“A country rich in natural gas should have gotten rid of the coal era a long time ago,” says the CEO of Ratio Partnership Yigal Landau, which owns 15% of the rights in the Leviathan reservoir (together with New-Med Energy – 45% and Chevron – 40%). With the discovery of the Tamar and Leviathan gas reservoirs at the beginning of the previous decade, large gas and oil companies from around the world wanted to enter the country, but regulatory uncertainty led them not to invest here. Landau’s words come against the background of the desire of the Leviathan reservoir partnership to expand the annual output from the reservoir from 12 to 21 BCM per year (the annual consumption in Israel is about 13 BCM) and the good results presented by the company in 2022.
Razio’s good year was not particularly surprising. Since the war in Ukraine began at the end of February 2022, the prices of fuels and natural gas in the world have climbed, in the West’s search for fuels that do not originate in Russia. Even a drought in some regions of China, which led to a decrease in the activity of hydroelectric power plants, did not reduce the demand for natural gas.
These led the Ratio company to record revenues of 380 million dollars during 2022, 30% more than the company’s revenues in 2021. This while gas production from the reservoir increased in 2022 by only 7%. Increasing the rate of exports also contributed to revenues. While in 2021, 58% of the gas produced in the reservoir went for export, this year the rate increased to 67%.
According to Landau, this is a “deal that shows interest in Israeli gas. Hopefully more companies will enter the Israeli market, therefore regulatory certainty is important”, it should be noted that while there is agreement in the market that the entry of foreign companies will benefit the Israeli market, there is no guarantee that there are additional gas reserves off the coast of Israel. Therefore, some fear that increasing the export quotas at such an early stage could lead to Israel’s natural gas reserves being rapidly depleted.
“According to experts, there is still a lot of gas in Israeli waters that has not yet been discovered, even double what has been discovered so far and could reach 2,000 BCM. I estimate that in light of this, the fourth tender of the Ministry of Energy will be sought after by Israeli and international energy companies.”
Don’t you think there is a difficulty in foreign countries having control over the natural gas reserves in Israel?
“First of all, the entire natural gas field is highly monitored and subject to strict regulation. Second, foreign companies own some assets in other strategic fields in Israel and there is no problem with that, the same is true in the field of natural gas in Tamar, Leviathan and Karish. In Leviathan, the operator of the rig is Chevron, an energy company from the USA which is one of the leaders in the world with tremendous knowledge and experience in the field and this is excellent news for the citizens of Israel.”
Landau also adds the impact of additional international companies entering the Israeli market following the fourth round of licenses for the exploration of gas reserves off the coast of Israel which is currently being carried out by the Ministry of Energy. “Razio would also like to participate in the current round of licensing. We see estimates that additional natural gas can be found in Israel.”
In the last quarter of the year, in which production from the Leviathan reservoir jumped by 16% (2.9 BCM) compared to the last quarter of 2021, Ratio’s revenues jumped by 41% and stood at $95 million (before royalties).
The partners in the Leviathan reservoir have announced several times their intention to increase the annual output from the reservoir, among other things by building a third pipeline from the rig to the shore that will increase the output by 15%. After that, the partners want to increase the production capacities even more from 12 to 21 BCM. “Today, part of the natural gas that is exported to Egypt undergoes a liquefaction process and is exported to Europe,” he says. Because of this, two alternatives are being considered that could lead to the export of natural gas directly from Levitan to Europe: the construction of the Eastmed pipeline, which will connect the rigs to Cyprus and from there to Greece, or the construction of a floating liquefaction facility, instead of using the facilities in Egypt. The advantage of the liquefaction facility is the flexibility that will allow gas to be transported all over the world, on the other hand, the liquefaction procedure leads to the loss of some of the natural gas produced.
You don’t think that increasing exports from Leviathan will harm Israel’s ability to supply natural gas. Is this a violation of Israel’s energy security, as many have warned, including the chairman of the system management company Sami Turgeman?
“The Leviathan reservoir is a huge reservoir. After over 3 years of production at Leviathan, we see that the reservoir continues to be significant and stable with approximately 619 BCM and joins the Tamar and Karish-Tanin reservoirs so that Israel’s gas reserves contain approximately 1,000 BCM of natural gas. Israel’s gas consumption Today it is about 12 BCM per year and is expected to increase gradually. Israel’s needs are guaranteed decades ahead, and this is even before new gas reserves were discovered and before we saw the massive entry of renewables that will answer some of the demands.”
Doesn’t the fact that the export prices are higher lead you to see the picture in a slightly different way from the main need of the citizens of Israel? With all due respect to the state’s revenues, the energy market makes up a few percent of Israel’s GDP – and the importance is in the ability to self-supply and energy security
“It should be remembered that Israel is the leading partner in gas revenues with over 60% of all receipts. These are amounts that will become more and more significant and we have seen the numbers in the last year. If more reserves are found then there is a possibility of additional huge sums of money that will enter the state coffers while strengthening its position The International
“Israel’s ability to self-supply is guaranteed and I remind you that the entry of additional companies, some of which are expected to compete as part of the fourth tender and invest a lot of capital in exploration, will be because they will want to profit from the move and export some of the gas if they find it.”
Before the end, Landau claims that as they increase the use of renewable energies in Israel, the need for natural gas in Israel will decrease.
“The first thing Israel needs to do is get rid of the coal that is used to produce 23% of Israel’s electricity – even though it is an expensive and more polluting fuel than natural gas. A country rich in natural gas should have gotten rid of the coal era a long time ago.”