Leviathan drill 521.
(photo credit: Albatross)
Before rushing to export natural gas, Israel must first use the commodity to
supply its own market, British energy expert Nick Butler said at the Herzliya
Conference on Wednesday.
Israelis seem to be convinced that natural gas
discoveries will lead to an immediate economic boom, but the fact is that even
in a best case scenario revenues will not begin to stream in until 2020 at the
earliest, Butler, a visiting fellow at King’s College London and a former BP
Group vice president of strategy, said.
The other panelists, including
Israel Electric Corporation chairman Yiftach Ron- Tal, Eilat-Ashkelon Pipeline
chairman Amos Yaron and Delek Drilling CEO Yossi Abu, spoke in favor of striking
a balance between supplying local demand and exporting gas.
said it would be unwise to build a major liquefied natural gas exportation
facility before more is known about how much natural gas the Levant Basin
actually contains. It would take at least five years and cost $6 billion to $8b.
to build such a facility, and that is before taking into an account that a
location has still not been found for it, he added.
Moreover, if Israel
is going to export gas, it has to understand the market to which it is
exporting, Butler said. He pointed out that the United States is now
self-sufficient, and that the Levant Basin is not ideally placed to supply gas
to the Asian market, given the competition from Qatar, Iraq, Saudi Arabia,
Indonesia and Australia.
“There is a real risk that the cost of getting
gas from here to there will reduce the net margin, and therefore reduce its
value to owners and to the State of Israel,” he said.
attention to the local market, Butler said he agreed with the forecasts of some
of his fellow panelists that the majority of Israeli electricity would soon be
manufactured from natural gas.
“This is a developed
economy. Israel is not a banana republic that has to export its natural
resources. I don’t see why Israel could not develop gas grids in major cities to
bring it to every business and every home. That is what has worked in most
European countries, and there is no physical reason that cannot be done here,”
Energy and Water Minister Uzi Landau, who spoke before the panel
discussion, said that continued gas exploration depended on being able to
provide an assurance that some of it would be for export. Landau also addressed
the topic of electricity production, saying that Israel would be open to selling
power to Jordan and Egypt should they wish to buy it.
the Environmental Protection Ministry, saying that it was motivated only by
environmental concerns, something that restricts the supply of gas and would
likely lead to electricity blackouts.
In response, Environmental
Protection Minister Gilad Erdan said he completely rejects the notion that his
ministry “exacerbated the shortage of natural gas.”
Rather, the depletion
has been caused by the overuse of natural gas on the part of industry, and the
Energy and Water Ministry should have been engaging in longer-term preparations
to prevent such deficits, a statement from the Environmental Protection Ministry
“The shortage of gas was known in advance and would have happened
even without any guidance from us,” Erdan said. “The shortage stems from a
long-term planning failure of the [Energy and Water] Ministry. If Minister
Landau and his ministry were operating as required, the public could enjoy
cheaper electricity and live in a cleaner and healthier environment.”