Israel Oil and Gas Industry: An Overview
Summary: Israel is not a traditional energy power. Yet in recent years the country has leapt from being a pure energy importer to an energy exporter, thanks chiefly to the discovery of several major natural gas fields. Today Israel's natural gas output not only meets domestic demand but also leaves a surplus for export, freeing the country from its dependence on imported oil.
1. Energy Overview
Israel, a country that once relied on imports to meet its energy needs, is making a sharp turn as its natural gas industry develops. Several offshore gas fields discovered recently may not only supply ample energy for domestic demand but also leave a surplus available for export.
In 2015, Israel's primary energy consumption consisted mainly of oil and other liquids (43%), natural gas (30%) and coal (26%). According to the latest BP Statistical Review of World Energy, coal consumption fell by 15% over the decade from 2005 to 2015, while natural gas consumption grew more than fourfold.
2. Petroleum and Other Liquids
As of January 2016, Israel's estimated proven oil reserves stood at 14 million barrels. The country has almost no crude oil or condensate, but in February 2015 Israel began drilling exploration wells in parts of the southern Golan Heights. In addition, Israel planned to start drilling near the Dead Sea in a block first discovered in 1995 but subsequently abandoned, which has only recently returned to attention. The block is estimated to hold roughly 7-11 million barrels of oil. Oil discoveries near the Golan Heights and the Dead Sea could have a positive impact on Israel's pursuit of energy independence.
In 2015, Israel's oil consumption was 240,000 barrels per day (b/d), all of it imported. Most of Israel's imported petroleum products were crude oil, while the country also exported small volumes of refined products. Israel plans to reduce its dependence on imported oil by expanding its fast-growing natural gas industry.
Israel has two refineries with a total refining capacity of nearly 300,000 b/d. The Haifa refinery has a capacity of 197,000 b/d, while the Ashdod refinery, after its upgrade in 2013, has a capacity of about 100,000 b/d.
3. Natural Gas
Historically Israel was a natural gas importer, supplied in large part by Egypt through the Arish-Ashkelon pipeline, with a small volume coming from a floating LNG regasification terminal completed in 2013. Israel hopes the recently discovered gas fields will provide enough fuel for growing domestic demand, with surplus gas available for export. In 2015, Israel's natural gas consumption was 297 billion cubic feet, almost entirely domestically produced.
3.1 Natural Gas Fields
By the end of 2015, Israel's proven natural gas reserves were 7 trillion cubic feet (Tcf). Energy exploration over the past few years has uncovered enormous natural gas resources, concentrated mainly in the country's offshore areas.
The discovery of the Mari-B field in 2000 provided Israel with substantial domestic natural gas for the first time. In the early years of development, Mari-B met up to 40% of Israel's natural gas demand. However, as the field entered the final stage of development, output began to fall sharply in 2012, and the field ceased production in 2013.
The Tamar field was discovered offshore near Haifa in 2009. At the end of March 2013, Israel began commercial production from the field. Tamar supplies more than half of the natural gas used for power generation in Israel and almost all of the industrial fuel demand. Gas produced at Tamar is transported through a pipeline connected to the infrastructure of the Mari-B development block and delivered via the existing onshore facilities at Ashdod.
In 2013, the Tamar Southwest field was discovered 8 miles southwest of the Tamar field. It is a smaller independent field with estimated reserves of 700 billion cubic feet. The Israeli government is currently negotiating with the gas companies that discovered Tamar Southwest on its development.
The most significant offshore discovery in Israel is the Leviathan field, located about 80 miles from the coast in water more than 5,000 feet deep. Evaluations indicate that Leviathan holds approximately 22 trillion cubic feet of recoverable natural gas. In May 2016, the Israeli government approved an agreement allowing the Leviathan partners to develop the field. Leviathan is expected to begin exports in 2019.
In 2014, the Royee field was discovered about 100 miles offshore. Royee's best estimate of recoverable resources is about 3.2 Tcf, with a range of 1.9-5 Tcf.
More recently, the East Daniel and West Daniel fields were discovered off the Israeli coast. Preliminary estimates suggest these adjacent fields hold combined resources of about 9 Tcf, nearly the equivalent of another Tamar. appraisal work to confirm the reserves is under way, but development of the fields has not yet been scheduled.
3.2 Pipeline Construction
Many proposals in Israel have suggested building pipelines and LNG infrastructure to support gas exports, but deliberations on how to bring the country's gas to market are still ongoing. As of 2016, Israel's focus was on developing regional gas pipelines. A gas pipeline to Jordan is under construction and expected to enter service in 2017, to be followed by a second pipeline.
3.3 Exports
After its transformation into an energy exporter, Israel drafted export agreements with several countries. In January 2014 the Israeli government agreed to supply natural gas to the Palestinian Authority once the Leviathan field began production. In early 2014, Noble Energy signed agreements with two Jordanian companies for sales of Tamar gas, with an initial term of 15 years and a total volume of 66 billion cubic feet starting in 2016. Other countries that have drafted agreements with Israel include Egypt, Turkey, Greece and Cyprus.
In June 2013, however, the Israeli cabinet approved the export of 40% of the country's natural gas reserves. With that 40% cap in place, Israel's gas reserves are estimated to be able to supply the country for 25 years.
