“IF MOSES HAD TURNED RIGHT instead of left when he led his people out of the
Sinai Desert,” goes an old joke, “the Jews would have had the oil and the Arabs
would have ended up with the oranges.” We can’t tell that joke any
more. And you can blame oil geologist Joseph Langotsky.
insisted for years there was oil and gas offshore in Israel’s territorial
waters. Few listened. Finally, exploratory drilling commenced. Now, two
major gas fields have been discovered in the Mediterranean, named Tamar and
Leviathan. The latter is said to be the biggest gas find in the world in a
decade. Tamar is named for Langotsky’s granddaughter. Leviathan means “whale” in
Hebrew and indeed is a whale of a find – new estimates show Leviathan has some
16 trillion cubic feet of gas, worth (at current European market prices, one
cent per cubic foot) over $160 billion.
Tamar has an estimated eight
trillion cubic feet of gas, and production will begin in 2013. Moreover,
the American firm Noble Energy, which owns 40 percent of Leviathan, is now
running drilling tests for what it believes could be three billion barrels of
oil or more around Leviathan, worth over $300 b. in today’s prices, or 1.5 times
Israel’s annual Gross Domestic Product. The question is – what should Israel do
with this new, incredible windfall? In March, the Knesset passed legislation
approving the Sheshinski Committee recommendations for taxing profits of the
natural gas companies. The tax rate will be 52-62 percent and will generate
additional tax revenues, according to Finance Minister Yuval Steinitz, of about
NIS 1 b. yearly, for 30-40 years, starting in 2015.
Steinitz told “The
Jerusalem Post,” “This annual amount will not change the world, but altogether,
it is an enormous sum that can serve education, welfare, defense and the entire
Zionist endeavor. Our children and maybe our grandchildren will
Steinitz and Prime Minister Benjamin Netanyahu fought a valiant
battle against the gas companies, led by billionaire Yitzhak Tshuva, who lobbied
fiercely to defeat the gas tax law and escape the higher tax
Now that the tax issue is settled, a major dilemma is emerging
– how to optimize the use of the gas. If our children and grandchildren are
truly to benefit, Minister Steinitz, you and your government must think out of
the box. Think “GasTech” – fund and build technology- intensive industries that
use natural gas, rather than just export the raw gas. Why should Israel behave
like a Third World nation that can only export cheap raw commodities, instead of
high-priced industrial products? TO UNDERSTAND WHY GASTECH makes sense, some
background information is useful. Worldwide, 29 billion barrels of crude oil are
consumed yearly, along with three trillion cubic meters of natural gas,
equivalent to 18 billion barrels of oil. In addition, seven billion tons of coal
are produced, equal to 35 billion barrels of oil.
Natural gas is 87
percent methane, CH4, a hydrocarbon. When burned, methane produces much less
carbon dioxide than other fossil fuels, per unit of heat. Hence, a shift to
natural gas can forestall the pace of global warming and climate change,
especially when gas replaces dirty coal. (The Israel Electric Corporation
currently uses imported coal to make half of its electricity.) The proportion of
fossil fuel energy derived from gas worldwide is likely to rise – gas burns
cleaner than coal or oil, it is relatively cheaper (as oil prices rise) and
there are proportionately more gas reserves than oil. According to British
Petroleum, the world has 46 years’ worth of proven oil reserves (at current
usage rates), but 60 years’ worth of gas reserves, and the latter number rises
daily. We have 130 years’ worth of coal reserves, but burning coal to make
electricity is increasingly ruining our climate. Burning a ton of coal generates
4-5 tons of carbon dioxide. Natural gas generates half that, for the same heat
Huge amounts of oil and natural gas are trapped in shale –
rock in which oil and gas are trapped. Anew way to extract oil and gas from
shale called “fracking” is now feasible and widely used, especially in America.
By this method, small explosions create fractures in the shale, into which oil
and gas seep and are then pumped to the surface. America has large oil and gas
shale deposits. In the long run, America’s dependence on oil will diminish as
“fracking” boosts both gas and oil production and gas provides 40 percent of
America’s energy needs, compared with 20 percent today.
Israel too has
shale oil deposits in the Negev. But more immediately, the Tamar gas field is 90
km (54 mi) offshore, in the Mediterranean, and three miles deep, and its gas
will reach Haifa in 2013. Leviathan is 130 km (78 mi) offshore. It will take
longer to develop.
