The Israeli Ministry of Transportation is testing natural gas powered trucks to approve them for import and usage in Israel. Mercedes, Scania and Iveco have applied for import licences according to Globes.

Yitzchak Tshuva’s Delek Gas company, which owns the rights to the Tamar and Leviathan offshore natural gas sites is planning to build natural gas fuel stations.

Israel has found tremendous reserves of natural gas, and depending on usage, the gas could last Israel over 50 years.

On Wednesday evening, the Delek Group announced that they believe they’ve found an additional 57 billion cubic meters (2 trillion cubic feet) of natural gas at the Karish (“Shark”) 1 well. Updated estimates, on Thursday morning, are now saying there is possibly 80-100 billion cubic meters.

The drilling began in mid-March, and was expected to go on for 3 months.

The Karish well is 75 kilometers north west of Haifa. The waters depth is 1,740 meters, and they will be drilling down 4,900 meters.

This well is being drilled by Noble Energy (47.1%), Yitzhak Tshuva’s Delek Drilling (26.4%) and Avner Oil and Gas (26.4%).

The issue of what to do with the gas is a controversial subject in Israel, with some sides saying it should be exported, while other saying it should all be kept for domestic use.

Government profits from the gas are going to be put into a special fund, but JewishPress.com has been calling for Israel to follow the Alaska model introduced by Sarah Palin, where State income and sales tax have been cancelled, and citizens of Alaska personally receive checks from the oil revenue royalties and taxes.

Palin introduced the concept that the natural resources of the state belong to the citizens of Alaska, and they should profit from it directly.

Recent news of a massive natural gas well have turned eyes on Israel’s struggle to adopt an energy policy in the wake of its first-time gas wealth.  Trying to measure the value of energy independence against short-term profits, Israel has shown that its unexpected blessing comes with a price.

In 2009, Tamar, located approximately 80 kilometers off the coast of Haifa, was the world’s largest natural gas discovery, endowing Israel with over 9 trillion cubic feet of natural gas.  The confetti had barely settled when Leviathan, 40 kilometers farther offshore, shocked the nation and the world with a payload double that of Tamar, and the esteemed honor of being the largest offshore natural gas discovery in the world in over ten years, and totally a grandiose 700 billion cubic metres (24.7 trillion cubic feet).

Financial and energy analysts could barely contain themselves.  Joyful predictions of long-coveted but previously inconceivable energy independence were raised, alongside the gleeful shouts of financial analysts who anticipated massive income from the export of gas.

And the battle for the mind of Israel’s government began.  Prime Minister Benjamin Netanyahu instituted a commission headed by Minister of Water and Energy Shaul Tzemach to investigate the sensibleness of exporting Israel’s new wealth of natural gas, which would supply Israeli needs for decades if kept under Israeli ownership.  His initial report recommended saving as much gas as necessary to fuel Israel through 2040.  Yet Finance Minister Yuval Steinitz pushed back, saying Israel should be allowed to export more.  So Tzemach promised a reconsideration and another report.

Yet before a report – which is due any day – could be issued, Avner, Delek, and Noble Energy companies – partners in the drilling projects and owners of the energy cache – made a quiet deal with Russia, agreeing to sell the superpower gas for the next 20 years at a fixed price – amounting to half the output of the Tamar field.

However, according to a report in Haaretz, a letter and corresponding report were written by Environmental Protection Ministry Director General Alona Sheffer-Caro, a member of the committee, following the Tzemach committee’s interim report, urging the government to conserve more of Israel’s natural gas for national use.

In the letter, Sheffer-Caro wrote, “Remember, the letter from the chief scientists from the Energy and Water Ministry and the Environmental Protection Ministry, stated that there had been multiple errors in the Natural Gas Authority’s projections of natural gas demand, which is going to be significantly higher than even the authority’s maximum projection.”

Yet the letter was not publicized on the committee’s website, and otherwise went unnoticed.

“We believe Israel should increase its use of natural gas by 2020 and should not export gas,” Sinai Netanyahu and Shlomo Wald, the chief scientists of the Energy and Water Resources Ministry were quoted by Haaretz as saying. “The Natural Gas Authority’s estimates are lacking. There’s a gap of 100 to 150 billion cubic meters between the demand projections that were presented to the committee and the most recent projections. The gas reserves are likely to last even less than 40 years!” they wrote.

A natural gas drill rig in the Mediterranean. Photo: Nati Shohat/FLASH90

Last week, Natural Gas Authority head Shuki Stern admitted during a public hearing held by the Tzemach Committee that his authority should have recommended that Israel keep 501 billion cubic meters for its own use, and not the 417 billion it had previously estimated.

Even more conservative estimates issued by the chief scientists say Israel will be using 650 billion cubic meters of natural gas by 2040 and will use up its offshore reserves by 2055 even if Israel exports none of the product and keeps none for storage in case of emergency.

Tamir Druz, an Israeli energy investment analyst, said that while the sale would result in big profits for the companies, and hefty tax revenues for Israel, the arrangement with Russia would exact a heavy price for the country.

“I think when you look at all this stuff, what it looks like to me is that Israel is behaving like an energy super power, it’s put its shingle out and said to the world ‘look, we’re a player,’” Druz said.  But Israel’s total inexperience as an owner of energy resources is working against it.

