Knowing the Drill: Ex-IDF Chief Bullish on Shemen Gas Prospects

Former IDF chief of staff Gabi Ashkenazi says defense establishment played no role in drilling.

As drilling at the Shemen offshore natural gas prospect approaches the depth where gas may be found, Shemen Oil officials - including chairman Gabi Ashkenazi - hosted TheMarker for a tour of the drilling platform.

Ashkenazi, who until recently was Israel Defense Forces chief of staff, said that his connection to the defense establishment played no role in the drilling off the shore of Palmahim, where the army has a live-fire training zone.

"The defense establishment didn't give us money, it signed off on permits as I imagine it would have done with anyone," said Ashkenazi in response to a question. "There were negotiations, and ultimately we signed an agreement that enabled us to drill, and meets the defense establishment's needs. Occasionally we need to vacate [the platform]," he noted.

Drilling at the Mediterranean site has reached a depth of 4,096 meters, while the final goal is 5,800 meters, stated CEO Yossi Levi. Estimates indicate that a gas reserve might be found somewhere between 3,000 meters and 4,500 meters, as well as between 5,250 meters and 5,800 meters, he added.

As early as the 1990s, high-quality oil was found at the Shemen field, some 16 kilometers off the coast at Ashdod, but drilling halted due to technical problems.

"We're talking about the potential for 1.8 trillion square feet of gas at a 36% probability, and 120 million barrels of oil at a 50% probability," said Levi. Under this scenario, potential revenues would be $12 billion, minus the state's 60% share as set in the Sheshinsky recommendations, he added.

Drilling ran into technical problems in April, causing a one-month delay that sent drilling costs skyrocketing to $138 million, up from $22 million.

"I'm happy to tell investors that after the difficulties, we're continuing with our plan," said Ashkenazi.

Moti Milrod
Albatross