural gas directly to the transmission system and the planning of onshore gas terminals and treatment plants in northern Israel is underway, albeit not without controversy.
|Prospective resources known today||Approx. 680|
|Of these, prospective resources with over 90% probability||Approx. 150|
|Reserves and contingent resources||Approx. 800|
|Total natural gas supply (reserves, contingent resources and prospective resources)||Approx. 1,480|
|Total natural gas supply for the purpose of setting policy||Approx. 950|
|Cumulative demand for natural gas for 25 years||Approx. 450|
|Maximum quantity permitted for export||500|
Source: Zemach Report Executive Summary