13 September 12 22:37–”The exploration and drilling industry in Israel is perhaps at kilometer 10 on a 100 kilometer journey, but it will all remain theoretical unless there are exports,” says David Aron, founder and CEO of British consultancy Petroleum Development Consultants Ltd. (PDC), which has been active in Israel since 2004, mainly in advising the Natural Gas Authority at the Ministry of Energy and Water Resources. This year, Aron also advised Israel Electric Corporation (IEC) on the agreement between it and the Tamar partnerships. He was recently offered the post of Petroleum Commissioner at the Ministry of Energy and Water Resources, but after thinking it over for a long time he eventually decided to turn down the offer, preferring to continue with his private business.
It was almost natural for PDC to be selected to advise the government committee on the gas industry presided over by Ministry of Energy and Water Resources director-general Shaul Tzemach. The committee recommended to the government of Israel that it should keep gas reserves sufficient to supply the economy’s needs for 25 years, while allowing each reserve to export at least 50% of its gas. The Tzemach committee’s recommendations now await government approval, but Minister of Minister of Environmental Protection Gilad Erdan has already declared his opposition to the recommendation that Israel should allow exports of gas. Aron believes in the opposite approach, and recommended allowing unrestricted gas exports, apart from an obligation to connect the reserves to Israeli territory.

“All in all, the committee reached reasonable conclusions,” says Aron. “It’s just a pity that it had to twist and turn along the way. It was explained to me that it was no easy feat to bring this committee together to formulate an agreed policy, and I can understand the complexity of it. In general, it can be said that, in most cases in the past, governments have adopted mistaken policies for developing their oil and gas markets.”

The most prominent example that Aron cites is Bangladesh. “Bangladesh decided to retain gas reserves enough for local consumption for 50 years. It simply wasn’t realistic, and caused a complete halt in exploration activity for new reserves in the country. International experience clearly indicates that when a country forbids exports of gas, exploration ceases.”

On the other hands, opponents of exports argue that the committee should not have based its calculations on future gas discoveries as well, discoveries that may not in fact be made.

“My argument is that Israel’s energy security necessitates allowing gas exports. It’s true that it’s counter intuitive for many people who do not understand how the world of energy works. There is in Israel a mood that perhaps originates in the Jewish shtetl in the Diaspora, that you have to watch every bag of food, and that if we use the gas we will be left in the end without food and with an empty bag. But in the reality of the world of exploration, the way to discover more reserves is to give the developers an incentive to look for them. I formed the impression, among other things on the basis of professional material I have seen, that the quantity of gas that is out there in the sea is far far greater than has already been drilled. I believe that Israel has gas reserves of the order of size of those of Algeria.”

Aron thinks that the committee went as far as it could to accommodate the opponents of exports, since keeping enough gas for more than 25 years would have made drilling not worthwhile. In addition, he warns that the government will struggle to implement a consistent policy without setting up a permanent mechanism “that will provide timely solutions to problems that arise, especially since we are talking about matters that have to do with several government ministries.”…Read More>>

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