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Israel Set To Join the Rich Countries Club

By Llewellyn King | Tue, 08 February 2011 13:37 | 3

From Israel, there is good news and bad news.

The good news – and it is huge – is that Israel will soon be awash in natural gas. Gas discovered on the country's outer continental shelf will turn the country from being hydrocarbon-deprived to being a net exporter.

Indeed, Israel is set to become so rich that it is laying the groundwork for creating a sovereign wealth fund for overseas investments in order to protect the country from inflation and the shekel from getting too strong.

The bad news is that with Hezbollah poised to control Lebanon's government, Iran has de facto arrived on Israel's northern border. Even without an Iranian nuclear weapon, this is a grave deterioration in Israel's security.

Already Lebanon has asked the United Nations to guarantee that Israel does not violate the integrity of Lebanon's outer continental shelf, where Iran plans to help Lebanon drill for gas.

Geology is about to change the political geography of the world's most combustible neighborhood.

The two huge gas discoveries are in the Tamar and Leviathan fields. Taken together, the gas reserves are estimated at 26 trillion cubic feet or 10 times larger than Britain's North Sea discoveries.

Since its creation in 1948, Israel has drilled on land for oil and gas with very little success. While the Arab Gulf countries have found and produced massive quantities of oil and gas, Israel has scrounged in the international markets for its hydrocarbons, including coal.

Israel's isolation made this difficult and expensive. In recent years, it has bought gas from Egypt. But Egypt will lose its good customer.

Turkey, once Israel's only Moslem friend – until the botched seizure of a humanitarian ship bound for blockaded Gaza – will be affected too. There were plans for a pipeline that would carry gas from Azerbaijan across Turkey and undersea to Israel. That economic boost will no longer be going to Turkey, but instead will probably go to Greece and Greek Cyprus. There have been preliminary discussions between Israel and Greece about shipping gas through Greece, by an undersea pipeline or a liquefied natural gas train, as an entry point into Europe.

Cyprus is a possible export-staging destination, as the Leviathan field, 86 miles off the Israeli coast, is nearby. But Turkish Cyprus, on the north side of the island, is not on board.

The Tamar field is 50 miles off the Israeli coast, and there are two smaller fields, potentially subject to claim by a free Gaza or a Palestinian state.

The gas will change Israel itself. Its defense force will have to defend the gas installations and the miles of pipes, pumps and other infrastructure. Israel has no domestic heating market, so all the new gas bounty will go to electric generation. The government hopes to make Israel the first 100-percent electric car country and the new gas will speed that transformation.

Credit for the Eastern Mediterranean gas discoveries goes to Houston-based Noble Energy. It is the technical leader in a consortium of Israeli companies. Now the world wants in before a whiff of the new gas has come onshore. The Gazprom, Russia's gas behemoth, is keen to have a piece as an investment and to protect its European markets.

The Israeli government expects an influx of U.S. and European companies to supply piping, pumps, controllers and construction equipment and materials.

It is not just private companies that are salivating: The Jerusalem government has just passed a law to tax gas profits at 62 percent.

Israel's hostile neighbors want in too. The Eastern Mediterranean is in play in an area where play is rough.

By. Llewellyn King

Llewellyn King is executive producer and host of “White House Chronicle” on PBS. His e-mail is lking@kingpublishing.com

About the author

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  • Anonymous on February 08 2011 said:
    26 trillion cubic feet of gas. That's a lot of gas. Of course, that's an estimate. What it turns out to be in reality is quite another matter, although it should be easy for somebody to pick up a few million on the basis of that estimate, even if there isn't anything there to be produced. As a Canadian gentleman remarked a year or two ago, "we're living in the most dishonest period in human history".
  • Anonymous on February 09 2011 said:
    Is it pure coincidence that Lebanon falls to Hezbollah and Egypt becomes more influenced by the Moslem Bortherhood just as this gas is found in the East Med? Israel now has 4 fronts to defend; the Syrian/Hezbollah/Lebanese, the potential 'creeping' conflict with Egypt if the MB gains influence, the potential threat from an Iranian Iraq through Jordan, and now the gas fields to defend. Iran will ensure that the gas fields productive ownership is hotly disputed and possibly even dangerous to exploit. Egypt might claim a share. Turkey might claim a share through N. Cyprus. As if the area wasn't already volatile enough, these potential disputes will only add to the potential. comment continued...
  • Anonymous on February 09 2011 said:
    continuing comment...Offshore drilling is a high insurance risk anywhere. Easy to sabotage. As we saw in N. Sinai with overland gas transportation. Hezbollah hasmissiles, Egypt and Turkey have navies, and even Iran has a small fleet in the area. The Russians will soon be baseing at Latakia in Syria. Its not a gas field so much as a hornets nest...

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