Acknowledging the enormous economic and strategic prospects available to Israel’s expanding natural gas sector, US Ambassador Daniel Shapiro warned on Monday that the country must stabilize its investment environment in order to attract international developers.
“For all the opportunities in Israel’s energy sector a note of caution is warranted,” Shapiro said, noting that the US encourages American companies to invest in Israel.
“But companies have many places where they can invest their money,” he added.
Shapiro was addressing the Israel Energy and Business Convention in Tel Aviv on Monday morning, organized by the Eco Energy Finance and Strategic Consulting Firm.
While Israel has a robust gas supply in its offshore Tamar and Leviathan reservoirs, there are many countries with greater energy resources, the ambassador cautioned. The development of “a stable, predictable investment environment is critical,” as the significant upfront investment required in the hydrocarbon industry must yield reliable returns, he said.
“We have consistently encouraged Israel to demonstrate that developing its energy resources is a government priority,” Shapiro added.
The timetable for bringing Israel’s larger Leviathan gas reservoir – which will predominantly be dedicated to export – is therefore critical, according to Shapiro.
“We are urging Israel to move quickly,” he said.
The 621-billion cubic meter Leviathan gas reservoir, located about 130 km. west of Haifa, is expected to begin flowing around 2017, assuming bureaucratic and financial hurdles are surmounted.
Noble Energy owns 39.66 percent of Leviathan, while Delek Drilling and Avner Oil – both subsidiaries of the Delek Group – each own 22.67% and Ratio Oil Exploration holds 15%.
The neighboring Tamar reservoir, a 282-b. cu.m. basin about 80 km. west of Haifa, began flowing to Israel’s domestic market in March 2013. At Tamar, Noble Energy holds 36% of the basin. Delek Drilling and Avner Oil Exploration each own 15.625%, while Isramco owns 28.75% and Dor Gas owns 4%.
Although several regional letters of intent have been signed between the Leviathan and Tamar developers and Israel’s neighbors, the companies continue to face many hurdles regarding the larger reservoir’s development due to the great financial investment required.
In May, Australian hydrocarbon firm Woodside Petroleum withdrew from a projected $2.71 billion deal to acquire 25% of the Leviathan basin due to disagreements with the country’s Tax Authority.
Nonetheless, Shapiro stressed that the United States remains committed to helping Israel develop its natural gas sector, which holds great potential for success, and attract investors.
“We want the US extensive experience and expertise in developing and managing our oil and gas industry to be part of the Israeli success story,” the ambassador said.
Likewise stressing the importance of developing Leviathan, Gideon Tadmor – Anver Oil Exploration CEO and Delek Drilling chairman – stressed that the companies “need support from Jerusalem.”
“We are at a watershed moment in terms of natural gas in the State of Israel,” Tadmor said. “We have to ask ourselves where we are going.”
“Everybody agrees that we cannot miss this historic opportunity,” he added.
“There are those who complain that we are dragging our feet and do not want to develop Leviathan,” said Bini Zomer, director of Noble Energy in Israel. “This could not be further from the truth.”
Both Zomer and Tadmor referred to a number of letters of intent and agreements that the Tamar and Leviathan reservoir partners have lately signed with Israel’s neighbors.
Just over two weeks ago, the Tamar reservoir partners signed a letter of intent to sell 2.5b. cu.m. annually to the Egyptian firm Dolphinus Holdings through the former Egyptian East Mediterranean Gas company pipeline.
In September, the Leviathan partners signed a letter of intent to sell 45b. cu.m. of natural gas to Jordan’s National Electric Power Company over a 15-year period.
These letters followed others with British- and Spanish-run gas liquefaction plants in Egypt, as well as agreements to sell gas to a future Palestinian power plant in Jenin and to Dead Sea factories in Jordan.
“Last week we marked 20 years to the peace agreement with Jordan, and today we are closer than ever to signing a gas export agreement to the Jordanian national electric company,” Tadmor said.
Also referring to these various letters of intent and agreements, Shapiro emphasized how energy can have a powerful impact toward securing Israeli-Palestinian peace, which he said remains a top priority of US Secretary of State John Kerry.
“A critical element of that goal is building up a sustainable basis for economy of a future Palestinian state,” the ambassador said. “The US is going to continue to support this effort because economic progress in the West Bank is in the interest of Israel and the US, as well as in the interest of the Palestinians.”