Despite Current Gas Shortages, Israel Prepares To Export Natural Gas

Oil refinery in the Haifa Port.

Though Israeli electricity prices rose nearly 9 percent at the end of last month due to reported natural gas shortages, Israel’s energy ministry has decided that Israel will export half of the natgas it pumps from its offshore reserves in the Mediterranean Sea.

Called the Zemach Committee, and led by Director General of Israel’s Ministry of Energy and Water Resources Shaul Zemach, the group that made the decision published a report in early April which says Israel needs a stable natgas supply of around 400 billion cubic meters (BCM). But Israel also needs money and the government is hoping that by properly massaging market conditions, Israel can keep up the market value of gas.

“The geopolitical situation, and the need to create market certainty to ensure conditions to create incentives for continued gas exploration and development, should be taken into account,” said Israel’s Minister of Energy and Water Uzi Landau at a press event releasing the report.

Israel currently has a reserve of 750 BCM, according to Globes, and is optimistic that once the the Leviathan well, with over 400 BCM (billion cubic meters) of natural gas, and the Tamar well, with around 200 BCM , are fully tapped and connected with adequate pipelines to shore, Israel will have an excess flow of gas.

But Israel is relatively paranoid about its reserves of natural gas because the ministry feels it cannot rely, as it once did, on a supply from neighboring countries, such as Egypt.

“This was something we knew before the problems with Egypt,” Zemach told a small gathering of energy professionals at a breakfast event last month in Tel Aviv. “Even then, the situation was not stable, but at the time we did not put enough emphasis on diversifying the country’s energy portfolio.”

The current hike in electricity prices is due to a gap in supply caused by the political upheaval in Egypt, which has subjected the flow of natural gas across borders to various acts of sabotage. This past July, Egypt’s natural gas pipeline to both Israel and Jordan was exploded in the third such attach since the beginning of the popular uprising in Egypt last February. That attack, the Egyptian security authorities said that the time, was caused by men armed with machine guns who had arrived in a small truck, forced security forces to leave and then planted explosive charges.

Israeli officials thought the industry had some time to secure permits and build infrastructure while supply came from Egypt, but they found Israel facing a shortage crisis. Neverthess, construction will continue as planned until Israel has a surplus of domestic gas.

The Zemach committee estimated that by 2040 Israel will need 420 BCM of gas, a figure that will be possible to maintain even if around 50 percent of the pumped gas is sold overseas. To manage the expected influx of wealth from selling the gas, Israel established a sovereign wealth fund this February that Israeli will use a a financial “security cushion” in the coming decades, Prime Minister Benjamin Netanyahu’s office told the Wall Street Journal. The fund will also increase tax on energy companies pumping the gas.

“We’ve been given an opportunity to set out important principles which will make possible the stable, credible, and secure management of this industry for many years,” Zemach said in releasing the report. The report is still pending public review.

Image of Israel’s oil refinery from Shutterstock

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