Israel’s Energy Minister Yuval Steinitz is on a mission to persuade big energy explorers put off by years of regulatory turmoil to start looking for natural gas off his country’s shores.
At a road show in London last week, Steinitz made his case with executives from large and mid-sized energy companies that prospects for finding big reserves are good.
“According to geological and seismological surveys, it is very probable that most of the natural gas is yet to be found,” Steinitz said in an interview late on Tuesday, on the eve of his London trip. “We hope to see at least two or three large companies submitting bids.”
A report by French consultants Beicip-Franlab estimated that Israel’s waters hold 2,200bn cubic meters of undiscovered gas, about 2 1/2 times the amount contained in known fields, Steinitz said. In the past 12 months, he said, he’s met with chairmen, executives and directors of almost all of the world’s major gas companies to promote new exploration.
Israel is actively seeking energy investors now that the last of the regulatory, legal and political challenges that held up gas development for years was swept away in mid-May. Two major discoveries in the past decade have put Israel on course to become a gas exporter, but so far only one mid-sized international energy company - Houston-based Noble Energy - has taken an active role. Earlier last month, Greece’s Energean Oil & Gas SA agreed to buy two small offshore fields.
The Tel Aviv Oil & Gas Index has risen 24% since mid-May and now trades near the 2016 high.
Israel hopes to interest companies to explore in 24 blocks accounting for 40% of the nation’s economic waters, Steinitz said. Licences could be issued as soon as November, and would be the first in four years because exploration stalled while Israel struggled to regulate its nascent energy industry, he said.
Foreign companies shied from Israel during the years of regulatory turmoil, which ended with higher taxes and forced divestitures for investors in Leviathan and Tamar, the country’s second-biggest field. Amos Hochstein, the US State Department’s special envoy for global energy affairs, said in an interview last month that big explorers will need to be reassured that the Israeli government won’t start changing regulation and tax laws.
“We need some time to pass to restore confidence in contract sanctity and regulatory longevity in the system,” he said. “I think there’s been some damage done to its reputation but it’s not irreparable damage.”
Solid diplomatic relations with potential energy partners in the region are also central to bringing large companies to Israel, he said. Israel has held gas talks with Egypt, Jordan and the Palestinian Authority, and is considering building a pipeline to Turkey and using idle LNG facilities in Egypt.
“We need to see the clearing of the geopolitical path, with obstacles removed for export deals in the region and that is already happening,” Hochstein said. He singled out the recent Israel-Turkey reconciliation deal as a major step forward and expressed optimism about talks for a reunification of Cyprus, which a pipeline to Turkey would traverse.
When the first deals start being realised with Egypt, Jordan, and with the Palestinian Authority, “I think you’ll start seeing the level of interest rising dramatically,” he said.
Talks with Egypt and Turkey continue, Steinitz said, without ruling out a longer pipeline to Greece. Multiple pipelines are definitely an option, he said.
Steinitz would like to see the excitement generated by new exploration in neighbouring Cyprus replicated in Israel. Cyprus received interest from Total, Statoil, Exxon Mobil, Eni, Qatar Petroleum, and Cairn in a recent licensing round, its energy ministry said last month.
“I think the Cypriots had a quite successful bid recently, and that’s because discoveries in Israel, Egypt and Cyprus in recent years mean the prospects are quite good,” Steinitz said. “If there will be additional discoveries in this triangle of economic waters, we will start seeing this basin as a very significant source of natural gas to Europe.”