Israel’s gas revolution

Audrey Leon

January 1, 2017

Israel is eyeing both future energy independence and potential export markets with the launch of its first-ever offshore licensing round. Audrey Leon reports.

Image from iStock.

Tiny Israel has big dreams of a gas-based economy. In the last 15 years, the Middle Eastern country has gone from a net importer of fossil fuels, to a natural gas producer with significant export potential in the long-term. With major discoveries being made in the Eastern Mediterranean, such as the 30 Tcf Zohr gas find offshore neighboring Egypt, as well as a few on Israel’s side, the country is ready to open its territorial waters to further investment.

“The opening of the sea for natural gas and oil searches is the best investment for Israel and its future. It is the best chance to increase the national resources bag for years to come,” said Israel’s Minister of Energy, Dr. Yuval Steinitz, in early November.

In the summer of 2016, Israel’s Ministry of Infrastructures, Energy and Water Resources (MIEWR) announced that the country would finally hold its first offshore licensing round, offering 24 blocks in the Levant Basin in the Eastern Mediterranean Sea.

IHS Energy, which assisted MIEWR with its international road shows, said that a recent, third-party basin modeling study estimated that there are 6.6 billion boe and 2.13 Tcm (75 Tcf) of gas yet to be found in the offshore part of the basin (in-place, yet-to-find, best estimate).

Israel’s government hopes that the round will help further break up the monopoly on the country’s producing gas assets, which has been dominated by one operator, Houston-based Noble Energy. And while Noble has been highly successful along with its Israeli partners in the Eastern Mediterranean with huge discoveries, such as Tamar and Leviathan, Israel wants to drum up some healthy competition.

Map of available blocks offshore Israel. Image from MIEWR.

“We’re waiting for you to come,” said Shaul Meridor, general manager, MIEWR, at the licensing round road show held in Houston in late November 2016.

The blocks available are a maximum size of 400sq km, and begin about 7km from shore, some of which are adjacent to recent world class gas discoveries in water depths of between 1500-1800m. The round began accepting bids in November. The bid period ends in April this year with winners due to be announced in July, Meridor told the road show audience.

The 24 blocks made available to interested parties are close to major finds and producing assets, including Tamar (discovered in 2009), Leviathan (discovered in 2010), Karish, and Tanin (discovered 2012-2013) to the North of the prospective offshore area, and the Mari-B and Noa gas fields (discovered in 1999-2000) to the southern portion of the prospective area.

Why choose these specific areas? Michael Gardosh, head of geology and geophysics for Israel’s Minister of Energy, said that Israel believes these are the best for exploration.

“They hold good potential,” he told the road show audience. “They are outside the territorial waters, far away from the national border. We don’t foresee any issues working here. We consider these good areas.”

The timing for a licensing round could not be better. In January 2016, according to a resource report by Netherland, Sewell & Associates, two fields – operated by Isramco Negev and Modiin Energy – showed multi-trillion cubic feet prizes. The Og field lower sand contains 8.84 Tcf best estimate, unrisked gross prospective resources and the Og field upper sand contains 3 Tcf. Both also have some condensate.

In addition to these finds, Israel’s neighbor Egypt has racked up new major natural gas finds, including Eni’s mega-discovery, Zohr (OE: April 2016), discovered in August 2015. Zohr – which is being fast-tracked with an eye on first gas by late 2017 – is also in the Mediterranean Sea, some 190km north of Port Said in 1500m water depth. Thought to be the largest gas discovery made in the Mediterranean, Eni has estimated total gas resources in place to be approximately 30 Tcf. In contrast, Israel’s Leviathan, operated by Noble, is estimated to contain 22 Tcf of natural gas.

The reprocessed multiclient 2D line survey (left) and the original shot in 2001 (right) Images from TGS.

Geology

As OE reported in April, in a profile on Zohr, the discovery itself was almost missed when its previous operator did not consider the area where it was eventually found, the Miocene carbonate build-up.

Gardosh believes that there is likely a similar system to Zohr within Israeli waters, he told the road show audience in November.

