By Amir Foster,
Director of the Natural Gas Association
and Chairman of the Strategy Committee of the International Gas Association
In 2022, the global energy economy went through shocks that were not seen in a
generation. Natural gas prices in the world repeatedly broke records, which led to
a historic increase in electricity prices. The whole world experienced a shock, but
there was one country that made it through the global crisis unscathed: Israel —
one of the few places in the world that stood with extraordinary resilience in the
face of the storm. This resilience is a direct product of the Israeli natural gas
revolution, which brought unprecedented achievements to the country in the
economic, environmental and political spheres.
During the decade that has passed since the natural gas revolution began here,
the Israeli economy has saved over NIS 126 billion in energy costs. The intensity
of polluting emissions from electricity production fell by more than 80%, the
intensity of greenhouse gas emissions from electricity production dropped by
about 30% (which made Israel a world leader in the field), and Israel became an
essential factor for the energy security of Egypt and Jordan.
Who would’ve believed this state of affairs? Within a decade, we developed an
impressive natural gas production capacity, which ushered Israel into an era of
energy independence and security that previously could only be dreamed of. In a
few years, with the cessation of the use of coal, local electricity production will be
based entirely on blue-white energy. In all this time, and despite the impressive
increase in demand for natural gas, the national gas reserves have only
increased and there is still tremendous potential for additional discoveries. The
revolution has just begun.
The next stage in the development of the Israeli gas economy is through the
expansion of production capacities, which will allow for maximum energy security
for decades to come. In addition, improved gas export capabilities will allow
Israel to break through beyond the regional arena and become an important
international energy supplier. State revenues will increase as a result, and
Israel’s international position will be strengthened.
We are proud to report here for the first time, the news on the Israeli gas
economy: we created a document that has never been seen before in Israel,
which is a comprehensive and in-depth study of the unimaginable and powerful
effects of the natural gas revolution which began as a distant and challenging
dream, and in the meantime managed to improve the lives of all of us.
ENERGY NEWS & QUOTES
“33 billion shekels will enter the wealth fund by 2030 — from just
the Leviathan and Tamar gas fields…”
This is what Yossi Abu, CEO of Delek Drilling, said in a debate in the Knesset. In
addition, the Budget Division of the Treasury said today that “Even if we meet the
renewable energy goals, there will be no choice but to plan and build more power
plants. Israel is under-performing renewable energies, but even if we meet In the
destinations, there will be no choice but to plan and build more power plants.”
The issue of renewable energy is of interest to the public and investors, and in
Israel they also ask how much of the gas companies’ profits will be ‘returned to
the public’ (the companies took the risk, yet of course this is of no interest to the
public who hear from self-interested parties how bad the ‘tycoons’ are – but the
truth is that they are not).
Idan Mor, a member of the budget department at the Ministry of Finance,
commented on the green alternatives to polluting fuels and said that: “The
substitutability of renewable energy is zero compared to power plants. Even if we
meet the renewable energy goals, there will be no choice but to plan and build
more power plants. Israel is under the strain of finding energy renewables, but
even if we meet the targets, there will be no choice but to plan and build more
power plants, because the substitutability of solar and renewable energy is zero
relative to power plants.”
“The goals that require 20% by 2025 require a supreme effort and we need to
prepare for a situation where we will not meet this. In any case, the electrification
of the economy in the longer term is more important in the short term, and it will
be necessary to meet the electricity supply with the introduction of the metro in
new cities, light rail, electric vehicles, etc. All of this requires preparation and
establishment of power generating stations,” he added at the ‘Energy
Conference’ expo in Kfar Maccabiah.
At the same time, the CEO of New-Med Energy, Yossi Abu, said in the special
committee regarding the Fund for the Citizens of Israel in the Knesset that “in the
last nine years, we have transferred to the state coffers about NIS 15 billion from
taxes and royalties, and in the next nine years, about NIS 33 billion will enter the
fund from Tamar And Levitan only, not including taxes and royalties and not
including new developments that may increase the volume of sales and with
them also the state’s revenues from the reservoirs. The total revenue of the state
from Tamar and Levitan alone will amount to NIS 280 billion.”
Abu called on the members of the Knesset to act for the immediate start of the
work of the dedicated wealth fund. According to him, “there is no reason to delay
the fund’s activity until the funds are settled, as long as in the future it will be
necessary to return tax payments to some of the companies; it will be possible to
do so in the form of offsets that will not reduce the amount of money that already
exists in the wealth fund.”
And what about hydrogen-based vehicles?
At the same conference in Kfar Maccabiah, the Acting Chief Scientist at the
Ministry of Energy, Gideon Friedman, said that the solution lies precisely in the
field of hydrogen: “We will support the bringing in of hydrogen-based vehicles,
buses, forklifts and trucks. Hydrogen storage will lead the change. This is long term storage.
