Avner Oil: From Promise to Reality
Partners with Noble Energy in the Eastern Mediterranean, Avner Oil & Gas Exploration L.P.'s Yianiv Friedman, Vice President Strategy, recounted Israel's previous attempts to uncover natural gas as “400 dry holes,” coming up with no success until the year 2000 at the 2nd Annual Frankfurt Gas Forum.
Mr. Friedman joked that regarding indigenous oil and gas resources Moses had taken a wrong turn when taking the Israelites out of Egypt. “If he'd taken a right turn, we'd be in Saudi Arabia. Things would've been warmer but better.”
However, thing had changed with the Yam Tethys discovery, which was the only reliable gas discovery until April 2013.
Regarding that development, he stated: “When governments want to do something, they are able to, from discovery until production of gas. Israel had no consumption of natural gas basically until the Yam Tethys discovery – it was a period of 4 years. So imagine the upstream development getting to shore, but also converging with electricity plants, building a grid onshore Israel to take the gas – this was all done in a very short period of time.”
Then came Tamar, said Mr. Friedman, a large discovery with the largest infrastructure project ever done in Israel. “Israel is a relatively small country, so a USD 3.5 billion project is huge. We have many challenges through this project, but we're reaching over 1 BCF/day of supply to the Israeli market.”
He added that in terms of the Israeli economy, Tamar had made a significant contribution to the country's GDP, had had a trickle down effect on the economy with many industries switching to gas, resulting in huge savings, not to mention the billions in royalties through the life of the project. Increased natural gas, he said, had had a positive environmental impact in Israel.
Mr. Friedman also spoke of the Leviathan gas discovery, which he said was almost twice the size of Tamar: 19 TCF. He called it an “export focused project” for Avner Oil.
“The effect of this in terms of royalties and tax revenues to the Israeli government will be significant, bringing international investors to the Israel energy sector, encouraging further exploration and development, and the effect of the enormous investment in infrastructure,” he explained, adding that it also had an enormous effect upon Israel from a geopolitical perspective, as Israel held the prospect of exporting natural gas to others, like Europe and the Far East.
Regarding the export of that gas, he said it involved a significant infrastructure investment, and Avner was looking at options other than LNG, like floating LNG, CNG, or pipelines. Such projects would also bear significant positive impacts for Cyprus, too, he added.
“As for exports,” said Mr. Friedman, “the message is, we have a lot of gas. We have development plans that can monetize 35-40 TCF. We have a lot of options.
“If you look at the neighborhood that we're in, it's not an easy one, but a tough one from a political perspective, but we think that energy could bridge all those differences and benefit the peoples of the region for a very long time.”
He said that in addition to delivering gas to Israel and Cyprus, there were the possibilities of a pipeline to Turkey, and an LNG terminal onshore Cyprus, among others, but there were immense challenges and a lot of competition for investment funds.
Charles Ellinas, CEO, Cyprus National Hydrocarbons Company, Cyprus, described what was at stake regarding the further development of East Mediterranean natural gas.
He was frank with the delegates in attendance: “If we don't get our act together, the world will go on without us, so timing is an issue.”
Apart from the regional markets, he said, major export markets would be the Far East and Europe, but the prospect of Far East sales was already becoming challenging because of gas from East Africa, North America, etc.
Mr. Ellinas added: “And now the US-Iran agreement may be paving the way for Iranian gas supplies to Europe. Given its huge resources, in a few years Iran could be a major player in the region, competing with East Med unless we move fast.”
Achieving FID for East Mediterranean gas by 2016 would be a challenge, according to him. If Leviathan gas came to Cyprus, he said the LNG project could start with two trains. The development costs, depending on how many trains, ranged USD 6-9 billion.
Losing out on selling to the Far East markets was a very real risk, he reiterated, expressing the need for European involvement in the development of Eastern Mediterranean gas in the form of a strategy.
“The EU needs to get involved in the region,” he said, explaining that talk of East Med gas had not been that serious. “It needs proactive support from the European Union, if this gas is going to find itself in Europe, not by default but by design.”
The benefits of Eastern Mediterranean gas, explained Mr. Ellinas, would not be felt until 10 years from now. “This time should be used for confidence building and the development of solutions. As much of the gas may be designated for the EU, this should also place East Med gas at the heart of the European Community long-term energy policy.”