“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.

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 benefit.”

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 payments.

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 equivalent.

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.

LNG (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.

“LNG 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 Europe.

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.

Strategically, an 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.

Petrochemical 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.

Haifa residents 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 nations.

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 dangerous.

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.

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