‘Within a few years, Israel will become one the largest producers of oil and gas
in the world,” according to Dr. Harold Vinegar, who until three years ago was
chief scientist of energy giant Royal Dutch Shell.
Vinegar told Globes he
estimates that exploration for gas will yield impressive results, but that
Israel’s true future lies in oil.
He believes the chances of finding
regular oil are not high, but that huge quantities of oil shale will make it
possible to produce oil in quantities approaching the production of Saudi
Vinegar’s deep-seated belief led him to join IEI (Israel Energy
Initiatives), which seeks to produce oil from oil shale in the Judean plain
region. Money and technology, he believes, will not be obstacles to realizing
the vision. However, bureaucracy and objections by local residents and by
environmental organizations are likely to delay it for a long time.1.
Vinegar, 62, has the look of a brilliant and eccentric scientist:
a shock of silvery hair, a slight potbelly, bushy eyebrows and thick-framed
glasses. Friends call him “the Stanley Fischer of energy” and point out that he
has 266 patents to his name. Three years ago, he gave up a fantastically large
salary, such as only an oil giant like Royal Dutch Shell could offer, and, led
by the Zionist vision, chose to immigrate to Israel.Globes: What’s your
prediction for oil and gas finds?
Vinegar: “On the basis of the data I have
seen, it looks as though the gas reserves in Israeli territory amount to at
least 50 trillion cubic feet [twice the quantity so far discovered, A.B.]. As
far oil is concerned, the story is more complicated. The gas discovered so far
is biogenic, which means that it does not in itself indicate the presence of oil
nearby. In my opinion, the temperature in the relevant strata is not high enough
for the formation of oil. On the other hand, in these strata there is a very
large wealth of source rocks [that could contain oil or gas, A.B.], and that’s a
very encouraging fact.”How is it that all this time we thought there was
no oil or gas in the region?
"Israel was cut off from the world of oil and gas
exploration, mainly because of the Arab boycott. Over that period, a lot of new
technologies were introduced, while in Israel no experts were trained in the
field. To the best of my knowledge, I am the first international expert to have
immigrated here in recent years.”
Vinegar was born and bred in Brooklyn,
New York, studied physics at Columbia University and earned his doctorate at
Harvard. The first project in which he was involved was the development of
magnetic resonance imaging (MRI). He began working for Royal Dutch Shell in
The oil crisis was at its height. The Arab countries reduced oil
supplies to the West because of its support for Israel, and the price of the
black gold skyrocketed. The British-Dutch firm was busy trying to find
unconventional ways of producing oil at reasonable prices.
to focus on the invention of a Swedish scientist by the name of Fredrik
Ljungström for production of oil from oil shale in situ. Over the years, Vinegar
developed Ljungström’s method and perfected it, but he never had the
satisfaction of seeing the fruits of his labors.
In the early 1980s, the
Iran-Iraq war broke out, but afterward the price of oil plummeted, and
initiatives for nonconventional oil production were halted or put on the back
burner. Vinegar continued working in other areas and, among other things,
developed a method of locating natural gas in oil drillings using MRI. This
method gave Shell a substantial advantage over its competitors in deepwater
drillings in the Gulf of Mexico.
Oil shale came back into fashion
following the latest rise in the price of oil, which started after the US-led
invasion of Iraq in 2003. Royal Dutch Shell and other companies showed renewed
interest in the oil-shale deposits in Colorado and Canada, but these deposits
proved problematic: The oil-shale stratum was not sufficiently sealed, which
allowed the oil to percolate and escape into other strata.
met Israeli geologist Dr.
Yuval Bartov, who told him about the shale
reserves in the Judean plain. Bartov founded IEI, which in July 2008, obtained a
license from the National Infrastructures Ministry to explore for oil in an area
of 238 square kilometers, south of Beit Shemesh.
“I have examined
oil-shale deposits all over the world, and nowhere have I seen a reservoir to
compare with what we have here in terms of the richness and thickness of the
stratum,” Vinegar said. “Just in IEI’s license area there is a potential
for 40 billion barrels of oil. In Israel as a whole there are, in my estimation,
250 billion barrels of oil and perhaps more. The reserves of Saudi Arabia, for
the sake of comparison, are estimated at 260 billion barrels.”
At the end
of 2008, three years after he was promoted to chief scientist at Royal Dutch
Shell, Vinegar announced his departure, after 32 years. This was shortly after
Shell signed an agreement for the development of an oil-shale deposit in Jordan.
