Energy Ministry opens Israel’s Mediterranean for new gas exploration

By
November 15, 2016 16:06

"A year and a half ago when I entered my position, the gas was stuck, the sea was closed and the sector was strangled,” Steinitz said, at a Jerusalem press conference. “We are changing this picture."




National Infrastructure, Energy and Water Ministry director-general Shaul Meridor (left) and Ministe

National Infrastructure, Energy and Water Ministry director-general Shaul Meridor (left) and Minister Yuval Steinitz (right) declare Israel's waters open for new gas exploration. (photo credit:SHLOMI AMSALLEM)

After a four-year freeze in offshore natural gas exploration, National Infrastructure, Energy and Water Minister Yuval Steintiz declared Israel’s Eastern Mediterranean open for business on Tuesday.

"A year and a half ago when I entered my position, the gas was stuck, the sea was closed and the sector was strangled,” Steinitz said, at a Jerusalem press conference that morning. “We are changing this picture."

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Gas companies interested in exploring Israel’s waters have 24 license zones open to them, each spanning a maximum area of 400 square kilometers, ministry director-general Shaul Meridor explained. According to competitive procedures, the companies will be awarded “drill and drop licenses” for an initial three years, with the possibility of extending that license an additional three years once they have executed a work plan and commit to drilling during that period.   

Companies are encouraged to bid for a number of licenses adjacent to one and other, Meridor said. Yet they must meet a number of economic demands to qualify, demonstrating assets of at least $400 million, equity of $100 million and a guarantee of $2.5-10 million.
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All proposals must be submitted to the Energy Ministry by April 21, and the winners will be chosen by July 15, Meridor said. Further details about the process are available in English at energy-sea.gov.il.

Those companies that already hold more than 200 billion cubic meters worth of gas assets in Israel’s waters are being excluded from the process, thereby eliminating Houston-based Noble Energy and the Delek Group – which currently dominate the sector – from placing bids.

"We did decide not to enable them to participate in this round because we want to create competition and we want diversity," Steinitz said. "It was a very difficult decision to take but we decided to exclude them. We really hope that we will have several serious companies involved in the natural gas here in Israel."

Ministry officials have met with the CEOs of oil and gas companies around the world, including from the United States, Europe, China and Australia, the minister added.

Steinitz expressed his confidence in the great potential for further finds off of Israel’s Mediterranean coast, stressing that Israel has already become a significant player in the industry. Independent research conducted for the ministry by the international consulting firm Beicip-Franlab determined that there are additional resources in Israel’s Eastern Mediterranean amounting to 2,137 BCM of gas and 6.6 billion barrels of oil, according to the ministry.

"We are flooding the market in the coming years with natural gas, despite all the obstacles and regulatory difficulties," Steinitz said.

With more than half of the country already powered by natural gas, Steinitz said that Israel will eventually be producing 70-80% of its electricity from this resource. Meanwhile, more and more factories are being connected to natural gas all the time. 

“The opening of the sea for natural gas and oil searches is the best investment for Israel and its future,” Steinitz said. “I am aware, by the way, that today’s declaration could lead to another campaign against me by the ‘gas captains,’ who will do anything in order for the gas to remain stuck in the underbelly of the sea.”

Steinitz was referring to the opponents of the country’s contentious “gas outline” that rattled Israel’s entire gas industry for all of 2015. The outline aimed to settle disagreements between the country’s developers and the government that all but froze Israel’s hydrocarbons sector from December 2014 through the beginning of 2016.

Already, Steinitz stressed, development is beginning at the large Leviathan reservoir and the smaller Karish and Tanin reservoirs off Israel’s coast. Meanwhile, Israel is in talks with a variety of countries, such as Turkey, Cyprus, Greece and Italy about potential export pipelines that could convey gas in the future to the European Union, he added.

"The best thing to do is to resume exploration in order to explore the full potential of Israel's natural resources,” Steinitz said.

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