Natural Gas to Begin Flowing From Tamar Field, Off Israel's Mediterranean Coast

Natural gas will begin flowing from the deep-water  Tamar field on Monday, marking a major milestone for the Israeli energy sector and for the economy as a whole.

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The U.S. company Noble Energy, which is the lead partner in Tamar, told customers that they can expect to get their first gas deliveries next week.

Noble's customers include the state-owned Israel Electric Corporation, private-sector power companies and industrial plants.

Israel has been suffering from a gas shortage for two years, after a spate of terror attacks on a pipeline delivering Egyptian gas cut off supplies and the Egyptian state-owned gas company reneged on its contract, citing irregularities.

That forced Israel's biggest natural-gas user, the Israel Electric Corporation, to turn to more expensive fuels, saddling it with severe cash flow problems, straining its power-generating capacity and damaging the environment.

The start of production at Tamar will not only boost the utility but the economy too. Echoing other forecasters, global investment bank HSBC said this week that natural gas production can be expected to contribute at least one percentage point to Israel's gross product growth this year. HSBC predicted GDP will grow 3.3%, compared with 2.6% without gas from Tamar.

Over the last several weeks, teams have been getting ready to begin sending gas from Tamar – which is 90 kilometers off Israel's Mediterranean coast, west of Haifa – to a gas liquefaction platform opposite the Ashkelon coast. From there, it will be shipped to an onshore reception station in Ashdod.

Energy Minister Silvan Shalom visited the Tamar platform on Wednesday, a week after he took office. He visited at the invitation of Noble, which owns 36% of the Tamar field. The Delek Group owns 31%.

"We're talking about a real revolution in the Israeli energy market that will lead to a new era of economic independence, one in which it is free from its reliance on foreign sources," Shalom said.

One key aspect of the emerging energy economy is generating controversy, however. The Tamar partners are seeking to export a third of the gas that the field produces, but environmentalists and others want most if not all of the gas to be saved for domestic consumption.

Before he turned his portfolio over to Shalom, former Energy Minister Uzi Landau told the Tamar partners they should not sign any export contracts until they were granted permission by the government.

Environmental Protection Minister Amir Peretz said this week that "We have to preserve our natural gas reserves as a national asset and as part of our long-term economic activity."

The cost of developing Tamar – Israel's biggest gas field after Leviathan, which is years away from production – has reached $3 billion to date. Tamar's reserves amount to an estimated 283 billion cubic meters. The gas is to be sent through a pipeline that had been laid for the smaller Tethys Sea field, which is tapped out.

In addition to IEC, other big beneficiaries of Tamar gas will include the private power-generating companies OPC and Dorad, which are completing construction on their plants. Industrial companies such as Oil Refineries Ltd., Paz, Hadera Paper Mills, Israel Chemicals and Nesher Cement have signed contracts for Tamar gas and will begin receiving deliveries next week.

Many have been relying on liquefied natural gas, which must be imported and which costs three times the price of ordinary gas. As the only domestic supplier of gas, the Tamar partners – which also include Isramco (29%) and Dor Alon (4%) – have been declared a monopoly by the antitrust commissioner.