“Russia’s goal has been to control the gas that moves around the world.  They use energy as a political weapon,” Druz said.  “I thought it was interesting that the announcement of the deal was made a few hours before Passover began, so it barely got any coverage in the news. You’d think it was the last country in the world we’d ever want to deal with, and then people are surprised when Putin shows up a few months later.  There’s a big gas component to the relationship.”

Russia under Putin has been a consistent and unapologetic supporter of Iran’s nuclear program, and wiped out $13 billion of Syrian debt  to the country in 2001, as well as selling arms to Syria which were transferred to Hizbullah.  In 2006, Russian Foreign Minister Sergei Lavrov met with Hamas leader Khaled Meshaal to discuss the Arab- Israeli conflict.

“Keep in mind that Russia has 70 times more gas than we do,” Druz said. “They’re buying our gas to control it. They don’t want anyone to interfere with their political and economic power.”

Despite the new relationship, British Petroleum  (BP) told Reuters on July 25 that it had beaten Russian gas monopoly Gazprom on a bid to provide Israel with liquefied natural gas (LNS).  BP will make two LNG deliveries a month starting December 1 for six months, with an option to make six more deliveries.

Considerable pressure has been placed on the prime minister to allow a greater percentage of Israel’s gas to be exported.  “You’ve got Finance Minister Yuval Steinitz saying the more gas we sell, the more tax revenue we collect.  Then there are those who say it will strengthen relations with Russia, warm up Turkey, and bring us closer to Cyprus, not to mention setting Arab countries back on their heels,” Druz said.  Loudest of all are the Tamar and Leviathan partners, who stand to make serious profits.

According to a report in Globes online business magazine, the prime minister has been convinced that an increase in the options for natural gas exports is a good idea.  Globes reported’ that representatives from the Prime Minister’s Office and the Ministry of Finance are pushing for the gas export policy to be as flexible as possible, and believe exports will positively impact Israel’s relationship with China and other Asian countries.

There is also excitement over a new agreement between Israel and Cyprus to lay a pipeline connecting the two countries and Europe.  The Cypriot Ministry of Commerce, Industry and Tourism submitted the plan for the Trans-Med Pipeline which will lay 1,400 kilometers of pipeline to connect the two countries to the network in Greece – to the European Commission. If approved, the pipeline is expected to be operational by 2018.

In the meantime, the public is silent on the matter of Israel’s energy independence.  “In the US, energy is a big part of each major party’s platform.  In Israel, I don’t know if there’s any party that has anything about energy in its platform at all,” Druz said.  “The Israeli public and the political establishment have never even imagined that Israel had the potential for any kind of energy independence, and two years ago they’re all of a sudden surprised by it, so the public and the political establishment have not caught up, and there’s no one to protect and preserve our energy for the next 40 years, it’s being sold off as quickly as possible to Russia.”

“To me it’s the equivalent of someone winning the lottery and they get it all up front, and they go and do something really harmful to themselves…. They got in with the wrong crowd …and all these bad things materialized because they had all this freedom. There are no grownups who are putting the interest of Israel above the short term financial interests.”

While Israel’s interests include profits from higher tax revenues, they also include the possession of natural gas.

“Israel Electric pays about $5.5 for each million BTUS of gas, anyway – if they sell to Israel, they’ll still make over 100% profit margin and instead of the gas lasting 20 years, it will last 40 years, and Israel won’t have to pay to liquefy, ship, or protect it,”  Druz said.

There are also Israel’s immediate needs. Earlier this month, Israel Electric Corp called on citizens to conserve power to help avert blackouts this summer due to fears that a heat wave will coincide with a natural gas shortage.

Though the problems would likely be short-term and not seriously detrimental to the economy, they would likely cause periods of discomfort throughout the country.

Amit Mor, CEO of Eco Energy, an Israeli strategic and financial consulting firm for the energy sector, predicted that Israel would rely on natural gas for 70% of its electricity generation by 2016, almost double its needs today.

Protection is a big issue for all Israeli resources, and has proved of vital importance for Israeli offshore gas fields.   Military officials have been making plans to secure oil rigs inside Israel’s exclusive economic zone (EEZ), which extend 129 kilometers offshore from Israel’s northern tip to over 185 kilometers off Gaza.

The IDF issued a statement to the AFP acknowledging that the gas fields “significantly [broaden] the challenges facing the Israeli navy”, and saying the Israeli government’s approach is “to use both presence and deterrence”.

That strategy will include the acquisition of four new warships outfitted with advanced radars and the Barak anti-missile defense system, as well as surveillance drones and patrol boats at an annual cost of NIS 3 billion.

On Sunday evening, Delek and its partners in Israel’s Tamar gas field signed a $5 billion gas supply contract with Dalia Power Energies Ltd. Under the contract, the gas field will supply Dalia Power with 1.38 billion cubic meters of gas for 17 years.

The Tamar partnership is also expected to sign additional supply contracts in the upcoming weeks with refineries in Haifa and Ashdod.

Dalia, building what will be the largest private power station in Israel, is slated to begin receiving gas in the second half of 2014. Israel views the entry of private power producers as the remedy to a market monopolized by the state-owned Israel Electric Corp.