Israeli Prime Minister Golda Meir famously lamented that Moses led the children of Israel for forty years of wandering in the desert until he found the only place in the Middle East where there wasn’t any oil.
But could Moses have been smarter than believed? Apparently the Canadians and the Russians think so, as both countries are moving to step up energy relations with a tiny nation whose total energy reserves some experts now think could rival or even surpass the fabled oil wealth of Saudi Arabia.
Actual production is still miniscule, but evidence is accumulating that the Promised Land, from a natural resource point of view, could be an El Dorado: inch for inch the most valuable and energy rich country anywhere in the world. If this turns out to be true, a lot of things are going to change, and some of those changes are already underway.
Israel and Canada have just signed an agreement to cooperate on the exploration and development of what, apparently, could be vast shale oil reserves beneath the Jewish state.
The prospect of huge oil reserves in Israel comes on top of the recent news about large natural gas discoveries off the coast that have been increasingly attracting attention and investor interest. The apparent gas riches have also been attracting international trouble. Lebanon disputes the undersea boundary with Israel (an act somewhat complicated by the fact that Lebanon has never actually recognized Israel’s existence), and overlapping claims from Turkey and Greece themselves plus both Greek and Turkish authorities on Cyprus further complicate matters. Yet despite these tensions, following Russian President Vladimir Putin’s surprisingly cordial visit last week, Gazprom and Israel have announced plans to cooperate on gas extraction.
This suggests at a minimum that Turkish efforts to block gas development in the region will face opposition from Russia as well as from Israel. Gazprom and other Russian companies are also likely to do well in any gas exploration deals developed with the strongly pro-Moscow (and very cash hungry) Greek Cypriot government.
The stakes are not small: the offshore Levantine Basin (which Syria, Lebanon, Turkey, Greece, Cyprus, Israel and even Gaza will all have some claim to) is believed to have 120 trillion cubic feet of natural gas and “considerable” oil. Drillers working in Israeli waters have already identified what look to be 5 billion barrels of recoverable oil in addition to over a trillion cubic feet of gas. (US firms were involved in these finds.) Israel’s undersea gas reserves are currently estimated at about 16 trillion cubic feet and new fields continue to be rapidly found.
The new Israeli-Russian agreement is part of a conscious strategy by the Israeli government to use its nascent energy wealth to improve its embattled political position. With Italy reeling under the impact of big wrong-way bets on Iran, Rome may also begin to appreciate the value of good ties with a closer and more dependable neighbor. Another sensible target for Israeli energy diplomacy would be India: the two countries are already close in a number of ways, including trade and military technology, and India is eager to diversify its energy sources.
Gas is one thing, but potential for huge shale oil reserves under Israel itself, however, is a new twist. According to the World Energy Council, a leading global energy forum with organizations and affiliates in some 93 countries, Israel may have the third largest shale oil reserves in the world: something like 250 billion barrels. (The US and China are both believed to have larger shale oil reserves, with the US believed to have the equivalent of well over 1 trillion barrels of potentially recoverable shale and China having perhaps one third of that amount. Canada’s Athabaskan oil sands reserves may contain the equivalent of 2 trillion of barrels conventional oil, or more than all the conventional oil known to exist in Saudi Arabia, Iraq and Iran combined.) If the estimates of Israeli shale oil are correct, Israel’s gas and shale reserves put its total energy reserves in the Saudi class, though Israel’s energy costs more to extract.
Many obstacles exist and in a best case scenario some time must pass before the full consequences of the world’s new energy geography make themselves felt, but if production from the new sources in Israel and elsewhere develops, world politics will change. The countries along both coasts of the Persian Gulf erupted into global prominence in the 1970s when world energy shortages catapulted them into previously undreamt of wealth and political influence. Those countries will still be rich; for the most part, their energy is cheaper to produce than the more unconventional sources in the rest of the world, including Israel.
