Tshuva: Gas will reach Israel's shores by 2013

Delek owner: "We will supply all of the needs of the state. I believe that we will reach understandings with the Treasury and Israel Electric Co."

By EHUD ZION WALDOKS
March 3, 2011 03:03
Tamar offshore gas field.

tamar offshore gas field_311. (photo credit: Courtesy)

 
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In the first definitive statement from the developers of the Tamar gas field since the publication of the Sheshinski Committee recommendations, Delek owner Yitzhak Tshuva pledged Wednesday that natural gas would arrive as planned by 2013.

Supply from Tamar and its timely entrance into the market has become increasingly critical as the supply from Egypt has been disrupted. Forty percent of electricity is produced by turbines running on natural gas.

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Egypt supplies 20% of the gas used to produce electricity. The Mari-B Israeli field which supplies the other 20% of the gas that produces electricity is expected to play out by 2013 – sooner if the Egyptian supply takes a long time to resume.

Senior officials at Tshuva’s Delek Energy had warned that the Sheshinski Committee recommendations had put that target date of 2013 in doubt.

However, speaking to the Israeli Institute of Energy and Environment’s Third Annual National Energy Conference, Tshuva said the 2013 deadline would be met.

“In 2013, the gas will arrive at Israel’s shores. We will supply all of the needs of the state. I believe that we will reach understandings with the Treasury and Israel Electric Corporation,” he said.



Tshuva was not scheduled to speak at the conference but requested and received a spot at the podium.

Tshuva has been attempting to negotiate government guarantees for the development of Tamar, but so far without success.

“We have not waited for that financing and we have invested $1.4b in the project,” he said.

Tshuva urged the country to use gas for cars and industry to save 50% on costs and keep the money at home rather than pouring it into foreign coffers.

He also called on the Treasury to sit down and talk with the gas developers.

“Sit with us, talk with us and we will reach agreements and understandings.

We will do our utmost and gas will arrive as planned,” Tshuva said.

Speaking on the next panel, Amos Lasker, CEO of the Israel Electric Corporation remarked, “What Tshuva said removes the veil of uncertainty surrounding the supply of gas. We haven’t heard such a declaration since the Sheshinski Committee Recommendations came out.”

Shaul Tzemach, director-general of the National Infrastructures Ministry, began the conference by declaring that “Natural gas is the most important project in the last 10 years, if not the last 30.

“Projects like the Carmel Tunnels are important but their impact is local. Gas is a national strategic priority,” he declared.

Dr. David Wurmser, Founder of the Delphi Global Analysis Group, attempted to put the Israeli natural gas finds into regional geo-political perspective. Wurmser contended that Turkey’s recent growing animosity to Israel stemmed not only from its leaders’ political leanings towards the Islamic world but also because Turkey feels threatened by Israel's gas finds.

Russia and Turkey are intent on carving out a major role for themselves supplying energy to Europe, with the help of Iran’s gas supplies as well. Russia and Iran have the gas reserves and Turkey the access. However, Russia’s reserves will run out in a decade, Wurmser said, and Turkey is afraid Israel will bypass its pipelines altogether and offer an alternative energy source via Greece.

Russia has attempted to buy into the Greek pipelines and many sources around the Mediterranean Basin in the hopes of continuing its influence even when its own supplies run out. It has also now expressed interest in Israel, Wurmser said.

Israel, however, retains the option to rebuff Russia and deny Russia the control over supplies entering from its southern flank.

Wurmser contended that a geopolitical “great game” was therefore heating up in the Levant Basin that was just beginning to play out – with Israel's natural gas finds at its center.

Nick Butler, a BP vice president and former adviser to the UK prime minister on energy issues said the natural gas finds “could create a moment of historic opportunity but it isn’t automatic.”

“The discoveries that have been made could be the most significant economic event in this country since 1948. It could provide the revenue to modernize the economy as well as invest in renewables. There are great employment prospects – 10,000 skilled jobs. Companies will come to build hundreds of miles of pipeline, services that come with creating a great industry will also emerge, and there will be increased national security,” he told the audience.

Israel should pursue two strategies, he urged, increase domestic demand and adopt an active export strategy.

Domestic demand could be increased by using more gas to produce electricity and less coal.

“Israel is the most dependent on coal in the OECD world,” he declared. Domestic demand could also be increased by converting the gas into oil and using it to replace imported oil. Similarly, the petrochemical industry could be double or tripled.

Turning to the export options, Butler noted that “gas in the ground has no value until it has a buyer.”

In contrast to Wurmser, he argued that the European market already had a lot of players and established infrastructure and so wasn’t the best market for Israeli exports. Instead, he suggested that the Asian market – specifically China, India, and Korea – were very good potential markets as energy demand would grow and was not yet “contracted with supply.”

Israel’s gas finds would likely more than meet its domestic needs for the next 30 to 50 years, he said, and therefore there would be ample gas to export. As global energy demand was constantly rising because of population growth and increasing standards of living, there would be no lack of markets for Israeli gas.

He also cautioned that an industry this large would need government to government strategic interaction rather than relying on a private company alone to broker the deal.

Finance Minister Yuval Steinitz stressed the importance of gas and the Sheshinski Committee in the face of the regional turmoil.

“The events that have occurred in our region show just how important the energy issue is. US Federal Reserve Chairman Ben Bernanke has warned about the effect of the unrest on the US economy and the European and Chinese economies," he said.

“Monday was a holiday for me [since the Sheshinski Committee recommendations passed their first reading in the Knesset]. Ten months since I created Sheshinski Committee and a public debate that was mostly legitimate but sometimes crossed the line, the fight was won successfully,” he said.

“The process has been a certificate of honor for Israeli democracy,” he added.

Nevertheless, “it’s too early to celebrate since the legislative process is not finished,” Steinitz cautioned.

Steinitz said the state would reap hundreds of billions of shekels over the next 40 years from the royalties and taxes on the gas finds. However, the annual government take would not change the macro-economic calculations of the state. NIS 10 to 20 billion would not “turn the state budget upside down,” even though it would be a very respectable addition, he said.

In addition to natural gas, there was also the chance of finding shale oil in the Judean desert and the Negev. If the environmental impact was found to be negligible, then it should be developed as well, the finance minister said.

Steinitz also warned of the potential dangers of deep sea drilling.

“The state must prevent any similar oil spill in the Mediterranean as the one that occurred in the Gulf of Mexico.

Environmental Protection Minister Gilad Erdan is concerned primarily for environmental reasons. I am also concerned because of the potential economic impact of such a spill.

Therefore, we are exploring ways to minimize the risk,” he said.

A delegation of experts from the Netherlands would be arriving shortly to offer their expertise on how to use the revenue from the government take from the gas finds wisely, Steinitz said.

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