US oil giant Chevron buys into Israeli natural gas
Israel started finding natural gas in offshore gas deposits more than a decade ago. They started in the 1920s under the British Mandate over Palestine with no success. Some estimate that what lies out under the shore-bed off the Israeli coast in the Mediterranean Sea could equal as much as one-fifth as all the natural gas owned by the United States.
Israel’s offshore gas deposits are known as Leviathan and
Tamar deposits and they are considered one of the world’s biggest offshore gas
discoveries in the last 10 years. Owners in the company exploring Leviathan
were Texas-based Noble Energy, Israeli owned Ratio Petroleum, and Israeli-owned
Delek Drilling.
Noble Energy held 39.66% of Leviathan, and it is also the
company that operates the gas drilling platform in the reservoir. Noble Energy
has two Israeli partners in the ownership of the Leviathan rights: Delek
Drilling (45.24%) and Ratio Petroleum (15%).
Noble Energy had a controlling share in the Israeli gas
fields but its assets officially transferred to the oil company Chevron this
past Friday.
While the gas deposits are an energy game changer for Israel
which had been burning coal and oil to fire its power plants, environmentalists
believe that public interests and health are at stake in the business and
operations of the natural gas facility. Analysts at research institutes might
argue the deal is a positive game changer for Israel in politics.
Let’s start with the environmentalists: They are even more
worried now thanks to the disastrous environmental record and cleanup policies
of Chevron. Last summer Chevron dumped 800,000 gallons of oil and water into a
California canyon. The oil and gas company has a spotty history with oil spills
and environmental responsibility. Over in Kazakstan it is rumoured that Chevron
violates workers’ rights and more:
“It is not by chance that Kazakhstan is considered to be the
jewel in the crown of Chevron, as the country’s oil helps the company
flourish,” says Sergey Solyanik, consultant to Crude Accountability.
He continues: “For Chevron and other foreign investors,
Kazakhstan has long been turned into a kind of field camp, where people come to
pump out natural wealth and make money, leaving behind large-scale
environmental pollution, poverty and lawlessness.”
Israel’s gas went online earlier this year amid fears and
protests of people worried for their health as the gas lines purged polluting
water into the sea. Israel now supplies natural gas domestically as well as to
Egypt and Jordan.
The addition of Noble will boost Chevron’s natural gas
holdings. It also adds nearly 1 billion cubic feet of natural gas reserves
close to growing markets.
The deal values Noble Energy at around $4.2 billion,
excluding $8 billion in debt. This is the first big energy deal since the
coronavirus crushed global fuel demand.
Natural gas has made Canada, Qatar and now Israel
energy-rich, in theory. But Israelis are left scratching their heads, wondering
who is benefiting from their natural resource.
While natural gas burns cleaner than oil or coal, it is not
a renewable energy. Fossil fuels contribute to global warming and while Israel
has been very vocal in the last 15 years about its advances in clean
technology, including solar energy, it supplies solar for only a meagre 3% of
its total energy use. This small number still makes it a world leader. Germany
in comparison produces about 8.2% of its energy from solar, mainly via
photovoltaic or PV panels.
Several people had wanted to stop the Chevron-Noble deal: US billionaire Paul Singer who invested in a
stake in Noble under his firm Elliot in NY told Bloomberg that that Noble
agreed to the deal [with Chevron] at the wrong time for the wrong reasons and
that the company is better positioned to benefit from a recovery in oil prices
if it remains independent. When the recovery happens, Noble should consider
selling its Mediterranean assets, Singer advised.
Israeli solar energy pioneer Yossi Abramowitz cautioned the
public to not accept the sale in the OpEd: Dear Nobel Energy Shareholders,
Chevron is About to Take You for a Ride.
He and his co-author Maya Jacobs, the CEO of Zalul, an NGO
to protect Israel’s sea, wrote:
“Reject the Chevron acquisition offer; they are
short-changing you, and only giving you shares in a sinking business. Are you
fully aware of Chevron’s environmental record and their $9.5b judgement in
Ecuador for the Chernobyl of the Amazon?
“Traditional oil companies are overburdened with what will
be stranded assets, as the world continues to battle Corona, adopt more Green
Recovery deals, and impose carbon taxes. While Chevron is valued today at a
whopping $155 billion – down $10 billion just this week — their valuation is
subject to wild fluctuations, like when in March, due to Corona, it lost nearly
half its value.”
In the Jerusalem Post (the competing newspaper to Times of
Israel) he said: “Chevron has one of the worst environmental track records on
the planet when it comes to oil safety, oil cleanup, respecting local lives and
paying judgments against it.
Abramowitz also expressed concern that “it looks like the
energy minister gave an assurance to Noble and Chevron [that it could] keep a
significant monopoly on Israel’s energy market,” saying this was “wrong
economically and wrong environmentally.”
Israelis currently pay 3 times the price for energy than
others in developed nations. The promise was that when Israel invested in
natural gas the citizens would earn the dividends by lower prices on their
energy bills. This promise never materialised.
If you look to the INSS, the Chevron deal is good for
political manoeuvring. The think tank’s analyst Oded Eran based at Tel Aviv
University writes in a policy piece:
“Without a doubt, the move brings the American presence in
the energy sector of the Eastern Mediterranean to a new level, which until
recently was limited to the relatively minor involvement of energy giant Exxon
in Cyprus and Noble Energy, which is a small American company in Israel.
Beginnings for the Eastern Mediterranean natural gas
pipeline?
“Israel wants to be part of a natural gas pipeline that
travels undersea to Cyprus and then Europe,” Eran writes, “it is not without a
huge cost and risks shaking the boat with Turkey:
“Although the Israeli government is promoting the Eastern
Mediterranean natural gas pipeline project, considerable doubt still exists
regarding its technical, economic, and political feasibility.
“At a length of 1,900 kilometers, 1,300 of which are at sea,
the pipeline, if and when it is completed, will transport approximately 10
billion cubic meters of natural gas from Israel and Cyprus to Europe each year.
“The cost of the pipeline has been estimated at 6 billion
euros. In early January 2020, Greece, Cyprus, and Israel signed the framework
agreement for the construction of the pipeline, and in July of this year the
Israeli cabinet ratified the agreement.
“Turkey has already expressed its firm opposition to the
project, and its dispatch of a drilling ship to Cypriot waters and its
agreement with the Libyan Government of National Accord regarding the
demarcation of economic waters (November 2019) should be seen as part of
Ankara’s response to the alliance between Israel, Greece, and Cyprus in the
natural gas sector,” Eran adds.
Comments
Post a Comment