The Birth of a New Industry
In Hebrew, the expression, “signs of oil” has long been a bitter-sweet euphemism for something of great promise that never quite pans out. Starting in 1953, oil and gas drilling has been carried out in various regions of the country, leading only to these elusive “signs of oil”.
Israelis came to believe that they live in the only place in the Middle East without oil or natural gas. But on January 18, 2009, this belief was suddenly dispelled.
Nobel Energy and its Israeli partner, the Delek Group, announced the discovery of a major natural gas field off the Mediterranean shore west of Haifa. The Tel Aviv Stock Exchange exploded, with shares of the corporate partners in the Tamar-1 drilling site shooting through the roof.
The Discovery Channel
Since that initial discovery, significant by any standards and sufficient to render Israel energy-independent, what seemed a pipedream may become a gushing reality.
A second offshore gas field, Dalit, was discovered two months later and in February 2010, Bontan Oil and Gas Exploration announced that its offshore prospects, Mira and Sara, may contain 6 trillion cubic feet of natural gas.
All of this was overshadowed in April 2010 when the Delek Group announced discovery of the Leviathan gas field.
At an estimated 16 trillion cubic feet, Leviathan is considered the largest natural gas find anywhere on the planet in the past decade.
Announcement of further oil discoveries soon followed. In a preliminary report, Givot Olam Oil filed a public disclosure citing estimates of 1.525 billion barrels of oil at its onshore Rosh Ha'Ayin site, attracting the attention of investors and regulators alike.
Fast and Furious Feedback
Following a 7.5-fold increase in 2009, oil exploration shares surged an additional 55% in 2010, contributing to 25% of the return on the Tel Aviv Stock Exchange’s leading stock index and more than 40% in the increase in overall trading volume.
The government and oil companies, in the meantime, are in the midst of haggling over the terms and taxes governing future operations.
Economists are already warning of the dangers of “Dutch Disease”, i.e. the structural economic disruption caused by a sudden windfall from natural resources that was observed in the 1960s in the wake of oil discovery in the North Sea.
Environmentalists, for their part, are mobilized to ensure that neither the Mediterranean nor its coast get lost in the translation from gas potential to gas reality.
Building an Industry from Scratch
Notwithstanding the short-term hoopla however, the long-term impact on the economy promises to be huge.
Through Tamar, Israel can guarantee energy independence for at least 20 years. Adding Leviathan to the mix could easily turn Israel into a LNG exporter.
More importantly however, the development and production of these fields opens up an entirely new industry in Israel, demanding new know-how and capital equipment and creating new jobs, new sources of government revenue and new businesses.
For starters, to take advantage of the new gas discoveries, Israel has to convert its entire energy installations from coal to natural gas-based.
The experience accrued by Scandinavian countries in off-shore drilling and down stream operations, as well as their expertise in environmental engineering, makes these countries well-poised to take advantage of the numerous opportunities that will undoubtedly unfold in the coming years.
