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.

1.  “The flow of natural gas from Israel’s Tamar reservoir in the Mediterranean to the Ashdod reception facility was inaugurated on March 30, 2013, ushering in a new era in Israel’s energy sector [led by the Houston-based Noble Energy]. Israel will not only become independent in being able to supply its own energy needs, but it is likely to become an energy exporter as its maritime gas fields are further developed…. The amount of gas discovered offshore now dwarfs any feasible, projected Israeli demand for at least half a century….Israel will become a net exporter of gas….Europe would seem to be the natural export market for Israeli gas….Yet Asia may emerge as Israel’s preferred export destination. The Australian firm, Woodside, which acquired about a third of the rights to the Leviathan field, is oriented toward marketing gas in Asia, and envisions building a liquefaction plant to service that trade….Israel will view with apprehension any scheme to anchor its critical infrastructure in countries beyond its own borders, such as Jordan, Cyprus, or Turkey….” (Dr. David Wurmser, April 4, 2013).

2. Hewlett-Packard (HP) is the second largest investor – trailing Intel – in Israel’s information technology sector, with 6,000 employees.  HP’s Israel-developed products carry the Indigo and Scitetx Vision brands (Southeast-Israel Business News, March, 2013).

3.  The Chicago-based AllScripts acquired Israel’s dbMotion for $235MN (Globes Business Daily, March 6, 2013).

4.   The globe’s largest biotech company, Roche of Basel, Switzerland, concluded a joint venture with Israel’s Chiasma, developing and commercializing Chiasma’s Octreolin for acromegaly and neuroendocrine tumors. Roche received a worldwide exclusive license in return for an upfront payment of $65MN and additional $530MN in milestones and royalties (Globes, February 19).

5.  Singapore Telecommunications (SingTel) and Israel’s Amdocs are establishing a joint development center in Israel.  Amdocs operates a similar center with AT&T.  SingTel intends to invest in a few Israeli start-ups, following its acquisition – in March 2012 – of Israel’s Amobee for $321MN (Globes, March 4).  Germany’s global optical giant, Zeiss, is establishing a research and development center in Israel.  Five years ago, it acquired Israel’s Pixer (Yedioth Achronot daily, April 4).  Michael Dell’s MSD Capital invested $22MN in Israel’s food chain, Rami Levy, increasing its holding to 6.1%.  The Boston-based Fidelity acquired 5% of Rami Levy for $27MN (Globes, March 29 and April 8).

6.  Hong Kong’s investment mogul, Li Ka Shing’s Horizon Ventures, led an$ 8MN round of private placement by Israel’s Nipendo (Globes, March 12).  The Waltham, MA-based Battery Ventures – joined by the Menlo Park, CA-based Opus Capital - led a $10MN second round by Israel’s SiSense (Globes, April 4). The Menlo Park-based Sequoia Capital – joined by T-Mobile – led an $11MN round by Israel’s Innovid (Globes, March 8).  Israel’s StarCom raised $4MN at the London  Stock Exchange for smaller companies, AIM (March 6).

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On the one hand, Israel is on the verge of a positive development whose importance is hard to underplay. As Caroline Glick described it,

This weekend Israel reportedly conducted its first successful test pumping of natural gas from the offshore Leviathan natural gas field. In the next four years, Israel will become a major natural gas exporter and will make great strides in developing its recently discovered shale oil deposits. Israel’s emergence as an energy exporter will have a transformational impact on Israel’s economic independence and long-term viability. [my emphasis]

But on the other hand, the security challenges Israel faces today from Iran, Hizballah, Egypt, Hamas, etc. have never been greater. The international delegitimization campaign against it, led by the U.N. and financed to a great extent by the European Union continues to gather steam. Jew-hatred and anti-Zionism have merged, with the former gaining cover from the latter, creating the least favorable social climate for the Jewish people since WWII. Academia is almost universally hostile, and Israel (and Jewish students) are attacked more viciously on college campuses than ever.

So how can Israel’s new energy resources be given a “transformational impact” on these problems? Here are a few ideas:

First, Israel should make mutually beneficial agreements with the major transnational energy companies. It should be made clear that these deals are contingent on their support for Israel’s political goals. It certainly worked for the Arabs — I remember Exxon Corporation publicly calling for a more “even-handed” approach to the Middle East immediately after the war in 1973. I have often speculated that the influence of these companies has been responsible for the irrational but unswerving U.S. policy to try to reverse the outcome of the 1967 war.

Second, Israel should give generous gifts of its soon-to-be-available gas and oil dollars to major universities in Europe and the U.S., to establish departments of Jewish and Israel studies. These departments should be staffed by academics who do not hate Israel and the Jewish people (I’m sure they can be found, especially when there are endowed chairs for them to sit in).

