Ocnus.Net

Editorial
First Gas Arrives in Israel From Offshore Field
By Dr. Gary K. Busch 2/4/13
Apr 3, 2013 - 12:10:38 PM

This week there has been an important shift in the complex economic, political and military balances in the Middle East. Israel, on Saturday, the 31st of March Israel marked the arrival of the first gas from its own offshore field (Tamar) to the receiving point at Ashdod.

The search for energy self-sufficiency had eluded the state of Israel since its founding in 1948. Despite millions of dollara spent on the exploration of possible sources of oil and gas, the discoveries were minimal and uneconomic. As Golda Meir was quoted �The Prophet Moses had led the Jews to the one place in the Middle East where there was no oil.� Over 40% of its energy was supplied by a pipeline from Egypt.

Some Israeli gas was provided by the Yam Tethys � the Mari B and Noa - natural gas reservoirs discovered in 1999 and 2000 by a partnership of the U.S.-based Noble Energy and the Israeli Delek Energy. These reservoirs marked the start of a new era.. Mari-B and Noa established the Israeli offshore holdings in the oil & gas game for the very first time, and introduced natural gas to the Israeli market. Yam Tethys has been supplying natural gas to the Israeli market since 2004. The major clients of Yam Tethys include the IEC (Israeli Electric Corporation); ICL (Israel Chemicals, Ltd.) and the sole Israeli Independent Power Producer.

Then, in 2009, the U.S.-based Noble Energy discovered the Tamar field in the Levantine Basin some 50 miles west of Israel�s port of Haifa with an estimated 8.3 tcf (trillion cubic feet) of highest quality natural gas. Tamar was the world�s largest gas discovery in 2009. At the time, the Yam Tehys gas reserves were estimated at only 1.5 tcf. Moreover estimates were that Yam Tethys, which supplied about 70 per cent of the country�s natural gas, would be depleted within three years.

With Tamar, prospects began to look considerably better. Then, just a year after Tamar, the same consortium led by Noble Energy struck the largest gas find in its decades-long history at Leviathan in the same Levantine geological basin. Present estimates are that the Leviathan field holds at least 17 tcf of gas. Israel went from a gas famine to feast in a matter of months. There were also large discoveries of oil in the same basin.

The USGS, (US Geological Survey), stated that undiscovered oil and gas resources of the Levant Basin Province amount to 1.68 billion barrels of oil, and 122 tcf of gas.



Just months earlier, securing foreign gas was a national security priority of Israel as its existing domestic gas supplies dwindled dangerously low. Further adding to the energy crisis were the so-called Arab Spring protests sweeping across Egypt into Libya in early 2011.The revolts toppled Mubarak, under whose regime Egypt had supplied some 40% of Israeli natural gas. With Mubarak toppled and the ban lifted on Egypt�s Islamic parties, especially the Muslim Brotherhood and the radical Salafist Al-Nour Party, the gas pipeline delivering Egypt�s gas to Israel was target of repeated sabotage and disruptions, the most recent February of this year in northern Sinai. Israel was becoming more than nervous about its future energy security.

Now, with the arrival of the first Tamar gas at Ashdod and the expected mega-flows of gas from the Leviathan fields before 2016 Israel is becoming a serious �player� in the international oil and gas industry. Israel will be producing far more gas from its offshore fields than it could ever possibly use for its domestic economy so it is preparing to export this gas via pipeline and, perhaps, as LNG. In February, a subsidiary of the Russian energy giant Gazprom signed an agreement for the exclusive rights to export liquefied natural gas produced from the Tamar floating LNG plant.

The success and approaching self-sufficiency of Israel in energy is tremendously beneficial to Israel�s economic future. However, it will be sustained by complicated political manoeuvring both as to the exclusivity of its legal rights to the whole Levantine Basin and by its choice of direction of its pipeline(s).

An initial problem arose over the claim by Lebanon that the Leviathan oil find was within its territorial waters. This has been disputed by the Israelis.

