As we know, the European gas markets experienced a perfect storm where the trilogy of price, security of supply and environmental benefits all went haywire: the price of gas skyrocketed by hundreds of percent; security of supply fell as Asia grabbed every molecule of LNG it could get its hand on and Europe was left with a dearth of gas supplies and near-empty storage meaning coal consumption in 2021 reached an all-time global peak and thus local pollution and global GHG emissions increased.
Since this crisis occurred, Europe and Israel, have taken very different views on how to proceed to ensure its energy basket and security of supply.
Europe came to its senses when the European Commission issued its draft list of environmentally friendly energy resources – known as the Taxonomy – including both natural gas and nuclear as sustainable investment, under certain circumstances.
Israel, however, it seems that just as it is getting it right in terms of the players in the market (with the presence now of majors such as Chevron and Mubadala, and with Energean due to bring its Karish field on line in several months), it is getting it wrong in terms of its policies. Thus, the Israeli minister of Energy, took the opposite decision than what we are viewing overseas when she declared that her and her ministry would not deal with gas over – at least – the next year, in order to inter alia, give a clear message, and focus resources on renewables. Recently, she made some feeble attempts to retract some of her words by explaining that drilling, exports and development would continue in 2022 as per licenses already granted.
Israel is already such a difficult environment for gas companies to operate in that it is unlikely that a new licensing round would have attracted great global interest, but her decision now not to ease gas exports is certainly a death warrant to any company even contemplating investing in a drilling campaign here, if/and when a new licensing round is undertaken.
In my view, the draft conclusions of the inter-ministerial committee which examined the Israeli gas market and which in June 2021 said that exports of gas need to be promoted by the government, did not in fact go nearly far enough. Indeed, it lacked clear active actions to be carried out. Such actions should include creating a geopolitical climate supportive of the construction of natural gas infrastructure, signing government-to-government agreements, adopting appropriate gas export taxation rules, establishing regulation which will enable construction of an FLNG facility and continued participation in the promotion of the EastMed project.
Minister Elharrar pleads with us to grant her this year to deal with renewables and in a radio interview said that the Ministry cannot efficiently deal with both renewables and gas, and that a licensing round would draw vital resources away from renewables. Surely, the cost of hiring a few more officials in the ministry is minute compared to the cost of getting the country’s energy policies wrong.
For Israel, contrary to Europe and North America, where nuclear energy is being revived as the country is fearful of over-reliance on its renewables, the only source of energy that can provide reliability, sustainability, affordability and environmentally friendly energy is gas. Israel would probably welcome nuclear, but this is not feasible at this instance, so our only alternative for baseload energy supply is gas.
In addition, electricity prices in Israel are due to increase this year by about 5%. This could have been 10 times worse, had it not been for the availability of local gas, as coal prices around the world increased by 100%, global gas prices increased by 300-500% and any new local renewable sources of energy will be more expensive in the short-run than what we managed to develop to date, as the low hanging fruit have already been picked in this sector for now.