Israel's Energy Minister Hopeful About Next Offshore Gas Auction

Yuval Steinitz expresses optimism regarding export prospects

A drilling platform at Israel's Leviathan gas field.
Albatross

Israel is confident a second auction to sell rights to develop offshore natural gas will be more successful than its first, because some Arab countries have shown they are open to importing the fuel, Energy Minister Yuval Steinitz said Tuesday.

Israel, which discovered large offshore gas reserves in 2009, will hold a second auction in October or November, offering about 20 or 25 blocks in the Mediterranean.

The first auction, last year, only got bids from two companies as some oil majors were concerned about a backlash from oil-rich Arab states hostile to Israel.

Egypt agreed early this year to buy $15 billion in Israeli gas. Steinitz is confident that this sale, as well as one to Jordan, will help this year’s auction get more attention.

Egypt and Jordan are the only two Arab countries that have treaties with Israel. Though powerful Sunni Muslim Gulf states such as Saudi Arabia and the United Arab Emirates do not recognize Israel, the U.S. allies do have a shared concern over Iranian influence in the region.

“I think companies were skeptics about the exporting possibilities” of Israel, Steinitz told Reuters in an interview. “Things are different now.”

In March, the partners in Israel’s offshore natural gas field Leviathan, its largest, said that all conditions have been met to allow the supply of gas to Jordan’s power generating company. In 2016 Leviathan’s partners signed a 15-year, $10 billion deal to supply gas to Jordan, subject to conditions and approvals.

Steinitz met with five energy companies this week, in part to spark interest in the auction, including Exxon Mobil, France’s Total, and Australia’s Woodside Energy, on the sidelines of the World Gas Conference in Washington.

Israel could offer incentives for companies interested in developing its offshore gas, Steinitz said.

Companies developing small to midsize fields would face no export limits, he said. Companies developing larger fields would have some export limits but those would be “very minimal, almost insignificant,” he said.

In addition, some companies would not necessarily have to link up with the Israeli natural gas transmission system and would have the option to pipe gas to Cyprus or Egypt or build a floating liquefied natural gas platform, he said.

Israel has many plans for its gas abundance. It hopes to sell more to Egypt where the fuel could be converted to LNG for export, and to build two pipelines — one to Jordan, from where gas could be sent to India, avoiding the Suez Canal, and another to Europe.

Israel and Lebanon, meanwhile, have been struggling to overcome a dispute over exploration in the eastern Mediterranean. The U.S. government has been trying to help resolve the disagreement by participating in back-channel talks. Steinitz said there were new ideas on how to solve the issue, but did not reveal them. Israel would like to help bring an end to the problem, but it is more urgent for Lebanon because the gas would help its economy, he said.