Although Lebanon believes it has a claim to the Leviathan field, the two countries are technically at war and do not recognise either land or sea borders. Israel has declared its maritime boundaries with Lebanon. Based on its boundaries on land, Israel established a maritime zone that veers well to the north, an area that encompasses all the known major gas fields. Lebanon has responded by submitting to the UN the coordinates of what it says are its maritime boundaries and has also lodged a formal protest with the world body against Israel which is being studied by the Division for Ocean Affairs and the Law of the Sea, and other UN bodies. Lebanon's Shiite movement, Hezbollah, and its primary backer, Iran, on the other hand, have no doubt as to who owns what. However, Israel, like the USA, has never ratified the 1982 UN Convention on Law of the Sea dividing world subsea mineral rights. The Israeli gas wells at Leviathan are clearly within undisputed Israeli territory as Lebanon affirms, but Lebanon believes the field extends over into their subsea waters as well. The Lebanese Hezbollah claims that the Tamar gas field, which has just begun gas deliveries, belongs to Lebanon. These claims and counterclaims on Leviathan remain to be settled. The dispute itself was made even more complicated by the bull-in-a china-shop approach to the question by Hillary Clinton and the U.S. State Department. In July of 2011 as Israel prepared to submit its own proposal to the UN as to where the offshore demarcation line between Lebanon and Israel should run, Frederick Hof, US diplomat responsible for special affairs regarding Syria and Lebanon, told Lebanon that the Obama Administration endorsed the Lebanese document and map, adding to the growing tensions reported between Obama and Netanyahu.

The Lebanese are only one of Israel�s problems which have been complicated by the intervention by the State Department and others. Israel is determined that the best route for the marketing of its new gas should be through a pipeline or pipelines to Europe via Cyprus and Greece, both of which have made substantial oil and gas finds in their respective offshore waters.

In December 2010, Greece�s Energy Ministry formed a special group of experts to research the prospects for oil and gas in Greek waters. Greece�s Energean Oil & Gas began increased investment into drilling in the offshore waters after a successful smaller oil discovery in 2009. Major geological surveys were made. Preliminary estimates now are that total offshore oil in Greek waters exceeds 22 billion barrels in the Ionian Sea off western Greece and some 4 billion barrels in the northern Aegean Sea. This would more than pay off Greece�s debts to the Eurozone when the gas came to the market. The exploitation of the Greek reserves already discovered could bring the country more than �302 billion over 25 years. The ECB, the Euro authorities and the IMF refused to consider this in their austerity plans for Greece. Notably, the German government, demanded instead that Greece sell off its valuable ports and public companies, among them of course, Greek state oil companies, to reduce state debt. Under the best of conditions the asset selloffs would bring the country at most �50 billion. Their plans called for the Greek state-owned natural gas company, DEPA, to privatize 65% of its shares to reduce debt. The buyers of these shares would most likely come from outside the country, mainly Germany.

The U.S. State Department was of little help. The U.S. is determined to stop or restrict the building of Russian gas pipelines to Europe and to prevent the investments of the Russian gas monopoly, Gazprom from gaining control of gas resources beyond the Russian border. The discovery of the enormous quantities of gas and oil in the Leviathan field spurred on exploration throughout the Eastern Mediterranean. Preliminary exploration has confirmed similarly impressive reserves of gas and oil in the waters off Greece, Turkey, Cyprus and potentially, Syria.

In July 2011 Secretary of State Hillary Clinton flew to Athens with energy on her mind. That was clear by the fact she brought with her her Special Envoy for Eurasian Energy, Richard Morningstar. Morningstar was her husband, Bill Clinton�s, Special Advisor to the President on Caspian Basin Energy Diplomacy, and one of the Washington strategic operatives in the geopolitical battles to dismember the Soviet Union and surround a chaos-ridden Russia with hostile pro-NATO former states of the USSR. Morningstar, along with his controversial aide, Matthew Bryza, have been the key Washington architects of Washington�s geopolitically-motivated oil and gas pipeline projects that would isolate Russia and its Gazprom gas resources from the EU. Bryza is an open opponent of Russian Gazprom�s South Stream gas pipeline that would transit the eastern Mediterranean states. Clearly the Obama Administration was not at all neutral about the new Greek oil and gas discoveries.

