'Israel able to fulfill energy needs - but with costs'

After second Sinai gas pipeline bombing halts flow of natural gas, experts say power supply will continue undisturbed but with short term costs.

By SHARON UDASIN
A natural gas pipeline [illustrative]. (photo credit: Courtesy)
A natural gas pipeline [illustrative].
(photo credit: Courtesy)
After a Sinai gas pipeline bombing on Wednesday morning halted the flow of natural gas from Egypt to both Israel and Jordan, experts say that Israel will be able to fulfill its energy needs, but not without both financial and environmental costs, at least in the short term.
The pipeline exploded on Wednesday after “an unknown armed gang” of saboteurs bombed a segment that runs through Egypt’s northern Sinai near the town of El-Arish, a security source told Reuters.
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This latest attack follows the February 5 explosion at a terminal in the area that left Israel and Jordan without its Egyptian natural gas supply for five weeks, and an additional attempt at the end of March in which the explosive failed to detonate.
The bombed pipeline delivers gas not only to Israel and Jordan, but also to Syria via a pipeline that runs through Jordan, where it is also reexported to Lebanon.
Meanwhile, Egypt’s public prosecutor is currently investigating six officials from the Mubarak government, including former energy minister Sameh Fahmy, on charges for “squandering public funds” by permitting East Mediterranean Gas’s transactions with Israel at a price below global market rates.
“The Israel Electric Corporation has the means to guarantee a continuous supply of electricity to meet the country’s demands for all of its users, regardless of the cessation in the Egyptian gas supply,” said Dr. Amit Mor, CEO and energy specialist at the Eco Energy consulting firm. “IEC will do this by utilizing the Ashkelon and Hadera coal plants at maximum capacity.”
Coal currently fuels the production of 62 percent of Israel’s electricity, while natural gas accounts for 36% – two-fifths of which is supplied by Egypt, according to Mor.
Senior officials at the IEC convened on Wednesday for a discussion headed by Chairman Yiftah Ron-Tal and CEO Eli Glickman to appraise the situation and determine potential alternative methods for running power plants, including the use of petroleum, the corporation said in a statement.
“We do not expect that as a result of the latest event there will be any drops in the supply of electricity from our power plants,” said National Infrastructures Minister Uzi Landau at a press conference on Wednesday afternoon.
“The IEC is well-equipped to deal with such incidents.”
While he agreed that the IEC is completely prepared to handle the situation, Mor said that the current case will be slightly more difficult to manage than that of February “because the demand for electricity during these upcoming days and weeks is significantly higher than the demand for electricity back in the winter,” due to increased use of air conditioning.
“It was a mild winter,” he said.
In addition to making extra use of the coal plants, the IEC will probably convert several of the stations that currently run on natural gas to operate on heavy fuel oil and diesel instead, Mor predicted.
Though sufficient to fulfill Israel’s energy needs, these switches to coal and oil will cost the IEC an additional $1.5 million-$2m. per day, however, according to Mor.
“Coal prices have increased significantly in the past few weeks, due to an increasing demand for coal in China and in the international market. Now coal is more costly than the Egyptian gas,” he said.
Egyptian gas currently costs Israel somewhere between $4.10- 4.50 per million British thermal units (there are 6 million British thermal units in one barrel of oil), while heavy fuel oil costs $20 per million and diesel costs $25 per million, Mor explained.
“[Diesel] is six times higher than the price of Egyptian gas,” he continued.
“At the end of the day, we, the electricity consumers, will pay that additional cost through the price of electricity.
“If the halt of the gas supply is short, then the increase in the electricity price will be marginal, but if the halt is long or permanent, then the resultant increase in the electricity price will be significant.”
Meanwhile, burning excess oil and coal also has dangerous ecological effects, experts stressed.
“Burning coal and fuel oil has adverse environment impacts because of the higher emissions of sulfur dioxide, nitrogen oxide and particulate metals, which have negative health effects, as well as carbon dioxide, which contributes to global warming and climate change,” Mor said.
“Although heavy fuel oil is significantly cheaper than diesel, due to environmental reasons, the priority should be to utilize the diesel-based power plants before the utilization of the heavy fuelbased power plants.”
Though acknowledging that Israel “will have to resort to these energy sources to some extent,” Landau assured journalists that the IEC and the government would remain “sensitive to our environment” at Wednesday’s press conference.
“The main problem is the cost,” said Brenda Shaffer, an expert on energy policy and management at the University of Haifa. “You have coal and diesel as alternatives. But they’re costly and they pollute. In the long term, it’s better to pay more for your gas but make sure that it’s stable.”
An additional short-term alternative for the IEC will potentially be an increased use of Israel’s own current natural gas supply, the Mari-B field off the coast of Ashkelon, according to Mor.
But “faster extraction of Mari-B will cause a more rapid depletion of this gas field,” he said, noting that Israel could then risk facing a gap period between when Mari-B runs out and the new Tamar field off the coast of Haifa will be ready.
Mor also felt that in both the intermediate and long term, Israel could benefit from installing semipermanent offshore Liquefied Natural Gas (LNG) regasification units.
Such an anchored tanker “could supply a constant supply of gas in times of cessation of the gas supply due to geopolitical, commercial or technical reasons,” according to Mor.
“We need a permanent solution of a permanent backup supplier, like an insurance company,” Mor said.
While Shaffer said she didn’t have an opinion on the shortterm use of an LNG supply, she felt that “a long-term, regular LNG facility makes absolutely no sense.
“I don’t know any countries that have natural gas reserves that import LNG,” she said, adding that it would be impossible to establish a “competitive” market in such a small, local setting for natural gas trade, and that the solution for future technical problems is making sure to have many “redundancies” in the system.
“You have to build redundancies in the system, multiple entry points,” she said of the future Tamar field. “You’d have to improve the diesel supply as a backup and make sure you have a lot of dual fuel plants, like with coal.”
Despite the current situation, as well as the February explosion, Landau expressed confidence that the deal with Egypt is stable and that gas flow will continue as normal once the pipeline is fixed.
“We wish to impress upon everybody that the Israeli government sees the peace agreement and the gas agreement as a cornerstone to our future economic agreements [with Egypt],” Landau said at the press conference, emphasizing a need to “maintain our good relations and our continued peace and economic activities with Egypt.”
He said he expected that the gas deal would continue to be considered a fair agreement by all parties, and noted that Israel pays twice what Jordan, Syria and Lebanon pay for the Egyptian gas.
“We think the deal we have with Egypt is good,” Landau said.
Shaffer, on the other hand, maintained that the deal with Egypt as a whole is “an unstable supply source” and said that Wednesday’s explosion “shows even more so why it can’t go on.
“I think it is going to have some big policy implications for Israel,” Shaffer said. “If [government officials] were hoping to bridge the gap with Egyptian gas until Mari- B came online, they’ll have to realize it won’t work.”
Even if the explosion in February and on Wednesday had not occurred, Shaffer said she felt that Egypt would not really have a sufficient ability to maintain its export commitments unless it changed its domestic gas subsidy policies, and added that “the best thing” for Egypt is to sacrifice its deals with Israel and Jordan.
“This is probably going to be a bigger crisis for Jordan than for Israel, because we have Yam Tethys [Mari-B] and all these redundancies,” she continued, noting, however, that with a reduction of natural gas use in Jordan and a resultant increase in pollution, Israel will suffer as well.
“We get that pollution too,” she said.