There are major challenges in transporting it and various processes
related to its assimilation instead of gas. We at the Ministry of Energy support the
establishment of a hydrogen fueling station and now support a mobile station.
We also help Bezan to produce hydrogen.”
Chen Herzog, from the accounting firm BDO, was actually less optimistic about
meeting the government’s goals for reducing emissions and said that: “In order
for there to be no excuses in 2030, we need goals that can be achieved and not
utopian goals. Only what is 80% likely to be achieved. The role of all regulators is
to admit that we will not meet the goals in the years remaining until 2030, and
produce instead a variety of solutions to reduce emissions and not just
renewable energies. For example, speed up the issue of electric transportation,
and establish efficient power stations, as well as develop a competitive market in
renewable energies.”
“BECOMING A KEY PLAYER IN THE WORLD”
Israel signs agreement to export gas to the European Union
At a ceremony in Cairo, Energy Minister Karin Elharar signed an agreement that
will allow, for the first time, a significant export of natural gas from Israel and
Egypt to the European Union. “A tremendous moment in which little Israel
becomes a significant player in the global energy market,” said Elharer, who only
half a year ago announced the cessation of natural gas exploration in the region –
but quickly retracted it.
The memorandum of understanding between Israel, Egypt and the European
Union – allows the export of Israeli natural gas in significant quantities to the
countries of the European Union. The event took place within the framework of
the Regional Gas Forum of the Eastern Mediterranean States (EMGF), in the
presence of the President of the European Union, Ursula von der Leyen.
As part of the signed agreement, the parties understand and agree that its
realization is subject to maintaining the energy security of the parties to it —
Israeli prioritization for supplies to the local market and protection of Israel’s
energy security. The validity of the agreement is from the date of its signing for 3
years. After them, it will be automatically renewed for another two years.
The memorandum of understanding deals with promoting the export of natural
gas to Europe, that is, natural gas originating in Israel, Egypt or other countries,
through the liquefied natural gas (LNG) facilities in Egypt as well as through
additional export options in the future. This is in order to ensure a stable supply
of natural gas to the European Union.
The parties to the memorandum of understanding recognize that natural gas will
be used for energy purposes at least until 2030, after which its consumption will
gradually decrease in Europe until 2050. The memorandum also deals with
formulating a plan to streamline and increasing the export of natural gas to
Europe. As part of the agreement, the European Union will encourage European
companies to participate in competitive procedures for the exploration and
production of natural gas in the economic waters of Israel and Egypt.
Also, the parties will jointly promote the examination of options for carbon capture
and reduction of carbon dioxide emissions. The parties to the agreement will
work together to encourage cooperation of the private and public sectors on
green hydrogen, green energies and energy efficiency.
The Eastern Mediterranean Natural Gas Forum (EMGF) was established in
January 2019 by the then-Minister of Energy Yuval Steinitz, and included Israel
plus Egypt, Greece, Cyprus, Italy, Jordan and the Palestinian Authority. This, with
the aim of promoting regional cooperation between governments and
organizations in the fields of production, consumption and supply of natural gas.
In 2021, the forum became an international organization and was joined by
France as a member and the USA, the European Union and the World Bank as
observers.
The organization is a platform for a regional discussion of bodies and working
groups regarding the utilization of the natural gas resources in the region,
formulating a common vision for the realization of the regional potential,
examining ways to exploit existing infrastructures and developing new
infrastructures — and more.
Within the framework of the forum, a number of governmental, commercial and
economic bodies operate, as well as working groups promoting common
professional issues, which include, among other things, steps to promote the
Eastern Mediterranean region as friendly for LNG-powered ships, as well as to
examine tools to reduce greenhouse gas emissions in the production and use of
natural gas.
“Political leverage that contributes to Israel geopolitically…”
Minister Elharer welcomed the signing of the agreement and said that: “The
memorandum of understanding will allow Israel to export Israeli natural gas to
Europe for the first time and it is even more impressive when looking at the
series of significant agreements we have signed in the past year, positioning
Israel and the Israeli energy and water economy as a key player in the world.”
The Ministry of Energy stated that this signing of the memorandum of
understanding is another step on the way to Israel’s positioning as a natural gas
powerhouse, which will make it possible to increase the export of natural gas to
Egypt, and from there to other countries in Europe, which need an additional
source of natural gas following the global energy crisis. “The export of natural
gas serves as political leverage and contributes to Israel geopolitically, while
maintaining the amount of natural gas needed for the consumption of the local
economy. This move also has enormous economic significance for the local
energy market and the Israeli economy. In addition, this step, like many other
steps promoted by the Ministry of Energy, helps Israel and countries like Egypt
reduce the use of polluting fuels such as coal and oil, and dramatically lowers air
pollution in the region.”