Morningstar is the US specialist in economic warfare against Russian energy diplomacy. He was instrumental in backing the controversial B-T-C oil pipeline from Baku through Tbilisi in Georgia across to the Turkish Mediterranean port of Ceyhan, a costly enterprise designed solely to bypass Russian oil pipeline transit. He has openly proposed that Greece and Turkey drop all historic differences over Cyprus, over numerous other historic issues and agree to jointly pool all their oil and gas reserves in the Aegean Sea. He also has told the Greek government it should forget cooperation with Moscow on the South Stream and Bourgas-Alexandroupolis gas pipeline projects and to co-operate on the Nabucco pipeline.

This year Russia's state-owned Gazprom began delivery of Russian gas to northern Germany via Nord Stream gas pipeline under the Baltic Sea from a port near St. Petersburg in partnership with the German company Wintershall. Gazprom is the largest natural gas supplier to the EU. Gazprom with Nord Stream and other lines plans to increase its gas supply to Europe this year by 12% to 155 billion cubic meters. It now controls 25% of the total European gas market and aims to reach 30% with completion of South Stream and other projects. Strategically vital now for the future role of Russia as an EU gas supplier, is its ability to play a strategic role in exploiting the new-found gas reserves of the Mediterranean, especially through its former Cold war client state, Syria. Moscow has long been engaged in promoting its South Stream gas pipeline into Europe as an alternative to the Washington Nabucco pipeline which was designed to leave Moscow out in the cold.

To complicate things further, Noble Energy also discovered huge volumes of gas off the waters of the Republic of Cyprus. In December 2011 Noble announced a successful deep water gas find offshore Cyprus in a field estimated to hold at least 7 trillion cubic feet of natural gas. This made Cyprus, overnight, a potential major player in the gas to Europe business. Cyprus and Israel agreed to co-operate on building a pipeline from Israel�s offshore facilities to Cyprus and continuing to Europe through joining up with the new offshore Greek gas fields.

This would not be an advantage to Turkey which, although it too has gas finds, finds itself cut off from any project that will involve Greek Cyprus. It plays an important role in the planned Nabucco project as a country which will host the line but currently finds itself dependent on Russia's Gazprom for some 40% of gas to its industry and feels vulnerable. Turkey, which is presently in a deep internal battle between Davutoglu and President G�l on the one side and Erdogan on the other, could play a far more constructive role in the region as transit country for Syrian and Iranian gas as well.

So the choices for Israel are complex. While its new gas supply has freed Israel from dependency on the imports of energy from Egypt it still will have to choose an export market in Europe which will compete with both the Nabucco and South Stream pipelines. This will alienate both the Russians and the U.S.. It will also greatly strengthen the power of Greece and Cyprus against the predatory advances of the Germans and their European colleagues taking over Greek and Cypriot assets. The Israeli Government is not certain of the way in which Turkey will function in this conflict. It will be hostile to a pipeline via Cyprus and Greece which leaves it out of the loop but more sympathetic to hosting a Syrian-Iranian-Iraqi-Russian gas consortium.

Egypt has a different problem. Egypt is suffering a fuel shortage which has helped send food prices soaring. There are electric blackouts even before the summer and petrol station gunfights have killed at least five people and wounded dozens over the past weeks. Egypt is a massive importer of food and requires a great deal of hard currency to buy this food. It is also woefully short on refined oil products, especially diesel. Energy subsidies make up as much as 30 per cent of Egypt�s government spending; the country imports much of its fuel, and for the first time last year it was forced to import some of the natural gas used to generate electricity � the reason for the recent blackouts. Egypt also imports about 75 per cent of its wheat, mixing the superior foreign wheat with lower-quality domestic supplies to improve its subsidized bread. Hard currency reserves have fallen to about $13 billion from $36 billion two years ago and the government owes billions to the foreign companies that operate Egypt�s oil and gas fields. The loss of its profitable sale of natural gas to Isreal will add to Egypt�s distress.

So, the blessing of Israel�s new supply of gas is a mixed blessing. It brings almost as many problems as it solves. However, with lots of cash flows as a result of the gas sales it can ponder its problems with some level of security. That�s certainly a start.

Notes: See several articles and studies by F. William Engdahl, K. Gajendra Singh and Hugh Naylor.



Source: Ocnus.net 2013