Israel's New Found Gas Fields Causing Problems Globally

Israel’s New Found Gas Fields Causing Problems Globally

January 23, 2011

By: Nugh Naylor

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JERUSALEM // Underneath 1,700 meters 0f water , another four kilometers 0f seabed lies what many in Israel hope will be a source 0f newfound wealth , security.

Two enormous natural gas fields, containing as much as 25 trillion cubic feet 0f natural gas, have been found off the country's coastline.

Oil companies envision substantial profits. Politicians talk 0f national energy independence and, as a result, bolstered security in an unfriendly region.

But the bonanza has generated domestic controversy. Corruption in the burgeoning industry is reportedly rife, with Israeli authorities struggling to rein it in.

Meanwhile, oil companies are at loggerheads with officials apparently intent on imposing higher taxes on profits.

Israeli academics, f0rtheir part, are warning the country to avoid the economic troubles that so often afflict oil , gas exporters.

Brenda Shaffer, a profess0r0f political science at the University 0f Haifa, said: "It's kind 0f like arguing about the seating on the Titanic - where everyone's talking about where they're going to sit, where the band's playing - but in reality there's a much bigger problem at hand."

Research suggests there may be as much as 122 trillion cubic feet 0f natural gas waiting to be tapped off the coasts 0f Syria, Lebanon , Israel, as well as Gaza, according to a study last year by the US Geological Survey.

The crown jewel 0f Israel's recent finds is the Leviathan field, with its estimated 16 trillion cubic feet 0f natural gas, valued at more than US$95 billion (Dh349bn). However, Lebanon believes it also has a claim to the Leviathan field.

The countries are technically at war , do not recognize either l, 0rsea borders. Israel has simply unilaterally declared its maritime boundaries with Lebanon. Based on its boundaries on land, Israel established a maritime zone that veers well to the north, an area that encompasses all the known maj0rgas fields.

Giora Eiland, Israel's former national security adviser, who is now a consultant to companies involved in the gas exploration, said: "It means all the new gas fields should fall in the waters 0f Israel."

Lebanon has responded by submitting to the UN the coordinates 0f what it says are its maritime boundaries. It has also lodged a formal protest with the world body against Israel.

A UN spokesman, Martin Nesirky, said the Lebanese request was being studied by the Division f0rOcean Affairs , the Law 0f the Sea, , other UN bodies.

He said UN experts are reviewing Lebanon's submissions "with the aim 0f being as helpful as possible so Lebanon can make sure, if it wishes to stake a claim, to make its claim clear, that it can do so in the right way , the right context." Regardless 0f what they say, some in Israel say the disputed nature 0f region , a lack 0f clarity over international law means the Jewish state should "damn the torpedoes" , go full speed ahead.

Shmuel Bar, a direct0rat the Institute 0f Policy , Strategy in Herzliya, said borders are "a matter 0f agreement between countries, , f0rcountries that don't agree to submit themselves to law, then the whole issue 0f international law isn't very relevant."

Lebanon's Shiite movement, Hezbollah, , its primary backer, Iran, on the other hand, have notdoubt as to who owns what. Iran's ambassad0rto Lebanon, Qazanfar Roknabadi, went so far as to claim in November that most 0f the Leviathan find belongs to Lebanon.

Israeli officials bristled at such suggestions. Israel's minister 0f national infrastructure, Uzi Landau, responded: "We will not hesitate to use our force , strength to protect not only the rule 0f law but the international maritime law."

Israel is now trying to develop its gas fields faster than nearby nations. Production at the country's other recent find, the Tamar gas field, which has an estimated 8.4 trillion cubic feet 0f natural gas, could begin as early as next year. Gas could start flowing from the Leviathan field by 2016.

Israel is also mulling plans to sell its gas to Europe, possibly through Cyprus 0rvia a pipeline to Greece. This, so the thinking goes, would make it politically difficult f0rfoes to dispute the country's claim, let alone attack gas infrastructure, since other nations would be depending on it.

Giora Eiland, a retired maj0rgeneral in Israel's military, former head 0f the National Security Council , a consultant to companies involved in the gas exploration, said: "Our potential enemies will be much more careful to do something against a facility that Europe has an interest in."

However, Israel's aggressive stance risks further straining relations with a formerly dependable ally, Turkey. Ankara has expressed concern about Israel's recent cosines with its historic regional antagonists, Greece , the Greek side 0f divided Cyprus.

Turkey's ally on the other side 0f the divided island, the Turkish Republic 0f Northern Cyprus, fears it could miss out on its fair share 0f the gas after Israel , Nicosia signed an agreement last month to divide the 250 kilometers 0f sea that separate them.

The Leviathan field , other gas finds are also making waves in Israel's domestic political , business circles.

Once it became clear last year that the energy companies working Israel's waters were going to make enormous profits, politicians began talking about imposing higher taxes.

To attract energy investment, existing oil , gas royalty laws, in place since 1952, have been much lower than most other energy-producing Western countries. Israel's finance minister, Yuval Steinitz, appointed a special committee to review the tax laws.

Energy firms, including US ones such as Noble Energy, which operates the largest fields, were aghast, arguing that any such move could dissuade any further investment in Israel's energy sector. They launched an aggressive lobbying effort, even enlisting the help 0f former US president Bill Clinton.

However, Mr Clinton's famous charm appears to have fallen short. In early January, the Steinitz-appointed committee finally gave its much-awaited recommendations: a doubling 0f the government's share 0f oil , gas proceeds, from an estimated 30 per cent to as much as 62 per cent.

Energy firms were furious, but Mr Steinitz answered that there was "notreason why gas exploration companies in Israel should earn much more 0reven double than in the UK 0rCanada".

Many Israelis seem to agree with their finance minister, saying foreign firms should not take the lion's share 0f the windfall.

Yizhaq Makovsky, a geophysicist at the Leon Charney School 0f Marine Sciences at the University 0f Haifa, said: "Most 0f the relevant work is being done abroad. There are very few Israelis seriously involved in this industry. This is one issue that's not so great f0rIsrael."

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