The global energy crisis and Israel’s opportunity

As we know, European gas markets have experienced a perfect storm where price, security of supply and environmental benefits all went haywire: The price of gas skyrocketed by hundreds of percent, security of supply fell as Asia grabbed every molecule of methane it could get its hand on, and Europe was left with a dearth of gas supplies and near-empty storage, meaning coal consumption in 2021 reached an all-time global peak. Consequently, local pollution and global greenhouse gas emissions increased.

Since this crisis occurred, Europe and Israel have taken very different views on how to proceed to ensure its energy basket and security of supply.

Europe came to its senses when the European Commission issued its draft list of environmentally friendly energy resources, known as the taxonomy, including both natural gas and nuclear energy as sustainable investment, under certain circumstances

However, it seems that just as Israel is getting the players in the market right, with the presence of major companies, such as Chevron, Mubadala and Energean, who is due to bring its Karish field on line in several months, it’s getting its policies wrong. Thus, Energy Minister Karin Elharrar took the opposite decision from what we are seeing overseas, when she declared that she and her ministry would not deal with gas over the next year at least, in order to send a clear message and focus resources on renewable energies, among other things. Over the last few days, she made weak attempts to retract some of her words by explaining that drilling, exports and development would continue in 2022, as per licenses already granted.

Israel is already such a difficult environment for gas companies to operate in that it is unlikely a new licensing round would attract great global interest, but her decision not to ease gas exports is certainly a death warrant to any company even contemplating investing in a drilling campaign here, if and when a new licensing round is undertaken.

In my view, the draft conclusions of the inter-ministerial committee that examined the Israeli gas market, which in June 2021 said that exports of gas need to be promoted by the government, did not in fact go nearly far enough. Indeed, it lacked clear active actions to be carried out. Such actions should include creating a geopolitical climate supportive of the construction of natural gas infrastructure, signing government-to-government agreements, adopting appropriate gas export taxation rules, establishing regulation that will enable construction of a floating liquefied natural gas (FLNG) facility and continued participation in the promotion of the EastMed project.

Elharrar pleads with us to grant her this year to deal with renewable energies and in a radio interview said that the ministry cannot efficiently deal with both renewable energies and gas, and that a licensing round would draw vital resources away from renewable energies. Surely, the cost of hiring a few more officials in the ministry is minute compared to the cost of getting the country’s energy policies wrong.

For Israel, contrary to Europe and North America, where nuclear energy is being revived, as the country is fearful of over-reliance on its renewable energies, the only source of energy that can provide reliability, sustainability, affordability and environmentally friendly energy is gas. Israel would probably welcome nuclear energy, but nobody will sell us the technology because we will not sign – for good reasons – the non-proliferation treaty, so our only alternative for baseload power, which refers to the minimum amount of electric power needed to be supplied to the electrical grid at any given time, is gas.

In addition, electricity prices in Israel are due to increase this year by about 5%. This could have been 10 times worse had it not been for the availability of local gas, as coal prices around the world have increased by 100% and gas prices have increased by 300-500%, and any new renewable sources of energy will be more expensive in the short-term than what we have managed to develop to date.