Israeli Company Promotes Shale Oil and Natural Gas Production, Protests Ensue

Israel imports all its oil and coal and 70 percent of its natural gas needs, leaving the government deeply interested in developing indigenous alternatives.

Highlighting the vulnerability of its imports, on 5 February there was an explosion on Egypt's $500 million East Mediterranean Gas Company Ltd. (EMG) pipeline, that transits Egyptian natural gas to Israel and Jordan in northern Sinai in the Massaeed area, west of al Arish.

The attack on the EMG pipeline is the 12th since February 2011, when a popular uprising deposed Egyptian President Hosni Mubarak.

Egypt currently supplies Israel with more than 40 percent of its natural gas used to generate electricity and as a consequence of the assaults electricity prices have risen by more than 10 percent in Israel in the past year.

But Israel has other natural gas options, even if they are politically sensitive. On 5 February Israel's Delek Group, Ltd. announced that it has discovered what it estimates to be close to 1.3 trillion cubic feet (tcm) of natural gas in Israeli waters near the Lebanese border. Delek is working in cooperation with the U.S. company Noble Energy. Israel is attempting to press forward to the swift development of its Mediterranean offshore natural gas assets, the Tamar field, discovered in 2009 and Leviathan, discovered the following year. In June 2011 an Israeli company announced the discovery of two new natural gas fields, Sarah and Mira, about 45 miles off the city of Hadera, while Noble Energy announced that drilling in the 125 square-mile Israeli Leviathan-1 offshore Mediterranean natural gas field had "the potential to position Israel as a natural gas exporting nation." Initial prospecting estimates of the Tamar and Leviathan fields off Haifa, concluded that the two sites between them could hold as much as 688 billion cubic meters (bcm) of recoverable natural gas

Never mind the political hornet's nest that it has stirred up with Lebanon.

Now, a land-based indigenous potential oil source is stirring up environmental concerns.

According to the Israel Energy Initiatives Ltd (IEI) website, "Israel is blessed with a vast oil shale resource. When this resource is developed, it will bring Israel to energy independence. It is estimated that in the Shfela Basin alone, there are 150 billion barrels of oil, 40 billion barrels are in IEI's licensed area." Further waving the flag, IEI's chief scientist Harold Vinegar observed, "Israel has one of the largest deposits of oil shale rock in the world, enough to produce 250 billion barrels… Saudi Arabia has reserves of 260 billion barrels."

Israel Energy Initiatives Ltd (IEI), founded in 2008, is an Israeli company based in Jerusalem and a subsidiary of Newark, NJ-based Genie Energy Corp., which is a publicly traded company. IEI's affiliate, AMSO, is engaged in an oil shale project on federal land in Colorado, through a joint venture with French oil giant Total.

In July 2011, the company received a one-year extension of a three-year license to explore the oil shale resources on its 92 square-mile Shfela Basin concession in the Adulam district between Beit Shemesh and Beit Guvrin.

The project has some heavyweights behind it - in November 2010 Lord Jacob Rothschild and Rupert Murdoch bought acquired 11 percent in equal shares of Genie Energy Corp. unit Genie Oil and Gas Inc. for a total of $11 million.

Major Israeli environmental organizations, including the Jewish National Fund, the Society for the Protection of Nature in Israel and the Israel Union for Environmental Defense have united along with Greenpeace in protesting the IEI Shfela license. They have expressed concerns that the IEI drilling down to the oil shale stratum, which begins at a depth of 1,000 feet, could contaminate the Shfela aquifer, situated underneath the Shfela oil shale formation. The Israel Union for Environmental Defense has petitioned the Supreme Court of Israel to review the legality of the IEI Shfela license and the court has scheduled a hearing on the matter for April.

How does IEI propose to tap its Shfela license shale oil and natural gas reserves?

Oil shale production faces unique technological challenges as the kerogen occurs in the shale as a solid and is not free-flowing like crude petroleum. The shale must be heated or "retorted" to extract the petroleum-like distillates.

IEI accordingly proposes to extract the shale oil by sinking heating rods made of molten salt into the shale deposits, where heat from the 600 degree Fahrenheit rods spread gradually through the shale over three to five years, allowing the liberated oil and natural gas to be pumped to the surface. Vinegar states that the technology could produce oil for as low as $35 a barrel.

So, piss off your neighbors, or potentially permanently pollute your non-renewable aquifers? As for water resources, Haaretz newspaper reported last month, "Israel is experiencing its eighth consecutive dry winter, according to statistics for the first part of the rainy season."

Tough call.

By. John C.K. Daly of Oilprice.com