Israel Set to Emerge as Major LNG Exporter

One of the most pressing issues for Prime Minister Benjamin Netanyahu's new government has been its policy toward Israel's vast offshore natural gas reserves. Specifically, how much of the gas should Israel keep for domestic use and how much should it export?

Last week, government officials led by Netanyahu finally announced the details of that decision. They recommend that Israel keep 60% of the nation's gas for domestic consumption, which, government officials reckon, should be enough to meet domestic gas demand for at least the next 25 years.

The remaining 40% should be made available for export, which the government estimates should bring in profits of some $60 billion over the next 20 years. The recommendation has been submitted to Netanyahu's cabinet, where it is currently under review for approval.

Implications for energy companies
The decision had been long awaited by companies investing in Israel's natural gas sector, especially U.S.-based Noble Energy (NYSE: NBL  ) and Israel-based Delek Drilling, the two largest stakeholders in Israel's offshore gas reserves.

The two companies had been seeking clarity on the government's stance regarding gas exports, as they aim to exploit the Tamar and Leviathan gas fields, which have been hailed as parts of one of the biggest offshore natural gas discoveries of the past decade.

Israel's massive offshore gas reserves
In March, Noble and Delek started pumping gas from the Tamar field, marking the first production from Israel's offshore gas reserves. Prime Minister Netanyahu hailed the development as "an important step toward energy independence" for Israel.

Tamar, which was discovered in 2009, is the biggest privately financed infrastructure project in the nation's history, costing $3 billion and four years to develop. Production from the field is expected to add a percentage point to the country's GDP growth this year, which is forecast to reach 3.8%.

While that's already impressive, the undeveloped Leviathan field, the larger of the two finds, holds even more promise. Leviathan's operators recently raised their estimates of the quantity of natural gas that can be recovered from the field by about 11%.

Delek, Avner Oil and Gas, and Ratio Oil Exploration said last month that the field, which is located in water depths of about 5,400 feet offshore Israel in the Rachel and Amit license, likely contains some 19 trillion cubic feet (tcf) of natural gas, 2 million tcf more than previously believed.

Export options
Delek and Noble Energy are currently mulling over plans to export the gas from Tamar and Leviathan via pipeline to Jordan, Turkey, the Israeli-occupied West Bank, and potentially even Egypt. Delek is also currently in talks with Cyprus about developing an LNG terminal on the island nation that would serve markets in Europe and Asia.

Cyprus, which discovered nearly 200 billion cubic meters of gas in its Aphrodite field, hopes to start exporting LNG in 2020 and plans on processing not only its own gas, but also supplies from Israel and possibly Lebanon.

The bottom line
With these major discoveries in Israel and Cyprus, the Mediterranean and Middle Eastern gas trade is likely to undergo a fundamental transformation over the next several years, as countries like Israel emerge as major LNG exporters, possibly joining the ranks of existing heavyweights such as Qatar.

Furthermore, as Israel's decision highlights, countries around the world that are blessed with vast reserves of natural gas are recognizing the potential of exporting their resources. But in making their decisions, they must weigh the benefits of keeping the gas for their own domestic consumption against the profits that gas exports could generate for their government and citizens.

There are many different ways to play the energy sector, and The Motley Fool's analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations, and poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report -- it's totally free.


Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 01, 2013, at 1:21 PM, jokerbasher wrote:

    @Voiceinthewind: What American's consider Israel terrorists? Name them? What groups? You? You are ignorant. $3.5 billion brings stability to the region and the only democratic country in the Middle East. I am going to bet that you don't even know how much of that money actually flows back to the U.S. Israel is on the forefront of fighting terrorism. Don't try to confuse a country that makes a contribution to the world any less than it is. You have no idea what you are talking about. Yes, the only thing you are speaking the truth about is that the amount of aid Israel receives will probably be reduced. Which is a good thing. Other than that, I will suspect your education is lacking and you need to begin by actually learning about the people and places you criticize. Look at North Korea, Iran and Somalia (fill in the rest). I think those countries are the ones you should be worrying about.

  • Report this Comment On July 01, 2013, at 3:07 PM, Oilvet wrote:

    Now I assume the Israelis will start paying us back the trillion or so dollars we have given them since 1947, Yeh right!

  • Report this Comment On July 01, 2013, at 5:43 PM, whyaduck1128 wrote:

    An Israel that is much closer to self-sufficiency in energy is really going to hack off a lot of people, not all of them Muslim. Selling some of the natural gas AT A REASONABLE PRICE to energy-poor Muslim nations like Egypt and Lebanon strikes me as a good way to influence neighbors positively. There's not much they can do to influence the rest except by their usual military and intelligence capabilities.

Add your comment.

DocumentId: 2518049, ~/Articles/ArticleHandler.aspx, 7/29/2014 9:10:28 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement