Globes (Gina Cohen) – The urgent issues in the Israeli energy market
About the UAE, Renewable Energies and Chevron and in general issues that were in the limelight recently in the Israeli natural gas market
On the week of Rosh Hashana, it is pertinent to point out in brief 3 recently related natural gas issues in the Israeli market:
The entry of Chevron
On the 4th October, the shareholders of Noble are due to vote on their merge with Chevron Corporation. Chevron is a first tier international major conglomerate with a market cap of $170 billion (down from 240B$) and is keen in general to expand its global gas business, which is more environmentally friendly than oil, and is especially interested to increase its LNG business.
The Eastern Mediterranean region is a new basin for Chevron and I believe that in the first instance it will seek to foster the Israel-Cyprus-Egypt triangle and bring first Leviathan gas to the operated LNG facilities in Egypt and then develop Aphrodite and tap it into the Leviathan-to-Egypt pipeline. In parallel, Chevron has 5 exploration licenses in Egypt and will probably move ahead on an exploration program there.
The diplomatic relationship with the UAE
The UAE consumes 76 bcm of gas a year out of which it produces 62. Interestingly, the country both imports gas (from Qatar) and exports small volumes of LNG.
Abu Dhabi, however is keen to lessen its dependence on hydrocarbons and in August this year, the United Arab Emirates became the first Arab country to produce nuclear power. The opening, and the increased use of renewable energy will reduce gas requirements at a time when the country is moving ahead aggressively with an integrated gas strategy that should see it achieve gas self-sufficiency by 2030 and could potentially turn it into a net gas exporter.
Insofar as Israeli gas is concerned, the main implications will probably be in the form of calming the opposition forces in Jordan that were against the purchase of gas from Israel and in the future, one can even fathom that Jordan could also become part of the future energy arrangements between Israel and the gulf. Israel and the emirates could also find venues to cooperate on gas imports and exports.
The Ministry of Energy is constantly moving the dot in this respect and is now pushing for 30% renewable energy in Israel by 2030 at the expense of natural gas. In my view, in the wake of the fact that the only (bar tiny volumes of wind energy) non-fossil energy available to Israel is solar, this is a high risk policy, One only has to look back at what happened in California a few weeks ago when in the midst of a heat wave they were unable to provide the necessary power because of poor planning and over-reliance on renewable energy sources.
In addition, the cost of producing renewable energy does not take into account the full cycle of costs as the figures exclude the system costs, which needs to be available for them even when the stations are unable to generate power. Essentially, this amounts to the need of about 200,000 dunam and the infrastructure to deliver the electricity from the open areas, such as the Negev, to the consumption areas, in the center of the country, in a crowded country like Israel. The marginal cost of extra renewable facilities on the system keeps going up as their use increases, and thus the higher this pro-rata rate of system costs increases. Some countries in Europe even took this too far and are producing too much renewable power so that sometimes blazing sun and gusting winds can cause too much electricity and the need to pay these plants or shut or turn output down to stop them overloading the network.