Natural-gas discoveries bring great potential for Israel

Between 2004 and 2011, Israel reduced CO2 emissions in its electricity production by more than 17 million metric tons. In terms of CO2 reduction, it’s as if all the cars in Israel were taken off the road for an entire year. In fact, not only has Israel reduced its CO2 emissions, it has reduced particulate emissions, nitrogen oxide emissions and sulfur dioxide emissions.

The reduction in greenhouse-gas emissions and improvement in air quality were not achieved by reducing consumption of electricity (Israel actually produced 163 percent more electricity in 2007 than it did in 1990) but by the displacement of more expensive and polluting fuels with natural gas, domestically produced and supplied by Noble Energy and its partners.

In 1998, Noble Energy made the somewhat unorthodox decision to explore off the coast of Israel; at that time, Israel’s waters had no commercial hydrocarbon discoveries. In addition, by coming to Israel, Noble was most likely forgoing more traditional opportunities in the oil and gas industry.

Nevertheless, Noble took the risk and in 1999 made a small discovery, its first in the Eastern Mediterranean, the Noa discovery.

One year later, Noble discovered the Mari-B reservoir off the coast of Ashkelon.

The discovery of Mari-B set the stage for the emergence of the natural-gas market in Israel. Noble Energy, its Israeli partners, the Energy and Water Ministry and Israel Electric Corporation shared a goal of domestically produced natural gas for energy production and worked together to achieve it. Noble Energy and its partners invested hundreds of millions of dollars to develop the Mari-B Field and install the infrastructure to bring the gas to shore, and they trusted that government approvals and customer demand would justify the investment. The ministry and IEC worked together to convert power plants that could burn natural gas and trusted that Noble Energy would supply that gas in 2004, as promised.

Through hard work and mutual trust, these parties successfully created an energy market in Israel and made the first steps toward cleaner and more affordable energy.

Prior to 2004, Israel used a combination of coal, heavy fuel oil and diesel (all imported) for its electricity production. By 2011, most of the heavy fuel oil and diesel was displaced and 40% of electricity production was from natural gas. In addition to the environmental benefits mentioned above, the savings were immense. Between 2004 and 2011, IEC saved more than NIS 26 billion from conversion to natural gas. The supply of natural gas continues to provide savings today. Since the Noa field started to supply gas this past June, IEC saves almost NIS 5 million every day by displacing heavy fuel oil.

In 2009 and 2010, Noble Energy made two of the largest offshore natural-gas discoveries in the world over the past decade. The Tamar and Leviathan discoveries provide an historic opportunity for the State of Israel.

The Tamar discovery is capable of supplying the needs of Israel’s domestic market for the next 20 years. In the coming years, a steady increase in domestic natural-gas consumption is expected, driven by power generation, industry and transportation. With one discovery, the State of Israel has discovered resources that can provide security of supply to the domestic market that many countries can only dream of.

If the Tamar discovery provides Israel with the ability to supply its domestic market for the next several decades, the Leviathan discovery has the opportunity to put Israel on the map as a world supplier of natural gas.

Based on the US Geological Survey’s estimates, the full potential of gas discoveries offshore Israel is more than three times the current amount of gas discovered. Reaching that potential will require exporting to markets beyond Israel’s domestic market.

Realizing the full potential of the basin by becoming a global supplier of natural gas will translate into substantial economic and diplomatic benefits for Israel. At the same time, the additional exploration encouraged by expanding markets will increase supply for the domestic market, thus enhancing Israel’s energy security. Assuming domestic and exported sales of the full potential resources over a 60-year time horizon, the net present value of expected government tax and royalty income is more than NIS 400b. Moreover, taking into account the direct and indirect economic multiplier effects that developing the resource will have on ancillary industries, Israel has the opportunity to expand the present value of its 2011-2070 cumulative GDP by more than NIS 1 trillion.

The stakes are huge for everybody. The government of Israel and industry must work together, as they did following the discovery of Mari-B, to realize the potential these discoveries have for the benefit of our environment, economy and security.

Binyamin A. Zomer is director of corporate affairs for Noble Energy in Israel.