State to allow export of 50% of gas reserves

A committee chaired by the director general of the Energy and Water Resources Ministry Shaul Tzemach, decided that Israel needs to have some 400 billion cubic meters of gas as a strategic reserve at any one time; the rest may be exported to foreign countries.

The Tzemach Committee on Energy Policy has recommended keeping only 25 years of natural gas reserves for Israeli use, and allowing producers to export the rest. The committee published its interim report yesterday and will now accept public comments before preparing its final recommendations.

drilling platform

A drilling platform in the Tamar offshore natural gas field - Photo by Albatross

The committee, chaired by the director general of the Energy and Water Resources Ministry Shaul Tzemach, decided that Israel needs to have some 400 billion cubic meters of gas as a strategic reserve at any one time; the rest may be exported to foreign countries. Committee members predict that this amount will supply the country for 25 years. The assumption is that the price for exported gas will be higher than the price set for sales to Israeli customers.

The committee did not decide how the gas will be exported, but did state that any gas liquification plants will remain under Israeli control and within Israel’s exclusive economic zone at sea.

In any case, at least 15% of total annual production must be sold in Israel. Another percentage must be kept as a reserve, and the gas will only be allowed to be exported after all the natural gas demand of the Israeli market is met.

Large offshore fields will be allowed to export up to 50% of their reserves. Smaller fields may export more − up to 100% for fields of less than 50 bcm. This will provide an incentive to develop the smaller gas fields as they are often not economically viable, since the cost of drilling the wells is relatively fixed and similar for both small and large fields.

The Environmental Protection Ministry objected to a number of the recommendations yesterday. Ministry Director General Alona Sheffer-Karo, who was a member of the Tzemach committee, said Israel should set more ambitious goals and that the estimated reserve requirements, as well as the 25-year period, were much too low. She spoke of a need for at least 550 bcm and to reevaluate the forecasts in 2020 and make changes as necesary once the uncertainty in the forecasts was reduced.

The numbers were of course too small for the gas companies and their owners, who want larger export quotas. Most natural gas exploration company shares fell sharply yesterday on the news. Ratio Oil Exploration fell 4.6% and Delek Drilling lost 3.1%.

 

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By Itai Trilnick

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