What started as a Greek energy company some 20 years ago has gradually developed into one of Israel’s primary natural gas suppliers. Energean is a natural gas manufacturer that supplies the Start-Up Nation with around half of its natural gas, amounting to over 7 billion cubic meters (BCU) of gas per year sold to Israeli consumers.
At present, Israel is the company’s only customer, and Energean likes it that way. “We sell 100% to the Israeli market, so obviously, we're a very significant player,” said Karen Simon, Non-Executive Chair at Energean.
“We sell 100% to the Israeli market, so obviously, we're a very significant player,”Karen Simon
In an interview with The Jerusalem Post, Simon elaborated on the company’s future Israeli operations, the current gas market and the role of natural gas in the eventual transition to clean energy.
Relative to the rest of the global market, Israel seems to be one of the world’s natural gas gold mines, given its many bountiful offshore deposits. How does the current amount of supply match up with market demand?
“There’s a lot of demand: people use a lot of power. Even if you have an electric car, you have to plug that car in to power it, and the electric plants that supply that power are gas fueled. The world continues to see a lot of demand, and Israel is included in that.”
With that said, do you expect the price of natural gas to increase in the near future?
“I personally think that it will. There are all sorts of dynamics that would indicate the continued growth of demand for energy, and gas is a very good source of fuel to provide that. Manufacturing plants — particularly fertilizer plants — home heating… as well, if China starts opening back up because lockdowns have been lifted, economic activity will come up. Everyone expects the demand for energy to continue to be robust.”
Despite its overabundance of gas, it seems like Israeli consumers are more than willing to use as much as possible. Is the Israeli gas market bottomless, or at least large enough to justify Energean’s continued focus?
“I'm not sure what ‘bottomless’ means. It all depends on the actual demand. I think at some point the Israeli market is going to be totally saturated and the gas is going to have to go somewhere else. Right now, we're in the position where that's clearly not happening in the next few years, but that is down the road.”
“Israel is benefiting from this wonderful resource that you are blessed with. Frankly, you're sitting on a great asset. The resource base that you have here has proven to be very attractive, and we haven’t officially decided on it yet but continuing to supply the Israeli market is certainly a very attractive alternative.”
If the company does decide to enter other local markets, are there any barriers that would prevent Energean from exporting its product to other nations in the area?
“One of the barriers of sending gas outside of Israel is you need more pipeline space, which you don't really have right now — and it’s potentially very expensive infrastructure to build. We're the kind of company that, if it's there, we'd be more than happy to use it. But I don't think we’re the players in the market to build it.”
“Israel has been a great market for us, [though] we're more than happy to sell the gas wherever it makes economic sense for us, and right now the export market is not really that available because of infrastructure capacity.”
Energean is somewhat smaller compared to other global energy corporations like Chevron or BP. In a market that relies so heavily on the discovery of new resources just as much as it depends on leveraging those resources, how does Energean stay in the game, when exploration is both speculative and expensive?
“The goal is to mitigate risk as much as possible. Pure exploration can be very speculative, and these [exploration efforts] are big investments. I mean, we spent like $130 million last year on exploration. Each day costs something like half a million dollars, depending on your rig rates, which are very high now.”
“Technology is amazing in the oil and gas industry in terms of what it's capable of doing. What we do is use seismic mapping to try to find certain characteristics in the reservoirs where we have a very high degree of confidence. We map reservoirs under water, so we know where to drill and how to drill in order to de-risk [the operation] as much as possible before we spend that kind of money.”
Has the current popular narrative surrounding climate change and clean energy contributed to the current rising popularity of natural gas over oil?
“Maybe slightly, because the view is that gas is going to be a cleaner burning fuel, but I think it's mainly the fact that there's so much more gas that's been discovered. These resources are very prolific and strategic.”
How does that clean energy narrative impact the natural gas market overall? Could natural gas lose its footing to innovations within the clean energy sector?
“Unless there's some fusion technology or something that all of a sudden is a breakthrough new technology, we don't see it being displaced. We see gas as still being a very strategic fuel source for 10, 20, 30 years.”
“People are waking up to the strategic importance of energy security [in light of climate change], and natural gas plays an important role in that transition. But that transition is not going to happen in a two to three-year time period, it's going to take much longer. So while these alternative technologies are being developed you're still going to have demand for power that's going to have to be met, and I think natural gas is going to play a huge role in that.”