Israel's subsea gas, oil fields heat up

International consortiums are showing increasing interest in developing Israel’s offshore oil and gas fields.

al-monitor This picture taken on Feb. 13, 2020, shows a view of a petrol station belonging to the Israeli Paz Oil Company in the Israeli settlement of Mishor Adumim in the occupied West Bank on the outskirts of Jerusalem. Photo by AHMAD GHARABLI/AFP via Getty Images.

Topics covered

drilling, fossil fuel, natural resources, israeli economy, leviathan, oil and gas

Jan 25, 2021

On Jan. 20, the Israeli press reported that the Unibin Israel company, headed by Israeli-British businessman Saed Sarsur, had signed a conditioned agreement to buy some 21% of the Shimshon gas and petrol field extraction rights. The deal is expected to be sealed within 90 days, upon approval of the other extraction rights holders and Israeli authorities. The company reportedly may invest $35 million in drilling there.

The undersea Shimshon gas field, off Israel’s southern coast, was discovered in 2012. After a few years of searching, exploration rights holders concluded that its potential was much lower than originally believed and the companies moved to other ventures. But a new study was conducted two years ago and a March 2020 report found that a specific drilling spot in that zone could produce as much as 900 million barrels of petrol. The news prompted Unibin to act.

Another recent development in Israel’s undersea energy fields concerns the Karish and Tanin natural gas fields, located in off Israel’s northern shores, adjacent the large Leviathan field. In 2017, the Greek oil company Energean teamed up with private equity fund manager Kerogen Capital to obtain the exploration licenses for Karish and Tanin. On Dec. 30 last year, Energean announced it had reached an agreement with Kerogen, paying between $380 and $405 million to become the sole holder of the exploration licenses for Karish and Tanin. It hopes to start extracting natural gas in 2023.

Unibin, Energean and Kerogen are not the only companies operating off Israel’s Mediterranean coast. Over the past two decades, several local and international companies have been involved in searching for natural gas and petrol. For several years Noble Energy has been the largest player in Israel’s natural gas extraction, operating the Leviathan and Tamar fields in the north. Last October, American Chevron completed its acquisition of Noble Energy, a move hailed by Energy Minister Yuval Steinitz as tremendous news for Israel’s economy.

Israelis are also familiar with the local Delek Drilling company, led by Israeli businessman Yitzhak Tshuva. The company cooperated with Noble Energy on Leviathan and Tamar and with Nobel on the older natural gas fields Noa and Mari B, both in the south. British Petroleum has also been active on pursuing gas exploration in Israeli and Palestinian waters.

Israel’s Petrol Act defines three stages for extracting petrol or gas, and the Energy Ministry supervises the process. In the first, exploration permits permit companies to research the geological characteristics of undersea or on above-ground areas and get an idea of the extraction potential. Then another round of deeper exploration requires another permit. Only companies that can show they're capable of taking on the endeavors are eligible to compete for exploration licenses. The permit procedures were put in place some four years ago. Since then, the Energy Ministry had granted 18 such permits, each for a period of three years. After exploring, companies can apply for the extraction rights. Extraction permits are granted for a period of 30 years with potential extensions for 20 more.

The latest financial developments attest to the international energy market's growing interest in Israeli gas and petrol fields. The past year had been a very difficult one for the energy sector worldwide, severely hit by the pandemic and ensuing economic crisis.

This interest was clear in the Jan. 19 decision by Chevron and its partner in the Leviathan and Tamar fields Delek Drilling to invest around $235 million in pipelines to export Israeli fuel to Egypt. They agreed to lay a new undersea pipeline and to expand some of the existing ones. The Israel Natural Gas Lines company will reportedly undertake both projects.

Chevron and Delek Drilling's move follows years of hard work by Steinitz, who together with his Egyptian counterpart Tarek el-Molla was behind the establishment of the Eastern Mediterranean Gas Forum, based in Cairo. On Sept. 22, seven ministers attended a videoconference organized by Cairo, marking the informal forum's evolution into a recognized organization. It was on there that Steinitz announced Israel will start exporting natural gas to Egypt and Jordan, a project that should generate some $30 billion over 10 years. Steinitz further noted that more deals could be in the offing.

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