Expert says Israel’s export costs to Far East will be much higher than competitors for all-important market, and suggests the LNG be used mainly for Israel’s domestic needs.

The national consensus holds that the discoveries of huge offshore natural gas fields in recent years amount to an economic revolution, one that will put the economy on easy street for generations to come. A leading British energy expert, however, says it’s an illusion.

Drilling at the Leviathan natural gas field off the Mediterranean shore. – Photo: Courtesy Albatross

“Exporting gas as LNG [liquefied natural gas] is very expensive. Israeli gas isn’t competitive enough to compete with LNG from other countries,” says Nick Butler, one-time senior energy adviser to former Prime Minister Gordon Brown, and former vice president for strategy and policy development at British Petroleum Group, in an interview with Globes’ Hedy Cohen.

The chief cost in exporting LNG lies in transporting it to market, and Israel is too far away from the major Far East consumers to be able to deliver the product economically, Butler said. “Israeli gas will have to compete with gas from East Africa, Indonesia, Qatar, Turkmenistan, and Australia, and will be the most expensive of all those options,” he said.

Closer to home, the prospects aren’t any better, adds Butler: “Jordan doesn’t need much gas, and exporting by pipeline to Egypt and Turkey incurs many political risks, of which you are very well aware.”

Butler: Keep home fires burning

He suggests that Israel use its natural gas resources mainly for domestic consumption. Asked if this wasn’t a meager option given that Israel already uses gas to produce 55-60 percent of its electricity, the highest proportion in the world, Butler said the country wasn’t being ambitious enough.

The idea that Israel has exhausted natural gas’ potential for electricity “is correct only if the target is to reach 70% of electricity production using gas. In my opinion, however, the target is wrong,” he said. “The government should aim at having 90% of electricity production based on gas. In addition to electricity, the government should introduce the use of gas in transport and the petrochemicals industry. All these ventures will generate large investments and many jobs in the country.”

Butler also urged Israel to follow Britain’s lead in delivering LNG directly to people’s homes for household use.

“The energy efficiency of coal-fired power plants is 35%, while that of gas-fired power plants is 45%. By the time electricity reaches homes from the power station, we’re left with 27% efficiency for coal and 37% for gas. If the gas is brought directly to homes, on the other hand, we’re left with 75% efficiency. That is a prodigious saving,” he said. “In the UK, for example, gas reaches people’s homes, and they use it, among other things, for heating, air-conditioners, and cooking. Why shouldn’t Israelis benefit from gas like any European country?”

View original HAARETZ publication at: http://www.haaretz.com/business/1.618092