Piping the gas onshore from both fields will cost
billions of dollars. Long before this is done, Israel must plan strategically
how to exploit optimally its gas resources. Here are some options.
(Liquid Natural Gas): Israel can act like Algeria, Trinidad and Qatar and build
plants that cool the gas to minus 260 degrees F, liquefy it to 1/600th of its
volume and ship it abroad in special LNG ships. I asked Prof. Yehuda Hayut, former Haifa University president and an
expert on shipping, whether LNG is safe in a terrorridden Mideast.
is a viable and very efficient way to transport gas,” he answered. “LNG ships
ply many trade routes from the Middle East and North Africa to the U.S. and
There are special safety measures when these vessels enter a port
and the record is very safe.” In 50 years of LNG use, no accidents have been
recorded. Constructing an LNG plant and building or leasing LNG ships takes
enormous resources. And it is still raw gas that is being sold. LNG’s price is
less than the crude-oil energy equivalent.
GTL (Gas to Liquid): Qatar has
gas reserves larger than Leviathan. It is also a benchmark leader in gas-based
industry and technology. Qatar has a revenue-sharing deal with global oil giant
Royal Dutch Shell to produce 140,000 barrels a day of clean diesel, and 120,000
barrels of gas condensate, from offshore natural gas. Israel should seek a
similar deal, or build a GTL plant on its own. The Qatar process is said to be
secret, based on cobalt catalysts. Israel’s creative chemical engineers should
be set to work at once to develop our own version.
Israel self-sufficient in gasoline and diesel fuel is a powerful advantage in
the unstable Mideast. With gasoline now priced at 7.39 shekels per liter (or
$8.15 a gallon), there is no time to waste.
CNG (Compressed Natural Gas):
Bottled compressed natural gas can run cars and trucks, in place of gasoline.
This could reduce Israel’s crude oil imports sharply.
Industry: Natural gas can become the basis of an expanded profitable
petrochemical industry, producing fertilizers and plastics, for example. Such
industry already exists in Haifa. Some experts think the gas can be piped to
this existing site, where new plants can be built.
recall, however, that a Katyusha rocket hit the refineries in 2006, in Lebanon
War II. Others think the gas should be piped to a new, safer petrochemical site
in the Negev, far from population centers.
At present there is global
overcapacity in petrochemicals and prices are low. Again, creative ideas are
needed to add value to raw natural gas, through technology, in ways other
countries find hard to imitate.
A Neaman Institute report shows that
Israel has 400 chemical plants, generating about a third of all industrial
production and exports and employing 30,000 workers.
There is also a
strong supply of chemical engineers. Yet only 4 percent of the Chief Scientist’s
R&D grants for innovation go to this industry, compared with over a third
for communications. This imbalance must be repaired. Sharon Kedmi, Director
General of the Ministry of Industry, told me his ministry is actively studying
so-called “Newtech” projects, including how best to use natural gas in industry.
Both the Finance and Industry Ministries must plan carefully to avoid “Dutch
disease” – the Netherlands’ currency appreciated when huge gas reserves were
discovered, ruining its industrial exports.
Almost everything in the
Mideast becomes a political dispute. Gas is no exception. There are conflicting
claims over rights to the offshore gas. Lebanon claims Israel is stealing its
gas. So does Gaza.
Wisely, Israel signed an agreement with Cyprus last
December, clearly delineating the sea border between the two
Cyprus stands to benefit a lot from Leviathan, because part of
the gas field belongs to it. Hopefully Israel and Cyprus will collaborate to
develop the field. Turkey strongly protests, claiming the Greek Cypriots are
scalping the rights of Turkish Cypriots. And in the background lurks the shaky
supply of Egyptian gas to Israel, halted by a saboteur’s bomb, and recently
threatened again by a bomb that luckily failed to explode. Though the flow of
Egyptian gas to Israel has resumed, it is unclear whether Egyptian gas will
continue to flow unhindered, in the wake of the deposing of President Hosni
Mubarak. Any delay in developing Tamar and Leviathan will thus be
Perhaps the only loser in this story is Langotsky. He had to
drop a limited partnership formed to finance exploration, when his partner,
mining tycoon Benny Steinmetz, bailed out, only two months before exploratory
drilling began. Langotsky will ironically not profit at all from the gas wealth
he was instrumental in generating. • The writer is senior research fellow, at
the S. Neaman Institute, Technion.