Striking it Rich: Israeli Energy Policy (Part Two)

Israel's Leviathan rig

Israel’s Leviathan rig

By Jonathan Kamel

Photograph of the Leviathan Natural Gas Field courtesy of ThomasWhite.com

Note: This article represents Part Two of a Three Part Series on Israel’s energy policy. You can find Part One here.

The man behind Israel’s natural gas boom used to be a lawyer. Gideon Tadmor graduated law school in the late 1980s but never practiced a day in his life. Like a typical Israeli he longed to be an entrepreneur and run his own company. “When I finished law school, I gave the diploma to my mother. I said to her, ‘Now hang it on the wall and leave me—let me live my own life,” he told Slate. Today, Tadmor’s company Avner Oil & Gas and the billionaire corporation Delek Group control all of the rights to known Israeli gas reserves in the Mediterranean, an estimated value of $25 billion in assets.

The story begins in 1991, when Tadmor founded Avner Oil & Gas Exploration. Without any experience in the energy industry, Tadmor sought out American companies willing to partner with him on Israeli offshore drilling. For years every oil company turned him down due to their business with Arab countries. Then he came upon Noble Energy. Noble, located in Houston, was integral in providing the capital, seismic testing, and massive drilling technology used to tap the Tamar and Leviathan fields. Tamar was initially discovered on January 9th, 2009, and estimated at 10 trillion cubic feet (tcf) of embedded gas reserves. At the time it was Noble’s largest deep ocean gas discovery.

In 2010, Tadmor brought on board Israeli billionaire Yizthak Tvusha, chairman of the Delek group, to provide much needed capital to finance the venture. Total costs to tap the Tamar field exceeded $3.25 billion with Noble Energy shipping the massive drilling platform 7,000 miles from Corpus Christi, Texas. Five subsea wells were drilled to encompass the entire spans of Tamar and connected to the platform which sits at a depth of 800ft. The plant only reached maximum production by July of 2013 and has already generated revenues of over $10 billion split between Noble, Delek Group, and Avner Oil & Gas.

Tadmor is hopeful about the impact of the discoveries on energy pricing and life in Israel, telling Globes “The entry of gas greatly reduces the expected rise in electricity rates and will save the economy NIS $13 billion a year.”

While Tamar was significant, Leviathan has created the most international buzz. The 18tcf of reserves found in the zone just west of Tamar was a “hallelujah” moment for Israel. While Tamar has the potential to provide 50-80% of Israel’s natural gas needs for the next 10 years, discovery of even greater quantities in the Leviathan field have raised questions of how much gas Israel should export to the rest of the world.

While many Israelis want Mediterranean gas to be reserved for long-term domestic use, a sizable percentage of Leviathan has been set aside for exportation. In 2013, members of the Knesset announced that 40% of Leviathan stores will be opened up to the highest bidder. As a “gift from nature” Prime Minister Netanyahu believes that the state stands to receive $60 billion from gas exports over the next 25 years, making Israel a potential top-25 natural gas producing country in the world.

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