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Israel's Natural Gas Potential

Written By Brianna Panzica

Posted August 3, 2012

Israel has more natural gas than it knows what to do with.

While that statement may seem hyperbolic, in this situation it’s rather literal. Since 2010, Israel has known it has 150 years’ worth of natural gas.

Noble Energy (NYSE: NBL) discovered the Leviathan gas field off the coast of Israel several years ago. That and other finds, including those by Delek Group Ltd. (TLV: DLEKG), contain a total of roughly 28 trillion cubic feet of natural gas.

From the start, the nation became interested in exporting the resource. But how exactly to do that is the question that keeps presenting itself.

Some have suggested a floating LNG unit. Others think a pipeline would be the best option, and still others would like to ship through the Red Sea.

But so far none of these possibilities are feasible. One major obstacle is the issue with foreign competitors.

From Bloomberg:

“Foreign investors won’t come here because of the regulatory uncertainty,” said Yossi Abu, the CEO of Delek Drilling LP, speaking in July at a Tel Aviv investors’ conference. “It’s not the government versus the developers, but the government and the developers versus our competitors in the rest of the world.”

Companies like Exxon Mobil Corp. (NYSE: XOM), Royal Dutch Shell Plc (NYSE: RDS.A), and Chevron Corp. (NYSE: CVX) won’t want to get involved in the region, Bloomberg says, because they’re already involved with other Middle Eastern nations.

Beyond that, there’s the high threat of attack.

From Bloomberg:

“The security threat to the gas fields is serious,” said Giora Eiland, a retired general and research fellow at the Institute for National Security Studies at Tel Aviv University. “Protecting all the activities of an LNG infrastructure will be an extremely expensive undertaking, and if a floating LNG platform worth billions of dollars is set up, it will likely be the most vulnerable target.”

A Sinai pipeline from Egypt to Israel was closed in 2005 after numerous bombings. The latest discoveries are in vague maritime territory between Lebanon and Israel. And a pipeline to Greece, another proposed idea, would just not be economically feasible.

But the nation has more than enough of the resource for its own supply. Noble will begin extracting natural gas in 2016 for domestic use in Israel.

Noble’s CEO Charles Davidson said in a conference call:

“We’ve found far more natural gas than can ever be used in Israel. There are more natural gas resources to discover in Israel and they have to be able to demonstrate there is a market there in order to justify other producers to come in and explore.”

The Israeli economy could reap great economic benefits from beginning exports of the resource. It already will be able to benefit from domestic use of the natural gas.

But even that production may be threatened by disputes and attacks.

The Leviathan well could cost $5 billion to develop, and Noble is looking for a partner in the project. It is also discussing the possibility of a floating unit with OAO Gazprom (MCX: GAZP) and Daewoo Shipbuilding & Marine Engineering Co (KRX: 042660).

While it weighs the risks versus the benefits, all that untapped natural gas will lie in wait. The nation needs to act soon.

That’s all for now,

Brianna Panzica

follow basic@brianna_panzica on Twitter

Energy & Capital’s modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.

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