At the beginning of the month, Minister Elharar announced that she was
changing her previous decision, and instructed her office personnel to prepare for
the fourth competitive procedure for natural gas exploration in the economic
waters of the State of Israel in the Mediterranean Sea. Just six months ago,
Elharar announced that they would not conduct further exploration because
studies have shown that natural gas causes more global warming than other
fossil fuels.
Elharer explained the current policy change by saying that “the Russia-Ukraine
war has illustrated in recent months the risks and prospects of energy availability
and prices, during the transition from the use of fossil fuels to green energy: on
the one hand, Europe’s problematic dependence on oil and gas supplies from
Russia, and on the other hand, the inability to provide the needs of the energy
economies in relying exclusively on renewable energies that use the existing
technology. Alongside the sincere and real concern for what is happening in
Europe, the global energy crisis is a huge opportunity for the State of Israel to
export natural gas.”
The Natural Gas Association stated that they “welcome the signing of this
important agreement, which will help Europe deal with the serious energy crisis
that afflicts it. Israeli natural gas, which provides price stability in the economy
and is praised by the leaders of the natural gas industry in the world, will now
also contribute to other countries and thus to global energy security. Israel can be
proud of its natural gas reserves, which fortify its position in our region as a factor
of proximity from a security and political point of view, and build a basis for
international cooperation.”
BENEFITS TO THE WORLD ECONOMY
On March 31, 2013, the production of natural gas from the “Tamar” reservoir
began, and the Israeli economy entered a new era, an era of essential use of
blue and white Israeli energy, an era of cheap and clean energy. The benefits of
the Israeli economy from the transition to the use of natural gas are economic,
environmental and geopolitical.
The publications of the Ministry of Energy indicate that since the production of
gas from the “Tamar” reservoir began and the use of natural gas in 2013 and
until the end of 2021, natural gas has saved the Israeli economy over 116 billion
NIS, of which about 65 billion NIS in 2021 alone. This is a saving of 7.5 million
NIS per hour in energy costs alone for the Israeli economy. The estimated
amount of savings from the beginning of the use of natural gas to the start of
production from the “Tamar” reservoir in 2013 was 24 billion NIS. As the scope of
gas use increased, so did the profit for the Israeli economy.
During the year 2021, natural gas saved the Israeli economy 7,500,000 NIS
every hour.
Environmental benefits: Dramatic reduction in pollutant emissions
The widespread transition to the use of natural gas, starting in 2013, resulted in a
dramatic decrease in pollutant emissions in the electricity sector. Emissions of
sulfur and nitrogen oxides have decreased since the start of gas production from
the “Tamar” reservoir by 84% and 74% respectively (as of 2021). This is a
cumulative saving of hundreds of thousands of tons of toxic gas emissions.
More electricity + less pollution
A dramatic decrease in the emissions of pollutants in the electricity sector since
the widespread use of natural gas to generate electricity began. Next was a
significant reduction in greenhouse gas emissions.
The expansion of the use of natural gas at the expense of the polluting coal, fuel
oil and diesel fuel also resulted in a significant decrease in greenhouse gas
emissions from electricity production in Israel. Since the start of gas production in
the “Tamar” reservoir until the end of 2021 it’s been shown to be at 27%.
According to the Ministry of Energy, “the total external costs saved as a result of
the transition to the use of natural gas between 2013-2020 is estimated at over
NIS 130 billion”.
State revenue
The gas economy makes a significant contribution to the state’s revenues, a
contribution that will increase and intensify with the introduction of the Shishinsky
levy into full operation of all gas reservoirs.
The Shishensky Committee for Taxation of Natural Gas Reserves in Israel
determined that the Israeli gas reserves are expected, on average, to transfer to
the state about 62% of their profits.
There are three types of taxes and royalties that the gas companies transfer to
the state: direct royalties that are transferred to the Ministry of Energy as a result
of production, corporate tax that is legally paid to the income tax and the
Shishansky levy that will go to the designated wealth fund that the state will
establish.
So far, the state’s revenues from natural gas reserves have amounted to
approximately 17 billion NIS.
During the coming years, with the entry of the Shishansky levy into full operation
and with the start of production from the Tanin and Karish gas field reservoirs, the
scope of taxation is expected to jump significantly and reach a rate of hundreds
of millions of shekels every month.
The total scope of the state’s revenues from the Tamar, Leviathan and Karish/
Tanin reservoirs is expected to amount to hundreds of billions of shekels.
The state’s revenues from natural gas reserves so far is a total of about 17 billion
NIS. [Source: Ministry of Energy