Israel is expected to increase natural gas drilling in 2023

Previous governments led by returning Prime Minister Benjamin Netanyahu promoted the development of natural gas fields in Israel’s economic waters, to some resistance within the country. The incoming Netanyahu government is expected to renew these efforts.

Netanyahu knows that, like Israel, Cyprus, Greece and Egypt are also looking for solutions to increase energy exports to Europe, including expanding reserves and export capacities.

After the large discoveries of the Leviathan and Tamar gas reserves more than a decade ago, Netanyahu leveraged them for regional diplomatic moves, including the creation of a forum of gas-producing countries in the Eastern Mediterranean. After the government is formed, it is expected to look for ways to increase production from the current gas fields, look for new reserves and increase export capacity.

Experts believe that there are still unexplored gas reserves in the eastern Mediterranean basin. Several Israeli and international companies have recently indicated an interest in searching for natural gas off the coast of Israel following the publication by the Ministry of Energy on December 13 of a fourth tender for permits to search for natural gas in Israeli waters.

The eagerness of the gas companies to start making offers is understandable: exactly a year ago, Energy Minister Karin Elharer said that she would not begin new gas exploration in 2022, and would in fact freeze tenders for additional gas exploration off the coast of Israel. She cited green energy efforts and pressure from environmental groups that oppose more offshore gas drilling.

The Russian invasion of Ukraine and the subsequent global energy crisis also affected Israel. In May 2022, Alharar announced a policy change and an upcoming tender procedure. Then, on June 15, it signed a memorandum of understanding with the European Union and Egypt on speeding up the process of exporting gas to Europe. Israeli gas was sold from the beginning of 2022 to Jordan and powered the main power plants in the country.

The December 13 auction offers exploration permits in four marine areas. In some of these areas, previous exploration permits have already been granted and seismic surveys have been done.

The fields that exist in Israel also have a potential that has not been fully realized. The partner companies in the Tamar Reserve announced on December 8 that they would invest approximately $673 million to expand gas production from the reserve in light of growing demand from Israel and abroad. Shortly thereafter, Israeli businessman Aharon Frankel exercised an option of Emirati Mubadala Petroleum to purchase half of its shares in Tamar for 520 million dollar.

The company NewMed Energy (partner in Leviathan) presented record profits this year due to its increased exports to Egypt and Jordan. All these developments are expected to pressure the new government to expand gas drilling as well as the gas quotas reserved for export.

Another incentive for the new government to increase exploration is the growing demand in Israel. At the beginning of January, the price of electricity in Israel will increase by more than 8%, because a fifth of its electricity production is still from coal, the price of which has increased greatly. According to the government’s plans, within five years all coal plants will be replaced by natural gas plants. Israeli industry is also switching to gas, which adds to demand.

According to a November 23 report by the Knesset’s research center, Israel can currently produce about 900 billion cubic meters of gas per year. Experts estimate that the potential of the gas fields in Israel’s economic territory is at least double that, but the capacity of Israel’s export pipelines is still small. The Cypriot Energy Minister, Netsa Filides, spoke about a possible pipeline from the Karish field owned by Energian Lai.

In a conversation with Al-Monitor, Filides said that the pipeline from Kharish will go to the liquefaction plant that will be created in Cyprus and from there to Europe. She stated that as Netanyahu previously promoted the issue for Israel and the region, she believes that his new government will do the same.