Major Oil & Gas Production: Israel Moving Toward Energy Independence

Israel’s recently-obtained ability to produce oil off its coast will be a major economic boost for the country.

Israel’s recently-obtained ability to produce oil off its coast will be a major economic boost for the country.
Israel’s recently-obtained ability to produce oil off its coast will be a major economic boost for the country.
For decades, it’s been accepted wisdom that the Middle East’s Arab nations – with their vast oil reserves – have the exclusive monopoly on the region’s energy exports, and could thus benefit economically without any limitation. But in recent years, the situation has dramatically changed, as Israel has discovered and developed significant sources of gas and oil that are allowing it to move swiftly towards the much-desired status of energy independence.

In 2009 and 2010, Israeli scientists discovered off the coast of Israel deep-water gas fields that contain sizable reservoirs of natural gas. As a result of their development, the Jewish state is close to becoming a serious exporter of energy to the Mediterranean – and possibly even the European – natural gas market. This eventuality will allow Israel to supply inexpensive and clean energy to its citizens, factories and vehicles for at least a generation. “There is an interesting cocktail of possibilities,” said Pinhas Avivi, political director of multilateral, global and strategic affairs at the Israeli Foreign Ministry. “The trick is to use the gas to solve problems.”

The first major Israeli gas field, entitled Tamar, began production in March, and natural gas is now flowing from the sea to Israel’s land. Prime Minister Benjamin Netanyahu described it as “an important step toward energy independence.” In fact, the Bank of Israel says that the gas from Tamar will raise Israel’s GDP a full percentage point.

More significantly, the Leviathan offshore discovery contains a gas reservoir equivalent in area to Las Vegas, and it is scheduled to go onstream in 2016. At the time of its discovery three years ago, Leviathan was the world’s biggest deep-water discovery in a decade, with enough gas to satisfy all of Europe’s needs for a year.

Israel is also looking towards its immediate neighborhood for potential clientele. “We could now envision selling gas to Egypt,” Avivi said. “The pipeline is there. You can simply change the direction the gas flows.” Jordan, which imported 80 percent of its natural gas from Egypt before the pipeline was stilled, could connect to Israel at the Dead Sea. Gas could also flow from the heart of Israel to the Palestinian areas of the West Bank, even to the power-deprived Gaza Strip, to fuel factories or generate electricity.

Charles Davidson, the chairman of Texas-based Noble Energy, which has become a major player in the development of Israel’s natural gas fields, has revealed that Noble and its partners are evaluating a number of export options for Israeli natural gas, including offshore floating plants that would convert the resource into liquefied natural gas (LNG), which could then be loaded onto tankers and shipped to any worldwide location. “In the sense that this can contribute to the prosperity of our neighbors, it’s a good thing,” said Brenda Shaffer, an energy expert at the University of Haifa in Israel.

Another company taking an active role in the development and production of the country’s newfound gas deposits is Israel Energy Initiatives (IEI). “We think that within a decade we can get 50,000 to 100,000 barrels of oil a day,” said Relik Shafir, IEI chief executive officer. Harold Vinegar, a major figure in the oil industry who is now working with IEI, is equally optimistic. “The truth is, Israel is sitting on the best,” he said. Its oil could very well cement the energy independence that natural gas portends, both economically and in terms of military security.

Vinegar envisions Israel, with its existing complex refineries, superior infrastructure and seaports as a natural nexus for “an integrated energy zone” that goes beyond borders and unites countries that – while not currently in a state of combat with each other – are still not truly friends. “Longer term, security will also come from Israel helping the countries around it,” Vinegar posited. “That’s a world state I would love to see.”

One Israeli company that takes center stage in the expansion of Israel’s energy resources is Delek, headed by multi-billonaire Yitzhak Tshuva. Over its six-decade existence, Delek has strived continuously to place Israel on the global energy map. Its efforts to achieve this challenging goal have required the investment of billions of shekels, the recruitment of the energy world’s foremost experts, the formation of partnerships with some of the world’s most respected oil and gas players, and – above all – the determined preservation of a steady vision in the face of numerous setbacks.

