Israel to Reopen Offshore Waters to Oil and Gas Exploration, Energy Minister Says

Yuval Steinitz tells Herzliya Conference introduction of natural gas in factories and transportation will be a 'huge growth engine.'

Offshore Leviathan natural gas drilling site.
Albatross

Four years after the closing of Israel’s offshore waters to further exploration for oil and natural gas, the National Infrastructure, Energy and Water Ministry intends to reopen the zone for further exploration, Yuval Steinitz, who heads the ministry, said Thursday.

Speaking at the Herzliya Conference, Steinitz said the new exploration opportunities would be made available between September and November of this year using what he called “a new system,” the details of which the Energy Ministry is still working out. Apparently, however, the plan will provide for the issuance of new exploration permits and drilling licenses through some kind of competitive bidding process.

A consortium of exploration companies is currently producing natural gas from the offshore Tamar drilling site. The much larger Leviathan offshore site is not yet in production. The country was witness to extended debate and litigation over the regulatory framework that the government developed with regard to these major offshore reserves. The cabinet made final changes to the plan last month.

A new survey presented to the ministry by a French consulting firm recently indicated that, beyond Tamar and Leviathan and other known reserves, there are potentially an additional 2.2 trillion cubic meters (2,200 BCM) of natural gas in Israel’s economic waters in the Mediterranean, Steinitz told his audience.

“The potential was estimated at a 50% probability. It could be less or also more,” he said.

Addressing prospects in the near term, Steinitz, a former finance minister, said: “It’s no secret that Israel is in the midst of declining growth, in investment in real assets, and in exports, and that’s worrying. I have no doubt that promoting development of the gas fields and the introduction of natural gas in factories and transportation will be a huge growth engine. I have no doubt that in the coming two years what will save us from entering a recession and zero per capita growth and actually restore us to a reasonable level of growth is progress in developing the gas fields.”

Dror Strum, the former antitrust commission director, roundly criticized what he said was a practice by Steinitz and his government of ignoring mistakes made by previous governments in the gas sector. He was also critical of how the government’s current natural gas policy blueprint was approved.

“I would have wanted to live in a country that learns its lessons, that doesn’t nurture private monopolies and doesn’t undercut professional staff, one after another. When someone doesn’t toe the line, they’re out,” he told the Herzliya Conference.

The former antitrust commissioner also took the Netanyahu government to task for what he said was its focus on exporting gas at the expense of its domestic use. “If we are looking for foundations for growth or new economic activity, they relate to gas that needs to be available and at a low price. Our resources don’t need to be devoted to export, but instead should first of all go to building the Israeli economy for the coming 30 years.”

Yossi Abu, CEO of two Delek Group subsidiaries, Delek Drilling and Avner, which along with Texas-based Noble Energy are the lead partners in the Leviathan and Tamar fields, said the local market has not been ignored. Delek, he said, was conducting contacts regarding the use of natural gas in the transportation sector and had already invested $20 million in a compressed natural gas facility in Ashdod. And by the end of the year, he added, the partners in the Leviathan exploration site will invest an additional 500 million shekels ($129 million) in that project.

Former Electricity Authority chairwoman Orit Farkash-Hacohen called on the government to quickly develop plans for the problems that she said the government’s gas framework did not address. With respect to energy security, she said the government needs to go beyond the framework if the development of back-up gas infrastructure is delayed.

The gas framework, she said, also failed to address the issue of high gas prices, which she said is resulting in excessive electricity rates paid by the public and an acute problem for industry. Shaul Meridor, director general of the Energy Ministry, countered that gas prices in Israel are lower than in Europe.