It is time for the government to approve natural-gas exports and send a signal that Israel is open for business.
By BINYAMIN A. ZOMERTamar(photo credit: Courtesy)
The Tamar natural-gas reservoir discovered 90 kilometers west of Haifa was the largest offshore natural-gas discovery in the world in 2009. One year later, Noble Energy and its partners discovered the Leviathan field, almost twice as big as Tamar and the world’s largest offshore natural-gas discovery in 2010.Together, these discoveries total almost 740 billion cubic meters, which is 240 b.cu.m. more than Israel will use for the next 30 years to generate electricity, shift the industrial sector off of liquid fuels and convert a portion of its transportation to CNG (compressed natural gas) or electric- drive trains. In short, our country is blessed with more gas than we can use for decades to come.Israel’s decision makers are now tasked with adopting policies that will guarantee energy security for the country’s citizens, maximize the economic potential for the economy, create incentives for international oil companies (IOCs) to invest in Israel and create conditions for increased competition in the gas market.The single-most important step the government can take to achieve these goals is to create the conditions for the establishment of a world-class export project.There are two arguments often raised in opposition to export. In a country such as ours, with the geopolitical challenges we face, there is a tendency to argue that we need to eschew exports in favor of “saving our resources for future generations.” Some have suggested ensuring a domestic natural-gas supply for the next 50 or even 100 years! The few countries that have followed this failed approach have been left with plenty of gas in the ground but no companies willing to invest in exploration and no security of supply.The classic case is Bangladesh, which in the 1990s saw proven reserves increase substantially from 310 b.cu.m. in 1992 to 570 b.cu.m. in 2000, mainly due to the exploration activities of IOCs. Production began, but permission to export was delayed and IOCs halted their exploration and production efforts. In 2002, the government announced that exports would be allowed only if 50 years of domestic supply could be guaranteed.IOCs subsequently left Bangladesh, explicitly citing the lack of exports as a driver in their decision. The reduced interest in exploration caused proven reserves to decline to 366 b.cu.m. by 2010. Today, despite its vast geologic potential, Bangladesh is an importer of natural gas.Alternatively, Australia has succeeded in developing its resources by allowing exports at levels that are profitable for IOCs, and it is poised to become the world’s second largest LNG (liquefied natural gas) exporter. Importantly, Australia has increased its security of supply through export-related exploration and production activity. Domestic consumption has climbed by over 7 percent annually on average since 1970, but increased reserve levels have amply covered the local market.The second argument made in opposition to exports is that we have not done enough to grow the domestic market.Even with very aggressive assumptions (80% electricity production from natural gas, increased industrial use, 25% of all light vehicles powered by CNG or electricity and a considerable shift to CNG in public transportation), Israel has more than enough gas to supply the domestic market for more than 30 years, with plenty left to export.
Nevertheless, it is in the interest of the government and producers to increase domestic demand. Serving the local market requires less time and is far less expensive than creating an export project. For this reason, producers tend to favor the local market. This need not happen at the expense of exporting natural gas.On October 2, 2011, Prime Minister Binyamin Netanyahu and Energy and Water Minister Uzi Landau appointed an interministerial committee to recommend policies regarding the natural-gas sector, including what should be done regarding exports. The committee worked for almost a year hearing from outside experts, examining the policies of more than 30 natural-gas-producing countries, meeting with environmental organizations, local manufacturers, consumers and gas producers. After a thorough and transparent process, the committee recommended that, after securing supply for the domestic market, some of the gas discovered be made available for export. The committee found that “permitting export of natural gas does not prevent, but rather promotes guaranteeing the needs of the local economy, and works to encourage the development of local industry based on natural gas.”The committee is correct. It is time for the government to approve natural-gas exports and send a signal to IOCs that Israel is open for business. Allowing exports will spur continued investment and encourage international oil companies to explore and produce here. That activity will lead to additional discoveries, additional infrastructure, additional competition in the marketplace and additional gas for the local market. Those are the elements of real energy security.Binyamin A. Zomer is director of corporate affairs for Noble Energy in Israel.
