GO
Loading...

Israel: No Oil, but Now Overflowing in NatGas

Ever since its founding as an autonomous state in 1948, Israel has relied on imported energy to meet its domestic power demands. However, offshore exploration operations have now found giant natural gas fields able to supply the country with more gas than it can use.

A flame rises from a tower at Yemen's second liquid natural gas plant in the coastal area of Balhaf.
Khaled Fazaa | AFP | Getty Images
A flame rises from a tower at Yemen's second liquid natural gas plant in the coastal area of Balhaf.

Noble Energy, Delek Group, and a handfulof other companies have announced finds in the Mediterranean Sea that hold enough natural gas to supply Israel’s energy needs for 150 years.

Noble Chief Executive Officer Charles Davidson, said the company has “found far more natural gas than can ever be used in Israel. There are more natural gas resources to discover in Israel, and they have to be able to demonstrate there is a market there in order to justify other producers to come in and explore.”

(More: Iraq's Kurdish Region Pulling Away from Baghdad Control)

Fantastic news for Israel, one may think, but unfortunately there are problems. The country's Ministry of Energy has said that the gas will be first used to secure the country’s economy and energy future, and that exports will be limited as a result; however, the reserves may require exporting to foreign markets in order to develop them.

Exporting the gas has its own challenges. A shortage of land will make it difficult to build a plant for turning the gas into LNG for export via tanker. An offshore facility or pipelines would be to subject to attacks, and expensive to protect.

(More: Sanctions Cost Iran $133 Million a Day in Lost Revenue)

Giora Eiland, a retired general and research fellow at the Institute for National Security Studies at Tel Aviv University, confirmed that “the security threat to the gas fields is serious. Protecting all the activities of an LNG infrastructure will be an extremely expensive undertaking, and if a floating LNG platform worth billions of dollars is set up, it will likely be the most vulnerable target.”

For that reason Nick Maden, a senior vice president at Statoil ASA, commented that while this is “the play that most companies will be trying to follow,” the fact that there has “been more gas discovered than you can commercialize” means that he would “be surprised if some of the gas in Israel isn’t stranded.”

By Joao Peixe of Oilprice.com

—This story originally appeared on Oilprice.com.

Squawk Alley