Chevron buy reflects new realities with Israel and US/Arab alliances
A company like Chevron clearly sees its ties within the Arab Middle East as less important than ever.
By DAVID KESSLERISRAEL’S GAS fields include some of the largest discovered anywhere in the world since 2010, including the Leviathan natural gas field, off the coast of Haifa.(photo credit: ALBATROSS)
On July 20, Chevron Corporation, America’s second-largest oil company with a formative role in shaping modern-day Saudi Arabia, announced its acquisition of Noble Energy, a much smaller US oil and gas company with major exposure in Israel. Through the lens of energy, this acquisition rewrites the rules of US-Israel-Arab relations, reflecting recent changes in the way the energy will balance these regional powers.Chevron’s history in the Middle East goes back almost a century, when the company was named Standard Oil of California. In more recent decades, Chevron has explored for and produced oil and gas in nearly every member state of OPEC, in several countries where Israel’s name is unspeakable. Chevron still maintains a close relationship with the government of Saudi Arabia, operating various fields on behalf of the kingdom within the neutral zone between Saudi Arabia and Kuwait. Recently, Saudi Arabia extended its agreement with Chevron through 2039.Conventional wisdom has always been that the prize of oil and gas in Arab countries was far too valuable for any Western oil company to risk over Israel, a country with comparatively minimal proven reserves. Like its largest industry peers, known as majors, both in the US and overseas, Chevron sat out of Israel and prioritized its allegiances elsewhere in the Middle East. It was the same with Italy’s ENI, Norway’s Statoil, and other government-owned oil companies like OMV of Austria, and Repsol in Spain.Even Hess and Occidental Petroleum, both large oil companies headed by Jewish Americans for the majority of the twentieth century, steered clear of Israel while remaining very active in North Africa and the Gulf states.Shunned by North America and Europe’s oil and gas industry, Israel was all too willing to admit Noble Energy, a mid-sized Houston-based oil company with no Middle East interests, into its Mediterranean waters in the late 1990s. In 1999, Noble announced its first discovery in Israeli waters, and in the two next decades, Noble transformed Israel’s petroleum sector from the butt of a famous Golda Meir joke to a world-class growth area.ISRAEL’S GAS fields include some of the largest discovered anywhere in the world since 2010. The CIA World Factbook ranks Israel 45th in the world for proven natural gas reserves – still well behind Libya, Kuwait, and of course Qatar, but on par with the United Kingdom, a well-known energy producer, and far ahead of Turkey, Jordan and Greece.As Israel’s petroleum sector has gained prominence, so has America’s; the United States has led the world in oil and gas production for the last few years, experiencing its own energy revolution. The oil fields of West Texas, the Gulf of Mexico, and elsewhere in the United States are now so prolific that the United States is essentially independent of the OPEC nations.It is in this entire context that Chevron’s July 20 press release about its Noble Energy acquisition should be read. The press release mentions Israel before any other area of Noble’s operation, including its asset base in the US. Only a few years ago, this press release would be inconceivable for two reasons: an oil company mentioning petroleum in Israel, and mentioning Israel at all.A company like Chevron clearly sees its ties within the Arab Middle East as less important than ever. The United States, Canada, Brazil and West Africa have enough petroleum reserves to carry the American economy into the end of the hydrocarbon age.As the world transitions to a renewable-dependent energy economy by the middle of this century, the Middle East countries will leave most of their oil reserves, and perhaps their gas reserves, in the ground. That will likely include Israel, but for the time being, Israel’s clean-burning natural gas means something to Chevron.
In other words, the Israeli oil and gas sector has blossomed (better late than never); the United States is envisioning itself as a self-reliant energy exporter; and the OPEC states of the Middle East, from Algeria to Kuwait, are rushing to retool their economies and preserve, if not to prioritize, their alliances.The writer is the director of international business at Energy Advisors Group in the US. He holds two degrees from Stanford University in Middle East history, focused on the petroleum sector.