But what they keep in money they may lose in clout. OPEC’s power to dictate world prices is likely to decline as Canadian, US, Israeli and Chinese resources come on line. In fact, the Gulf’s most powerful oil weapon going forward may be the ability of those countries to under-price rivals; expensive shale oil isn’t going to be very profitable if OPEC steps up production of its cheap stuff. (Brutal, dog-eat-dog price wars driving oil prices down to derisory levels: Via Meadia trembles at the thought.)
Nonetheless, the ability of the Arab governments to influence political opinion in Europe and the rest of the world is likely to decline as more oil and gas resources appear — and as Israel emerges as an important supplier. We could be heading toward a time when the world just doesn’t care all that much what happens around the Persian Gulf — as long as nobody gets frisky with the nukes.
Another big loser could be Turkey. For years the Kemalist, secular rulers of Turkey worked closely with Israel, and the relationship benefited both sides. Under the Islamist AK party, that relationship gradually deteriorated. Both sides were at fault: Turkish politicians were all too ready to demagogue the issue to score domestic political points, and Israelis did not respond with all possible tact.
But if Israel really does emerge as a great energy power, and a Russia-Greece-Cyprus-Israel energy consortium does in fact emerge, Turkey will feel like someone who jilted a faithful longtime girlfriend the week before she won a huge lottery jackpot. More, Turkey’s ambitions to play a larger role in the old Ottoman stomping ground of the eastern Mediterranean basin will have suffered a significant check.
If the possibility of huge Israeli energy discoveries really pans out, and if the technical and resource problems connected with them can actually be solved, the US-Israeli relationship will also change. Some of this may already be happening. Prime Minister Netanyahu’s evident lack of worry when it comes to crossing President Obama may reflect his belief that Israel has some new cards to play. An energy-rich Israel with a lot of friends and suitors is going to be less dependent on the US than it has been — and it is also going to be a more valuable ally.
The emerging new energy picture in Israel has the potential to be one of the biggest news developments of the next ten years. Potentially, the energy revolution and the change in Israel’s outlook has more geopolitical implications than the Arab Spring. Via Meadia will be following this story and trying to make sense of the geopolitical and economic shifts as they occur.
Even at this very early stage, the impact of Israel’s energy wealth is dramatic. On President Putin’s visit to Jerusalem, he donned a kippah and went to pray at the Western Wall of the ancient Temple. As one press report has it, at the close of his visit, Putin turned to one of the Russian Jews present and said
I came here to pray that the Temple should be rebuilt, and I wish that your prayers will be fulfilled.
Putin had more honeyed words for his Israeli hosts. Touring the Wall, he said “Here, we see how the Jewish past is etched into the stones of Jerusalem.” This is not quite a formal recognition of Israeli claims to the Old City, but it is much more than Israelis usually hear. (Many Arabs and Palestinians insist that there is no connection between the Jews and the Western Wall, known in Arabic as the Al Buraq Wall after the mysterious heavenly steed said to have brought the Prophet Mohammed to Jerusalem on his famous Night Journey.)
The reaction from the Arab side to Putin’s statement about the historically Jewish character of Jerusalem was correspondingly furious. The Al Aqsa Institute issued the following statement:
We tell Putin and people like him that the Al-Buraq Wall is exclusive Muslim Waqf property, is an inseparable part of the blessed Al Aqsa Mosque and non-Muslims have no rights at this wall or at the blessed Al Aqsa Mosque, and all historic facts and international documents stress the fact that the Al Buraq Wall is Islamic…
We stress that every stone in the Al Aqsa Mosque and its buildings shows is evidence that it is Islamic and every stone in Al Quds is testimony to Al Quds’s Muslim and Arabic nature.
If the oil and the gas start to flow in anything like the quantities experts think now may be possible, expect many more visitors to Jerusalem to say similar things to Israelis and the Al Aqsa Institute will have to issue a lot more angry rebuttals. An Israel with vast energy endowments may be less coolly received in certain circles than it is today.
In the meantime, we wonder if there was an 11th, hitherto undiscovered commandment on those tablets at Sinai: Thou shalt drill, baby, thou shalt drill.
View original The American Interest publication at: http://blogs.the-american-interest.com/wrm/2012/07/02/israels-saudi-sized-energy-potential-makes-first-political-impact/