Cheap, Clean Energy

After Four Years in the Works, Natural Gas Makes Its Way to Israeli Shores

Energy Ministry announces gas to arrive in Israel within 24 hours; new Energy Minister Silvan Shalom: This day heralds economic independence for the State of Israel.

The Ministry of Energy and Water Resources announced the start of natural-gas production from the Tamar deep-water field, although it will take the gas around 24 hours to reach the Ashdod onshore terminal. Production began at 4 P.M. Saturday from the wells, located approximately 90 kilometers off the coast of Haifa, in the Mediterranean Sea.

The gas is conducted around 150 kilometers, via an underground pipe, first to a production platform located around 25 kilometers offshore of Ashkelon and from there to an onshore terminal at Ashdod.

Once the necessary tests are carried out the lead partner in Tamar, the U.S.-based company Noble Energy, will announce the start of commercial gas supply to customers. Barring any unexpected circumstances, customers can expect regular gas deliveries to begin within 24 hours.

The Tamar partnership is led by Texas-based Noble Energy, which has a 36% stake, followed by Yitzhak's Tshuva's Delek Group (31% ), Isramco (29% ) and Dor Alon (4% ). Tamar's reserves amount to an estimated 284 billion cubic meters. Production is to begin at 7.5 BCM a year and ramp up to 11 BCM within a few years.

The partnership has signed supply contracts of up to $36 billion in total with Israeli customers, close to half of the gas field's estimated 30-year, $76-billion lifetime production. About $37 billion of the total will go to the state in the form of royalties, income tax and a special fee levied on the energy exploration companies by way of implementing the recommendations of the Sheshinski committee.

The start of commercial production at Tamar should come as a relief to Israel Electric Corporation, which has faced a shortage of natural gas for the past 18 months that has forced it to purchase more expensive -- and polluting -- fuels for its generating plants. But the new supply stream is not expected to keep Israeli electricity rates from rising 6.5% in May, a move that is needed in order to close a NIS 7 billion gap between the utility's current rates and the cost of more expensive inputs. An additional 2.4% rate hike is scheduled for 2014, also to cover the electric company's fuel costs.

Tshuva, whose Delek group has a 31%-stake in Tamar, said: "This project will change the face of the Israeli economy and will guarantee energy independence for the state. This is a new age, filled with opportunities for the Israeli economy, which can take advantage of the benefits of natural gas on the environmental, geopolitical, social and economic fronts and turn the State of Israel into an important international player."

I congratulate the people of Israel on this transformational achievement, which significantly moves them toward energy independence and away from reliance on imports, said Charles D. Davidson, chairman and CEO of Noble Energy. Utilizing natural gas from Tamar will provide cleaner air, save the state billions of shekels in energy costs and be an engine for economic growth.

The Tamar project is also a technological and commercial milestone for Noble Energy and our partners. First production and the commencement of sales have been achieved in just over four years from discovery. Building on this success, we will work with our partners and the government to sanction the next phase of development at Tamar and the domestic phase of Leviathan, added Davidson.

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