He further discussed the Jonah High, which is a structure that is somewhat deeper than Egypt’s Zohr, with a good layer of shale covering. He said that the Myra-1 well (near the Tamar and Leviathan fields) was designed to test this. The well, then-operated by GeoGlobal Resources, was drilled in 2012. It ran into some difficulty, and was unable to penetrate the structure, only the top of it. “This could be potentially prolific,” he told the audience, and he added that there could be more plays just like it.

Gardosh also noted that Israel’s offshore geological conditions, which he said are favorable for generation and accumulation of both oil and gas, adding that of the 35 exploration wells that have been drilled there has been a high success rate (>60%).

A report by French consultants Beicip-Franlab, conducted in 2015, Gardosh said, highlighted the potential for both oil and gas in the lower and upper Jurassic and middle Cretaceous. He added that there is good source rock for biogenic gas in the Oligocene, Miocene, and Pliocene.

Gardosh highlighted four main hydrocarbon plays – three of them in proven (Pliocene, Oligo-Miocene, Jurassic) and one is speculative (Cretaceous). But, he noted that additional traps are likely found in all plays.

Seismic firm TGS shot a multiclient 2D line survey, covering 6831km in 2001 offshore Israel. According to a statement from TGS to OE, the Israeli data pack includes the 2001 vintage version, but misses the improved new version, TGS says. “Since reprocessing these data in 2016, TGS has needed to update its interpretation. While the reprocessing has greatly improved the imaging of the biogenic plays and made facies interpretation and identification more reliable, it has also revealed new, deeper structures, and previous assessments of heat flow and maturation now need to be re-appraised. TGS now believes that this deeper, thermogenic set of plays could hold potentially large volumes of mature conventional hydrocarbons in Jurassic and Cretaceous systems.”

The reprocessed Jonah High survey (left) and the original (right) Images from TGS.

Easing regulations

Israel has not always been an easy country in which to operate. Famously, Noble Energy and its partners Delek and Avner Oil ran into trouble when it submitted its first Leviathan development plan. The country was troubled by a growing monopoly that Noble Energy had in the country’s offshore and demanded the firm and its partners sell off interest in the smaller Karish and Tanin fields – and, at the time, its interest in the major Tamar gas field, already in production.

Ultimately, a new gas framework was developed by the energy minister and approved by Israel’s government and parliament in 2015 to get development activity back on track. Noble Energy received approval from MIEWR for its Leviathan development plan in June 2016. Noble Energy said in early November of the same year that it expects to make a final investment decision by early 2017. The Israeli contingent of the Leviathan partnership approved the field’s development plan in December 2016. Wood Group Mustang has been chosen to provide front-end engineering and design work for the project.

But, with the major regulatory issues in the past, Israel is hoping to entice investment and foster competition in the market. Meridor told the road show audience that encouraging industry to come to Israel is one of the government’s biggest challenges. Overall, he said, Israel wants a gas-based economy. “Not just because there is gas, but because it is better for Israel,” he said. “Our goal is to go natural gas – CNG (compressed natural gas) for cars and buses.

“We will put a lot of incentives there and soften regulations as a whole,” he added. “We want to make it easier for plants to move to natural gas, we want to have 100 by 2017. It’s our goal and our mission.”

Export market

Once the gas is produced it has to go somewhere. Currently, Israel is considering exporting to Egypt, Cyprus and Jordan – where recently Noble Energy and its Leviathan partners signed an agreement to supply some 1.6 Tcf of natural gas over a 15-year period.

Simon Blakely, of IHS, showed the Houston road show audience that there are two main export markets for Israel to consider – Turkey and Egypt.

However, Blakely told the audience, right now there is a very competitive playing field for natural gas and likened the market to a children’s game. “When we look at the global gas business today it is a game of musical chairs,” Blakely said. “There are parts of the world that have too much gas and parts that don’t (outnumbered).”

Blakely cited Russia as a major player and competition for Israel in the natural gas market, with Iran being an unknown quantity at the moment. Russia is already a big supplier for Europe, including Turkey. However, Blakely sees the country as a real commercial opportunity for Israeli gas, calling Turkey a success story. “There are 10 million homes in what was a virgin market – with no infrastructure at all,” he says. “It’s a very stable market, people have invested in heating systems in their homes.”

Additionally, with the lowered oil price curbing investment in liquefied natural gas (LNG) (and floating LNG projects) – Blakely says a gap may soon emerge that will require new LNG contracts, around 2022-23.

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