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Israel Gasses Up

Israel has finally announced its intentions for its vast reserves of natural gas yesterday. The tiny country has been sitting on outsized reserves of offshore gas for years, but until yesterday had been vague about what it would do with this resource windfall. Israel will keep 60 percent of the gas for domestic use—enough, reportedly, to meet the country’s gas needs for at least the next two decades—and export the rest. If current predictions hold, the country stands to make a profit of $60 billion from these exports. The FT reports:

Analysts say that Israel’s Mediterranean gas finds, among the largest of their kind in the world in recent years, have the potential to boost the economy for years to come and could transform the Middle East’s energy map….

[Prime Minister Benjamin Netanyahu’s] government said the decision “balances the need to ensure a source of available and affordable energy for the citizens of Israel and the need to export gas from which the state will generate profits to be invested in the welfare and safety of citizens.”

It says something about the size of the newly discovered reserves that they can meet all of Israel’s domestic gas needs and still have a such a bounty to export. But exporting won’t be an easy task. Israel can choose to liquify its gas and export it by ship, but this process is expensive and adds a lot to the cost of the gas. The other option is to ship the gas by pipeline, likely travelling to and through Turkey. But Israeli-Turkish relations are frosty, and though cheap energy might warm things up a bit, some big sticking points remain.

Still, figuring out the logistics of exactly how to bring one’s resource bounty to market is the kind of problem many world leaders would love to have.

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  • BrianFrankie

    To be clear on this, while Israel has not finalised the export laws, there is a clear expectation that the export path will be LNG. Nobel has brought in Australian LNG specialist Woodside to help commercialise the reserves:

    and planning for the Leviathan LNG project is moving ahead rapidly. Pipelines are a possibility I thin kit is easy to discount. A subsea line north across the Lebanese and Syrian coastal shelfs, through earthquake prone terrain, to a an only-nominally-friendly power – it is just too much risk to accept. LNG provides the flexibility Israel needs.
    I’ll give you good odds on an LNG announcement before the end of 2013.

  • Andrew Allison

    Cyprus is closer, and in need of revenue.

  • Darkwater

    Golda Meir used to joke that Moses and the Hebrews had wandered in the desert for 40 years and finally settled in the only place in the Middle East that had no oil. This seems like some partial recompense.

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