Delek’s recent discoveries of natural gas reserves in Israel’s coastal waters have created a new strategic reality in the Middle East: Israel is no longer dependent upon external parties for the supply of its energy needs. Delek was established in 1951 by the Israeli government as an Israeli company to operate a chain of gas stations. In founding the chain, the government aimed to reduce Israel’s dependence on foreign energy companies, including the American and British oil companies that had already established operations in the Israel market.

During the 1960’s and 1970’s, Delek grew steadily to become Israel’s second largest fuel company, and expanded its management and operational capabilities significantly. During this period, Delek also began supplying an increasingly sophisticated range of petroleum-based products to the IDF and private industry. The company expanded its activities to other areas of the energy sector, including production of oils for industry and automobiles, maritime and overland transportation, fuel supply for aircraft and ships and fuel storage and transportation facilities, among others.

In 1982, the company founded Delek Investments, which expanded its operations to engage in the exploration of oil and gas in Israel’s coastal waters. Delek obtained extensive drilling rights, raised significant financing and initiated onshore and off-shore drilling activities.

In 1988, Tshuva acquired control of Delek, setting in motion a clear expansion strategy in the energy sector, including increased exploration for natural gas and broadening Delek’s network of gas stations and adjacent convenience stores. In 1999, partners in the Yam Tethys joint venture, including Delek Drilling, Avner Oil & Gas Exploration, Delek In-vestments and U.S. based Noble Energy, discovered Noa and Mari B, two significant natural gas reservoirs lo-cated offshore Israel opposite Ashkelon.

These discoveries led to the beginning of Israel’s natural gas market. In 2004, following broad engineering efforts and the first of its kind in Israel, the Yam Tethys partners introduced natural gas to the Israeli market. Its first customer was Israel’s Electric Company which, for the first time, fueled the operation of one of its electric power stations with Israeli natural gas.

In 2001, Delek Group established Delek US, and through it, acquired over 500 gas stations throughout the Southeastern United States. Delek US also purchased the La Gloria oil refinery and marketing facilities located in Tyler, Texas. In 2007, the Group acquired the marketing activities of Chevron in the Benelux region, an enterprise made up of 869 gas stations and convenience stores, mostly under the Texaco brand name. The acquisition signaled Delek’s entry into the European energy market. It expanded further in 2010, when it purchased BP’s retail fuel and convenience stores in France.

In 2009, the discovery of the Tamar and Dalit fields 100 kilometers off of Israel’s northern coast by Delek and its partners marked a major turning point for Delek and Israel’s energy sector as a whole. Tamar’s and Dalit’s reserves are estimated today to contain over 9 trillion cubic feet (TCF) of natural gas. In late 2010, Delek struck the largest natural gas find in Israel’s history at the Leviathan well.

Together with its partners, Delek continues resolutely to search for oil and gas in the Mediterranean’s Eastern Basin for the purpose of realizing its major, latent potential. In the future, Delek intends to continue strengthening its position as Israel’s leading energy and infrastructure group.

Delek continues to focus on the expansion and development of its energy-related businesses. While investigating options for production and potential export of Leviathan’s natural gas, Delek has so far made another three discoveries, including Aphrodite in Cyprus. In parallel, the Group continues to leverage its synergistic retail gas station and convenience store businesses to expand and improve its downstream operations.

Delek has become Israel’s largest and most successful oil and gas exploration and production company, the sole operator of independent power plants and the second largest operator of gas stations. Delek, The Israel Fuel Corp. is Israel’s second largest fuel distributor. Over 240 stations service more than 110,000 vehicles daily.

Delek US Holding, Inc., through its brand Mapco, is a leading fuel distributor in its base county, Nashville, Tennessee, and surrounding states. With its diversified downstream energy business, Delek US is focused on petroleum refining, the wholesale distribution of refined products and convenience store retailing. The refineries have a combined nameplate production capacity of 140,000 barrels per day. The marketing and supply segment markets refined products through a series of owned and third-party product terminals and pipelines.

All in all – in addition to the inherent majestic spiritual quality of Eretz Yisrael and its bountiful agricultural resources – the land of Israel turns out to have an abundance of the crucially-needed oil and gas that provide vital energy. Apparently, Moses did the right thing – for so many reasons – when he led the Jewish people into the Promised Land.

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