This week, in synagogues the world over, the following words of Moses from Deuteronomy describe the land of Israel were read:
“And that ye may prolong your days upon the land, which the LORD swore unto your fathers to give unto them and to their seed, a land flowing with milk and honey. For the land, whither thou goest in to possess it, is not as the land of Egypt, from whence ye came out, where thou didst sow thy seed, and didst water it with thy foot, as a garden of herbs; But the land, whither ye go over to possess it, is a land of hills and valleys, and drinketh water as the rain of heaven cometh down; A land which the LORD thy God careth for; the eyes of the LORD thy God are always upon it, from the beginning of the year even unto the end of the year.”
Israel is not a land like any of its neighbors. Its terrain is varied, and it seems to have few natural resources. In the oil-rich Middle East, it has always been dry — until recently.
Several years back, a large natural-gas field off the coast of Haifa was discovered. The field, named Tamar, is 1,700 meters (5,600 feet) under water and contains an estimated ten trillion cubic feet of natural gas. Nearby, the Leviathan field holds an estimated 18 trillion cubic feet. Additionally, below the natural gas layer, at a depth that was unattainable until now, lies an oil reserve estimated at 1.5 billion barrels of crude. These discoveries are set to make a drastic impact on the Israeli economy and energy market, as until now Israel has had to import some 98% of its natural gas needs and spends about $10 billion a year on it. Local sources would be a boon to tax revenues and translate into significant savings for the Israeli consumer.
The first natural gas began pumping from Tamar in March of this year. At the time, Prime Minister Bibi Netanyahu stated, “We are taking an important step towards independence in the energy sector. In the past decade we have promoted Israel’s gas sector and this will enhance Israel’s economy and benefit all the country’s citizens.” Leviathan production is expected to begin between 2015 and 2017.
What to do with these new-found resources has also been a bone of contention. On the one hand, the natural gas could power Israeli needs for decades to come. On the other hand, selling it could bring financial cooperation in the region and be a catalyst for peaceful relations with Israel’s neighbors. Initially, a 53% cap on exports was recommended, but Knesset agreed to a 40% cap in a vote last month. At the time, Netanyahu said, “The State of Israel has received a gift from nature – gas in vast quantities. Thanks to the decision we made today, every Israeli citizen will enjoy this gift. We will lower the cost of living in the electricity sector via the gas that will flow into the Israeli economy, and we will invest in the public welfare thanks to the profits that will go into the state coffers from gas exports.”
The discovery has also benefited Israel’s foreign investors. Houston, Texas-based Noble Energy reported a second quarter net profit of $377 million, up 29 percent year-on-year, due in no small part to its success in Israel. Noble Energy is the operator and lead partner in both the Tamar and Leviathan field ventures.
Improvements in drilling technology, and the use of horizontal drilling techniques, have enabled the recent developments in the energy field in Israel. “Thanks to advances in drilling technology, Israeli companies and their international partners can now reach greater depths that will enable oil exploration at lower geological levels than ever before,” Yossi Abu, chief executive officer of Delek Drilling, another partner, said in a phone interview with Bloomberg. To access the oil reserves suspected to be beneath the Leviathan field, for example, Noble will have to dig the country’s deepest well, over 9,500 meters (31,200 feet) below the seabed. The costs will be higher than those of the Leviathan natural gas exploration, but according to Guil Bashan, an analyst at IBI-Israel Brokerage & Investments Ltd., the greater profits of oil over gas, plus the lower cost of transport, will make the investment worthwhile. Although the chances of success are estimated to be about 25%, the company is optimistic.
The Bank of Israel predicts the Tamar field production will increase Israel’s GDP by as much as 1% and boost the economy by up to 3.8% if all goes well. The natural gas and oil potential of the region could place Israel among the 25 largest reserves in the world.
