Zemach: Gas exports won't hurt domestic industries

Director-general of Energy and Water Ministry insists Israel will maintain sufficient supply of natural gas for domestic electricity needs.

By
May 1, 2013 22:37
4 minute read.
Shaul Zemach

Shaul Zemach 370. (photo credit: Courtesy Ministry of Energy)

Despite the contention surrounding Israel’s prospective natural gas export policies, Shaul Zemach, director-general of the Energy and Water Ministry, insisted on Tuesday that Israel will maintain a sufficient supply for domestic-electricity needs and also for the petrochemical industry.

Zemach was addressing participants of the First International Conference on Natural Gas Chemistry: Natural Gas is Much More than Cheap Fuel, an event organized in Tel Aviv by the Energy and Water Ministry and the Israel Chemical Society. While it is still up in the air exactly how the government will allocate the nation’s sudden influx of natural gas, academics, regulators and policymakers from Israel and around the world discussed opportunities for the country to use the resource as a raw material for more than just generating electricity.

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The Zemach Committee, a team of gas experts headed by Zemach, recommended last fall that Israel allocate a maximum of 500 billion cubic meters of natural gas for export. This number has had environmentalists up in arms, as they have collectively expressed a desire to preserve the gas for both domestic energy production as well as the petrochemical and alternative fuel development industries.

At the conference, however, Zemach stressed that his plan would maintain a sufficient domestic gas supply to fulfill these needs.

“What we tried to do is try to give the certainty that the industry needs in order to maintain investments, to develop the industry in an efficient manner,” Zemach said.

“That includes not only the natural gas industry and oil industry and refineries but also the petrochemical industry. We believe there is potential for that industry.”

Over the past decade, natural gas consumption in Israel began as 1.19 billion cubic meters per year in 2004, rising to 5.34 billion cubic meters in 2010 and back down to 4.96 billion cubic meters in 2011 and 2.55 billion cubic meters in 2012 after the Egyptian gas supply to Israel ceased, Zemach explained.

This year, the ministry expects gas consumption to rise back up to 7.25 billion cubic meters, increasing to about 9.7 billion cubic meters in 2015 and 13.3 billion cubic meters in 2020, he said.

The Bank of Israel is projecting that that the country’s GDP is gaining about 1% growth from the new natural gas activities, accounting for 25% of growth in 2013.

“We will not sacrifice domestic industries for the sake of exporting natural gas,” Zemach said. “But the other side of that very same point is that those industries have to have some economic and technology grounding. And that’s for you to explore and that’s for us to support.

And I think that’s the new challenge of natural gas for the Israeli economy.

And I’m sure that after this debate is finalized the Israeli economy is going to rebound.”

Ariella Berger, head of oil alternatives and energy research at the Israeli Institute for Economic Planning, said during a panel discussion at the conference that she takes particular issue with these forecast numbers, and that the ministry has not accounted for all of the country’s future needs. While the population today is roughly 8 million, in 2050 it should be around 12 billion, and in terms of Israel’s gas needs “the picture changes substantially,” she said.

Due to population growth, increased need for gas fuel mixes and energy industry’s “own use” – the amount of energy required to extract the resource – the numbers will likely be much higher, Berger said.

“It’s not a very simple matter. The effect on the economy is non-linear,” she said.

As far as petrochemical development from natural gas sources goes, the gas itself – methane in Israel’s case – presents “a very substantial challenge to activate in a way that is commercially viable,” said Dr.

Richard Schlosberg, chairman of the US-based Chemical Research Committee and a consultant, who previously worked for ExxonMobil.

“There are lots of different uses in the end sector and each has a different value for the economy,” he said.

Unlike corporate gas giants such as Exxon or Shell, Israel is not constrained in how it will develop its petroleum, as the country does not have an ingrained infrastructure for dealing with the resource, Schlosberg explained. Rather than focusing on simply alternative fuel development, the country should look to the potential of the chemical industry, he added.

“We believe that the demand around the world for fuels is not growing nearly as fast as the demand for chemicals,” Schlosberg said.

While developing olefins like ethylene and propylene would be mean competing against “the big guys,” Israel could take a different approach and work on developing more complicated oxygenates from natural gas – like glycols and acrylates, Schlosberg said.

Israel could thereby use its natural gas as “something that gives them a sustainable opportunity to meet and beat competition depending upon the pricing,” he said.

A higher level of technology, with which Israel is certainly equipped, is required for such complex but highly profitable chemistry, according to Schlosberg.

“Since you don’t have an existing petrochemical industry, you have a blank page,” he said. “I think you could 20 years from now be among the leading providers of chemical technologies and chemical products.”


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