Third, Israel should build a massive satellite TV/radio/Internet channel, broadcasting in multiple languages to all parts of the world. This channel should present entertainment, news and cultural programming attractive to as wide a range of viewers/listeners as possible. Again, media people who who have positive attitudes will appear when the opportunities for employment do.

Fourth, Israel should create independent think-tanks and scientific institutes in major democratic countries which will produce papers and articles — academic and popular — on important topics. Some proportion of the jobs in these institutes should be reserved for retired politicians.

Fifth, Israel should award international prizes for achievement in scientific and cultural fields.

Sixth, Israel should establish an institute for technical training where promising students from developing nations can come and study at no cost.

And seventh, despite all this, Israel must maintain and improve its military capabilities to deter aggression and terrorism.

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The operator of Australia’s Pluto liquefied natural gas project, Woodside Petroleum, will buy a 30 percent share in Israel’s Leviathan natural gas field for $2.5 billion, becoming a strategic partner in the drilling.

Woodside, Australia’s second largest oil and gas producer, will make a first payment of $696 million.

Leviathan is expected to start producing usable gas in 2016.  The value of the field is estimated at $8.3 billion.

1. “[Australia’s] $30BN Woodside Petroleum is looking at taking an interest in the giant Leviathan gas field off the coast of Israel…. The Leviathan field, discovered in 2010, has an estimated 17 trillion cubic feet (TCF) of gas, making the biggest deep water gas discovery of the past ten years. 50-75% of the gas is slated for export….  Woodside Petroleum Ltd. bids for 30% of the rights to the Leviathan licenses. It is 50% higher than their market value. Woodside is one of the finalists in the licensees’ choice for a strategic partner.

“Woodside’s bid reflects a value of $7.5 billion, compared with analysts’ estimates of $4.7-5.5 billion for the gas field…. ‘Petroleum Intelligence Weekly’ reported that [Russia’s] Gazprom, Woodside and apparently South Korea’s Korea Gas Corporation (Kogas), are finalists in the Leviathan process…. [The Houston-based] Noble Energy [which controls 39.66% of Leviathan] prefers a Western partner for Leviathan.

“Woodside would fit the bill for Noble Energy: it is a veteran company with deep water expertise as well as building liquefied natural gas facilities for gas exports from its fields off Australia’s northwest coast. This area is considered the most developed in the world, attracting hundreds of billions of dollars in investment in onshore and floating LNG facilities” (Globes Business Daily, October 22, 2012).

2. Steve Ballmer, Microsoft’s CEO 4th visit to Israel: “I’ve arrived to Israel, the high-tech country…. The integration between Microsoft and Israel is natural, because Israel’s high-tech industries are among the global leaders…. I’m energized and inspired by Israel’s innovative capabilities, which have made Israel an important arena for Microsoft….” (Globes, November 2).

3. Intel Corp. CEO Paul Otellini is in Israel: “We are perhaps the largest private employer in Israel (about 8,000 employees in the company’s development and production centers), and most of those employees have technological know-how. Some of our most sophisticated engineering efforts are carried out in Israel…. We have been in Israel for 40 years and we have done many things. We’re here for the long term and we will decide next year regarding our next factory.”

Otellini visits Israel in order to launch the company’s $5 million investment in Israeli high schools over the next four years, in partnership with the Ministry of Education. The project’s aim is to double the number of high school students completing their science and technology matriculation certificate (Globes, November 2).

4. According to the $56BN Swiss bank, UBS – which is currently expanding its Israel wealth management operations - Israel is among the top five promising economies with the highest growth potential.

5. “The UK law firm Berwin, Leighton Paisner (BLP) LLP, Britain’s fifth largest, with 1,000 attorneys worldwide, is expanding to Israel, opening an office in Tel Aviv as part of the expansion of its international operations. The firm’s customers include 59 companies on the Global Fortune 500 list. Its decision is a vote of confidence in Israeli economic growth…. ‘We’re here because the Israeli business world is heading in directions which we see as markets of the future, like China and the Far East…. BLP sees the steady business growth of Israeli companies’ activity in international markets….(Globes, Oct. 30).’”

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DowJones Newswire reports that Delek Drilling Partnership and Avner Oil Exploration announced Sunday that the Karish prospective offshore gas field may hold as much as 2 trillion cubic feet of natural gas.

A survey said the field may contain as much as 3.5 trillion cubic feet of gas.

Delek and Avner own 26.47% of the field, and Noble Energy owns 47.1% and it is located near their Leviathan gas field.

Gas discoveries was just recently a topic of discussion on The Yishai Fleisher Show on JewishPress.com radio.

Source: FoxNews

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.