Oil and gas exploration that might benefit Israel has long been stymied by political fears. Because of worries about antagonizing current relationships with Arab partners, Big Oil had till now avoided the possibility of any political blow-back from finding any potential oil and gas in Israel.
So it took a relatively minor company, Noble Energy, to make the Leviathan gas discovery off the shores of Israel.
For years, only small Israeli oil and gas explorers like Riato and an Israeli energy firm, Delek Group, had persisted in trying to find fossil energy for Israel, according to the Wall Street Journal. Delek Group finally succeeded in enticing Houston-based Noble Energy to start exploring off the coast of Israel after the small independent company pioneered off-shore exploration in the Gulf of Mexico.
Because of the urgency of gaining energy independence, situated as it is in the midst of unfriendly neighbors, Israel had passed a very easygoing oil and gas deal back in 1952, with some of the world’s best perks for energy companies, including low royalties and corporate taxes on exploration. But this summer, the Israeli government started considering changing the law, to boost the government’s take of any gas find.
As it became clearer this year that the Tamar, and then the Leviathan gas finds could wind up being very large, Israel’s Finance Minister Yuval Steinitz proposed changing the terms, not just for future finds, but even retroactively, on these previously granted exploration leases. These would abolish tax breaks for energy firms and impose steep tax increases of 20% to 60% on windfall profits.
This would completely change the financial picture for energy companies who are operating on the previous basis. Noble Energy and Israeli oil executives fought back, even enlisting the US State Department and then former President Bill Clinton to lobby hard to keep the law the same.
“Your country can’t just tax a US business retroactively because they feel like it,” Clinton told Prime Minister Benjamin Netanyahu in July, after Noble Energy announced its first tentative findings, according to the Wall Street Journal report.
With the prospect of actual energy independence looming now for Israel, with the Leviathan gas find confirmed this week, how Israel handles the relationship between its government and its gas bonanza – will change its history. We have both extremes, from Nigeria, with no laws impeding the oil industry, to Norway, which is the only comparable democracy that has virtually nationalized its oil from the North Sea to benefit its people rather than oil tycoons.
But whatever the government does, the Leviathan gas find has already changed Israel’s relationships with other regions, and not just the great oil and gas powers of the Arab world.
Obviously its own natural gas fired electricity is a natural to power the electric vehicles being developed by local entrepreneur Shah Agassi, to replace the gasoline-powered vehicles that enrich its Arab neighbors.
But currently, electricity fueled by imported Russian coal supplies 71% of Israel’s electricity.
Not only could the nation now substitute for these risky foreign coal supplies by switching to natural gas, (since coal plants are fairly easily converted to burn natural gas, as US utilities have found) but by doing so, Israel can now easily and economically swap almost three quarters of its current electricity portfolio to one with less than half the carbon cost.
So this changes Israel’s relationship with a Northern nation which has been unafraid to bully Europe – when it was in dire need of Russian energy supplies – using its energy hegemony. Now Israel no longer needs Russian coal. With this find, it is not just energy independent, itself.
But customers from throughout Asia are now wooing the formerly friendless nation, desperate for the last drops of fossil fuels.
Image: Leviathan by Guillaume Rondelet
Read more on natural gas in Israel:
Leviathan Gas Discovery Could be The Mother of All Resource Curses
No More Gas Exploration in Israel?
Gas Discovery Will Not Change Israel’s World Standing
Beating the Nationalist Drum and Israel’s Oil Interests
Hezbollah Interferes With Israel’s Mediterranean Energy Business
UN To Mediate A Natural Gas “Standoff” Between Israel and Lebanon Gas Fields Dispute