Monday, September 03, 2012

Israel's Energy Revolution: From Barren Energy Island to a New Bonanza of Nat Gas and Shale Oil

From the August 31 Financial Times article "Field of dreams: Israel’s natural gas":
For decades a barren energy island, forced to import every drop of fuel, Israel today stands on the cusp of an economic revolution, fueled by the vast riches that lie below its waters.

With reserves of almost 10 trillion cubic feet of natural gas, the Tamar field is a hugely valuable asset for the Israeli economy (see map above). Discovered in January 2009, it was the biggest gas find in the world that year, and by far the biggest ever made in Israeli waters. But the record held for barely two years. In December 2010, Tamar was dwarfed by the discovery of the Leviathan gasfield some 20 miles farther east – the largest deepwater gas reservoir found anywhere in the world over the past decade. 

The two fields, together with a string of smaller discoveries, will cover Israel’s domestic demand for gas for at least the next 25 years, and still leave hundreds of billions of cubic feet for sale abroad. The government take from the gasfields alone is forecast to reach at least $140 billion over the next three decades – a staggering sum for a relatively small economy such as Israel’s.

Experts are convinced that Tamar and Leviathan will not be the last big Israeli discoveries. They point to the US Geological Survey, which estimates that the subsea area that runs from Egypt all the way north to Turkey, also known as the Levantine Basin, contains more than 120 trillion cubic feet of natural gas. Israeli waters account for some 40 per cent of the total. Should these estimates be confirmed through discoveries in the years ahead, Israel’s natural gas reserves would count among the 25 largest in the world, on a par with the proven reserves of Libya and ahead of those of India and The Netherlands.
And it's not just natural gas, Israel also might have as much as 250 billion barrels of shale oil in the recently discovered Shfela Basin southwest of Jerusalem (see map below), according to this July 13 article in the Financial Post article titled "Israel's Shale Gale." 

HT: Warren Smith

17 Comments:

At 9/03/2012 9:45 AM, Blogger Jon Murphy said...

While this is certainly good news for Israel, I worry a little about the stability and security of the shale-oil finds. It seems like they would become prime targets for those wishing to unseat the Israeli government and control over the region.

 
At 9/03/2012 9:50 AM, Blogger Mark J. Perry said...

Yes, that exact point is mentioned in the FT article.

 
At 9/03/2012 9:58 AM, Blogger Jon Murphy said...

This comment has been removed by the author.

 
At 9/03/2012 11:11 AM, Blogger Dave said...

Interested US companies should join the IS Department of Commerce Oil & Gas Trade Mission to Israel in October. If you're ready to carpe diem, the deadline to register is almost here! http://export.gov/trademissions/israel2012/

 
At 9/03/2012 11:54 AM, Blogger VangelV said...

stands on the cusp...

Call me when there is a positive return on the investment. American producers are getting killed as the product that they make has continued to sell for a small fraction of the total cost of producing it and any new investment is mostly depleted within a year.

The more I look the more this is beginning to feel like those AGW arguments that go, 'most scientists believe.' Well the ambiguity speaks volume. Stop talking about cusps and show real profits. If you can't this is just hype.

 
At 9/03/2012 12:21 PM, Blogger hancke said...

Vange, the primary gas fields mentioned are not in shale. Offshore drilling has good track record of profitability. You're right about the feel of AGW arguments. Facts seem secondary.

Israel views these discoveries to be of national security instead of profit/loss.

 
At 9/03/2012 1:07 PM, Blogger VangelV said...

Israel views these discoveries to be of national security instead of profit/loss.

I have a problem with this view. Israel can't afford to destroy capital. Eventually these discoveries should return much more in energy than the energy invested to develop them. If they don't they will weaken national security rather than enhance it.

 
At 9/03/2012 1:32 PM, Blogger Che is dead said...

I've noticed that every time there is a post on gas, "Vag" feels compelled to share his with us.

 
At 9/03/2012 6:43 PM, Blogger Craig Howard said...

I've noticed that every time there is a post on gas, "Vag" feels compelled to share his with us.

Yeah, I've been reading his comments for, gee, must be a couple years now. And he is convinced that shale oil and gas will prove unprofitable. He may well turn out to have been right, but it's exceedingly odd that so much private money is being committed to it without the blatant government subsidies we see in "renewable" energy.

I'm not ready to discount his opinion entirely, but it's certainly an outlier.

 
At 9/03/2012 8:26 PM, Blogger VangelV said...

Yeah, I've been reading his comments for, gee, must be a couple years now. And he is convinced that shale oil and gas will prove unprofitable. He may well turn out to have been right, but it's exceedingly odd that so much private money is being committed to it without the blatant government subsidies we see in "renewable" energy.

It isn't 'odd' at all. The energy sector can borrow massive amounts because credit is cheap and easily accessible. As long as the SEC allows the accountants to assume low depreciation costs and to ignore the depletion data it is easy to report profits even as there are large negative cash flows and an explosion of debt on the balance sheet.

It is easy to prove me wrong. Look at the producers and show us that they can self finance their shale activities without using revenues from conventional production operations.

I'm not ready to discount his opinion entirely, but it's certainly an outlier.

Facts do not care about consensus. As I have written many times, you can make a lot of money from some wells in the core areas of the best formations. But the average well is not profitable. And given the large depletion rates it is virtually a certainty that most of the capital investment in the last two years will have to be written down. We have already see BHP and Encana already take steps to clear up portions of their balance sheets. Expect many other companies to follow over the next few quarters, particularly if a price spike gives them cover.

 
At 9/04/2012 1:32 AM, Blogger Benjamin said...

People are getting better and better at extracting oil and gads continuously.

The private sector does more for less every year. The public sector, including the military, does less for more every year.

I sense we have seen the ceiling on oil prices for a long, long time.

If the federal government would get out of the way---and stop financing a $! trillion a year defense complex to assure our access to a commodity that is beaching abundant, we taxpayers would be better off.

Develop oil, gas and cut federal outlays civilian and military. Court prosperity.

 
At 9/04/2012 6:49 AM, Blogger VangelV said...

People are getting better and better at extracting oil and gads continuously.

The reality shows otherwise. A few decades ago it cost us around a barrel of oil of energy to extract 100 barrels of oil out of the ground. The projects that we are arguing about today have an EROEI that is close to 1:1.

 
At 9/04/2012 2:19 PM, Blogger juandos said...

"The projects that we are arguing about today have an EROEI that is close to 1:1"....

Well vangeIV I'm beginning to wonder why you're not more skeptical of the data you've been putting out there to bolster your claims...

 
At 9/04/2012 10:05 PM, Blogger VangelV said...

Well vangeIV I'm beginning to wonder why you're not more skeptical of the data you've been putting out there to bolster your claims...

I am clearly skeptical of a citation that claims, "It takes 1,000 tonnes of water to grow a tonne of wheat. "

It really doesn't. The author is talking about rain that would fall whether or not anything was growing on the plot of land. Referencing people who are unaware of their own ignorance is not a good way to try to make your point. And if you actually read the reference that you provided you will find that the author did not refute the EROEI concept. He just talked around it not knowing what he does not know.

 
At 9/05/2012 4:05 AM, Blogger Ian Random said...

This comment has been removed by the author.

 
At 9/05/2012 4:06 AM, Blogger Ian Random said...

The question is how will the Palestinians throw rocks at the drilling derricks.

I think Dennis Prager has been proven wrong. His point was that the Israelis bought the only patch of sand without petroleum products on it.

 
At 9/05/2012 10:01 AM, Blogger VangelV said...

The question is how will the Palestinian Muslims throw rocks at the drilling derricks.

They better know how to swim.

 

Post a Comment

Links to this post:

Create a Link

<< Home