Although the natural gas business is one of “unprecedented volatility,”
governments must consider the impact down the line, experts agreed in a panel
session on Thursday.
“Whereas oil is like dating, the gas business is
like having a marriage – it really is a long-term business,” said Edward Chow, a
Washington-based senior fellow at the Center for Strategic and International
Studies’s Energy and National Security Program.
Chow spoke at the
afternoon session on “The Land of Milk and Honey... and Natural Gas – Challenges
and Opportunities,” at the Israeli Presidential Conference 2013 in
From the United States, Israel and Norway, the experts
discussed how Israel should proceed with its Mediterranean hydrocarbon finds,
looking at export opportunities, geopolitical implications and financial
A day earlier, Prime Minister Binyamin Netanyahu announced that
he would recommend to the cabinet on Sunday that 540 billion cubic meters of gas
– approximately 60 percent of Israel’s estimated current reserves – be earmarked
for domestic use, with the rest going to export.
Gideon Tadmor, CEO of
Avner Oil Exploration and chairman of Delek Drilling – both companies developing
the country’s two largest fields – argued that the potential to export large
quantities of gas would allow Israel to become an “international energy player”
and a “stabilizer in the region” by supplying gas to neighbors such as the
Palestinian Authority, Jordan and Turkey.
Other panelists, however, said
Israel’s gas would have no such effect.
It won’t change Israel’s
geopolitical situation,” said Brenda Shaffer, an expert on energy policy at the
School of Political Science of the University of Haifa.
can be geopolitical value in sharing gas with its neighbors, Israel should not
hope that by doing so it will be generating a kind of “peace pipeline,” Shaffer
“Countries don’t get closer because of the incentive of oil
and gas,” she told The Jerusalem Post following the panel
Extending gas pipelines to neighbors can lead to increased
trade, but this “can also be a source of contention,” Shaffer
Where geopolitical value can certainly be found, however, is
by providing neighbors with a source of electricity, in a Middle East that still
uses disruptive, expensive and dirty oil for its power, she said. By selling
Jordan – and Syria and Lebanon through Jordan – natural gas, Israel could ensure
that its neighbors gain a regular, reliable power supply, according to Shaffer.
In addition, such a steady electricity supply would allow for the cheaper
production of desalinated water, minimizing regional conflicts over the
“The geopolitical value is not in using the energy as a weapon
but in having prosperous neighbors,” Shaffer said. “If we want our neighbors to
be stable and economically prosperous, they have to have a stable electricity
Because a national natural gas industry inevitably “takes a long
time for maturation,” it is not yet possible to tell exactly where Israel will
end up exporting its gas, aside from to its Palestinian and Jordanian neighbors,
If the government chooses to not construct a liquefied natural
gas export plant at home, it might find benefit in making use of the existing
facility in Egypt, which is running at 40 percent capacity. Shaffer favors this
option over using an LNG plant that may be constructed on Cyprus.
is unlikely to export gas to Turkey through a pipeline, she said.
don’t think that Turkey is really interested in importing the Israeli natural
gas,” Shaffer said. “It’s a way to put a wedge between Cyprus and
To maximize net revenue, lower transport costs make exporting to
the immediate neighbors something Israel should seriously consider, Chow agreed.
While oil responds to a global marketplace, gas is a “fundamentally different”
business that responds only regionally, due to transportation economics, he
Although generating competition in the Israeli gas market can
theoretically be a good tool for reducing prices, Shaffer warned that
competition should only be viewed as a “tool” and not as a “goal” for the gas
“If it can lower prices, increase production, it is good, but it
is not a goal in itself,” she said. “Competition will never happen in this
market. We don’t even have competition in banks, how are we going to have
competition in two gas fields?”
No matter how Israel chooses to go forward with
its exploration and its exports, Kjell Magne Bondevik, former prime minister of
Norway, stressed it must maintain “a long-term perspective” on every step of the
way. Ideally, Israel should emulate Norway in its decision to establish a
sovereign wealth fund for petroleum, so that revenue from the hydrocarbon sector
is set aside and allocated for specific purposes.
Within two months, the
Knesset is set to discuss the approval of such a policy, to preserve resources
for future generations as well as avoid a recession, Prof. Eytan Sheshinski of
the Hebrew University said. The fund will invest abroad, and only under
emergency circumstances will the government be able to borrow from it, he
“These resources don’t only belong to our generations but must
be administered in a way that must benefit future generations, which they belong
to,” Bondevik said.
“Natural gas is limited, nonrenewable resources and
should be exploited so.”