Israel, the energy island


Energy security has re-emerged as one of the drivers of European energy policy and even of the EU’s external policy. For Israel, energy security has always been the main objective of energy policy, and it is probably the most affected country by energy geopolitics in recent history. The EU is also being affected by the Arab-Israeli conflict, insofar as it prevents a consistent development of the natural energy corridor that runs from the Persian Gulf to the Mediterranean through Israel. On the other side, the EU and Israel also share concerns on Russian petro-politics. Israel-EU energy security cooperation also has non geopolitical dimensions like energy regulation convergence and the promotion of renewable energy. Israel could be interested in considering its inclusion in a potential PanEuroMediterranean energy region modelled after EU regulations and policies.

Israel is an e island; its network is not connected to the systems of neighboring countries. The energy sector is dominated by the government-owned utility company-Israel Electric Corp (IEC).  The company generates over 91 percent of electricity to the national grid and owns the transmission and distribution networks. IEC’s fuel sources are fossil fuels (gas, coal, diesel and fuel oil).

In 2009, 800 Billion Cubic Meters (BCM) of natural gas was discovered off Israel’s coast by U.S. energy company Noble Energy and its local partners at the Tamar field, that today, provides approximately 60% of Israel’s electricity needs. After a protracted public debate and the Israeli High Court’s intervention, the Israeli Government finally agreed on a revised Gas Framework agreement in late May 2016, paving the way for Noble Energy’s development of the Leviathan gas field.  Noble believes the Leviathan field is on track for first production by the end of 2019.

Israel plans to use the gas to leverage the development of a gas-based auxiliary industrial sector. The country is rapidly developing a gas-based electricity sector and the regulator has issued licenses for Independent Power Producers (IPPs) including combined cycle plants. The government is also rolling out a pilot project to use gas for public transportation sector.

For decades, Israel was an energy-starved country surrounded by hostile, oil-rich neighbors.

Now it has a different problem. Thanks to major offshore discoveries over the last decade, it has more natural gas than it can use or readily export.

Having plenty of gas is hardly a burden, and it offers a cleaner-burning alternative to Israel’s long time power sources. But it presents challenges for a country that wants to extract geopolitical and economic benefits from a rare energy windfall, including building better relations with its neighbors and Europe.

Part of the problem is timing. Just as Israel prepares to produce and export large amounts of gas, the United States, Australia, Qatar and Russia are flooding the market with cheap gas. The other is math: Israel’s 8.5 million people use in a year less than 1 percent of the gas that has been found in the country’s waters.

“We have a surplus of gas,” Energy Minister Yuval Steinitz said in an interview. “Israeli waters are swimming in gas, and what we have discovered is only the beginning.”

Noble Energy, a Houston-based company that made its first discovery of gas in Israel in 1999, has found more than 30 trillion cubic feet of gas off the country’s coast over the last decade. Some experts say new discoveries could double that.

As a result, Israel is phasing out diesel and coal-fired electricity, replacing it mostly with gas-fired generation and some solar power. Prime Minister Benjamin Netanyahu’s cabinet is considering banning the import of gasoline and diesel cars starting in 2030 and gradually switching to vehicles fuel by compressed natural gas or electricity.

Israel is also stepping up exports to neighbors like Jordan and Egypt. There are even plans to supply gas to a power plant in the West Bank for Palestinian customers.

Yet these efforts will make only a dent in the country’s reserves.

For decades, Israel depended on Russia and other sources for fuel, while its industries and homes relied on coal and oil power plants that blanketed its cities with smog. The switch to gas has helped clear the air in cities like Tel Aviv and Haifa that have converted diesel-fuel plants.

Israel’s biggest coal plant — in Hadera, a coastal city — will be converted over the next three years, cutting national coal consumption by 30 percent. Officials say they expect to eliminate coal use in 11 years.

In Hadera, improvements are already noticeable after gas replaced oil in one part of the plant and officials installed a scrubber, an exhaust-cleaning device. The beach is no longer caked with sticky black tar, and a yellowish tinge on the horizon is gone.

Israeli officials acknowledge that the gas will compete with cleaner solar energy. But they argue that the plentiful supply of electricity from gas-fired power plants will encourage the use of electric vehicles, reducing pollution.

The Israeli government says it is committed to the Paris climate agreement and is close to getting 10 percent of its electricity from renewable sources by next year. Environmentalists say the country could do better.

The Leviathan field, Israel’s largest, will be connected to the mainland by pipeline by the end of the year, and that should speed the use of gas in transportation, which has been minimal so far. Fifteen garbage trucks in Haifa are running on compressed natural gas. The country has imported 59 such buses from China and has ordered another hundred or so.

Israeli policymakers long favored a proposal to build a pipeline to Europe through Turkey. But relations with President Recep Tayyip Erdogan have deteriorated in recent years, closing that option, at least for now.

The most ambitious proposal is to build the world’s deepest and longest gas pipeline, to Italy through Cyprus and Greece. That project has the support of the European Union, Cyprus and Greece, but investors are reluctant to invest the estimated $6 billion to $7 billion it would cost.

Again, that would be a political investment more than an energetic one for the “island” Israel. A costly investment, that would also probably face opposition from Turkey, which is drilling in waters claimed by Cyprus, but a strategic one.

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