Vinegar immigrated to Israel in early 2009 and settled with his family in
“I waited for Shell to sign with the Jordanians,” he said, “and
then I came to Israel.”Is there a chance that Shell or another oil giant
might one day invest in Israel?
“No company like that will come into Israel if
it has serious investments in the Arab world.”What did you find when you
“Shortly after I arrived I volunteered to teach a course at
Ben-Gurion University. I realized that all my students were from the
environmental studies faculty. There is a severe shortage of oil professionals
and experts in Israel. There was a government company that was shut down in the
1980s, and while it operated, 450 dry drillings were carried out here. That’s an
unimaginable figure in the private market.”2. THE OIL
Over the years,
oil-exploration adventurers would visit Israel, some of them reminiscent of
Indiana Jones, arguing enthusiastically that there had to be legendary oil
reserves in the promised land. The adventurers picked their drilling
sites according to concealed hints in the Tanach, especially Yehezkel, but the
drillings ended in disappointment. The legend of oil riches in Israel turned
into an old joke.
According to Vinegar, the oil prospectors weren’t
entirely mistaken. They only missed by a few hundred meters, or they came a few
million years too soon. If the oil-shale stratum at a depth of 300 meters
between Beit Shemesh and Kiryat Gat were laid deeper – for example, two
kilometers – it would have turned into one of the biggest oil fields in the
Even at its present depth, the stratum will in the end form an oil
reservoir, only we will have a short wait of three million years for it to
happen. A brief scientific explanation: an estimated 70 million years
ago, in the Cretaceous period, the region of Israel and Jordan was mostly
covered by the famous Tethys Sea. The land surface formed a basin at the bottom
of which the skeletal remains of tiny sea creatures gathered and sank to the
In this way, in a short period (in geological terms) of a million
years, a thick, uniform layer of oil shale was formed: sedimentary rocks
containing solid organic material called kerogen.
If this material is
heated to high temperatures, hydrocarbons can be extracted from it: oil and
natural gas. In the Judean plain, the thickness of the layer reaches 300 meters.
An additional deposit, some 40 meters thick, is under the Rotem plain, near
Mankind has been extracting oil from oil shale for decades. The
first were the Swedes, during World War II. They mined the oil shale, burned it
in large ovens and reached a peak production level of 10 thousand barrels a day.
Rotem Amfert has used the same method in recent years in the Rotem
Producing oil by this method is very expensive, costing $70 to
$100 per barrel. In the burning process, soot and tarlike substances are
released into the air, causing a severe odor nuisance, as Dimona residents will
There is, however, another method, supposedly cheaper and
cleaner. Its inventor was the said Fredrik Ljungström, who proposed heating the
oil shale while it was in the ground and producing the oil from it in
Over three decades, Vinegar perfected Ljungström’s method, and
today, IEI is convinced that the total cost of producing oil will be $35 to $40
per barrel.3. THE WORK PLAN
On the desk in Vinegar’s modest office in
Jerusalem’s Har Hotzvim Industrial Zone stands a test tube containing a reddish
liquid. This is high-grade oil produced from an oil-shale core extracted from a
survey drilling near the settlement of Aderet.
So far, IEI has carried
out survey drillings in the Judean plain area and laboratory tests. The company
hopes to start a pilot by the end of the year to demonstrate that Vinegar’s
heating method works and that it has no negative effects on the
IEI seeks to carry out the pilot in an eight-dunam area,
probably beside Ela Junction. For two years, two barrels of oil a day will be
produced from the site, about 500 barrels in all, at a total investment of $30
million to $40m.
“The pilot is designed to determine whether the
reservoir meets expectations and whether our technology is suitable,” Vinegar
said. “There will be no problem raising the money, and, assuming that the
regulation allows us, we will be able to get going without problems.”
the pilot succeeds, and the appropriate permits are obtained, IEI will set out
to raise the finance required for commercial production, $2 billion to $4b. IEI
plans to start production in 2017.
On a strip of land measuring 100
meters wide by 200 meters long, 200 horizontal borings will be made via which
the special heating elements will be introduced. The elements will be heated to
300 degrees Celsius and will operate for three years.
The fluids are
meant to separate from the rock, leaving the black, polluting sediment behind in
the bowels of the earth.IEI is sure that the stratum is sufficiently
sealed to prevent seepage of fluids into the aquifer, 400 meters
The process is not supposed to release any poisonous gases, and
the oil produced will be very easy to refine. This project will consume large
amounts of power, but, at the advanced production stage, natural gas will form
at the production site, and the use of it to generate heat via molten salt will
cut the cost of production and make the process more efficient.
venture will operate for 25 years and will advance by 200 meters a
year. One of the possible routes is Route 35, the section between Beit
Guvrin and the Tarkumiya road block, a remote area reasonably far from the
tourist centers of the Adulam Grove Nature Reserve. By the end of the decade,
production will peak at 50,000 barrels a day, about a fifth of Israel’s oil
IEI CEO Relik Shafir estimates that, theoretically, it would
be possible to supply the country’s entire oil needs, but raising production
above 50,000 barrels daily would require huge investment in
“Fifty-thousand barrels will supply the oil consumption
needs of the military and of civil aviation,” Vinegar said, hinting at IEI’s
main claim: that the project will ensure energy independence for
Israel.How will the Sheshinski Committee’s conclusions on taxation of
energy finds affect the new venture’s profitability?
“On the whole, the
Sheshinski Committee taxation is not bad. The model of deferred taxation, until
the developers pay back their investment, is logical as far as the oil and gas
exploration industry is concerned. What bothers me is not the taxation but the
fact that the State of Israel changed the rules of the game retrospectively,
after the developers had already found gas. The taxation regime in Israel before
the committee was set up was among the lowest in the world.”
new taxation makes the venture much more worthwhile from the point of view of
the state. If oil is sold at $100 a barrel today, then the new taxation, which
amounts to 60 percent, will bring in $36 to the state. In other words, the same
barrel of oil that the state currently buys for $100, it will be able to buy
from us for $64. This consideration will become much more significant when the
price of oil rises, and we see the price rising to at least $150 a barrel by the
time we start production.”Will the state be able to cut the price of
gasoline to consumers?
Shafir: “Theoretically, if the state wants to pass on the
discount to consumers, it will be possible to reduce the price of gasoline by
30% to 40%, which means something like NIS 4.5 per liter, if we take today’s
price.”4. THE PROBLEMS
IEI is currently waiting for approval from the
local Planning and Construction Committee to be able to start the pilot project.
The committee’s meeting to discuss the application has been delayed by
objections from environmental organizations and local residents.
residents claim that IEI’s technology is unproven and that the venture involves
many environmental risks. They are not prepared to turn the Adulam region, with
its high natural and tourism value, into a guinea pig.
The residents have
managed to obtain the support of the Agriculture Ministry and local government
representatives. Meanwhile, many environmental organizations have joined
the opposition to the venture. Adam Teva v’Din Israel Union for Environmental
Defense has filed a petition in the High Court of Justice, requesting a ruling
that the Oil Law, under which IEI is entitled to a shortened permit application
track, does not apply to production of oil from oil shale.
The state has
rejected these claims in its response to the High Court of Justice, and no
ruling has yet been handed down on the petition.
“In the US, once you
have the license it’s enough to phone the local Bureau of Land Management to
notify it that you are starting drilling,” Vinegar said. “Here, it’s more
complicated. There are so many ministries involved, and each has a share in the
planning. That isn’t surprising because there was no gas or oil here, and the
petroleum commissioner has a tiny office.”What about the residents?
“Everywhere we have worked we have formed ties with the local population. In
Colorado and in Canada, the more transparent you are and the better your
communications, the better you do. I’m very optimistic. It’s always worst at the
start, but the pilot will undoubtedly succeed, and I believe that, in time, the
residents will understand that it’s not so frightening and that the story has
been blown up out of all proportion. One of our jobs is to demonstrate that this
venture caries no dangers, and we will do that in the pilot.”
founded in 2008, is controlled (89%) by IDT, owned by Jewish-American
billionaire Howard Jonas, who made his fortune out of international dialing
cards. Vinegar and Bartov also own shares.
Last November, two glittering
names joined the list of shareholders: media tycoon Rupert Murdoch and Lord
Jacob Rothschild, each of whom bought 5.5% of Genie Energy Ltd, the energy arm
of IDT, which, besides IEI, also owns an oilshale venture in the US. The
purchase valued the two ventures at $200m.
Other well-known investors in
the venture are philanthropist and former private- equity fund manager Michael
Steinhardt, who serves as chairman of IEI, and former US vice president Richard
Cheney, who is a director of IDT.