Natural gas begins to flow from Tamar gas field
Israel's first batch of natural gas begins flowing through underwater pipe en route to Ashdod intake center, where it is expected to arrive in 30 hours; Israel begins move to energy independence
The gas is travelling in pipes hundreds of kilometers south into the Yam Tatis gas field and from there will continue to an intake center in Ashdod, where it is expected to arrive in about 30 hours.
This marks a major turning point both for Israel's economy and society and will provide the state with energy independence at least until 2035.
Prime Minister Benjamin Netanyahu said, "This is an important day for Israel's economy. On the holiday of freedom we are making an important step towards independence in the field of energy."
He further added, "In the past decade we have pushed the gas industry forward and this will benefit Israel's economy as well as Israel's citizens."
Upon its arrival to Israel, the gas will support the generation of electricity at power stations - owned both by the Israel Electric Corporation (IEC) and private companies, as well as smaller factories - gradually allowing for prices to drop as Israel's electricity shifts from expensive, polluting and import-dependant materials, such as diesel and fuel oil, to its own natural gas.
The transition will also increase Israel's competitive edge in comparison to foreign industries and increase state revenue as royalties for the gas begin to roll in.
Under the sea
The search for natural gas at the Tamar field, which is named after the granddaughter of Joseph Langotsky, the senior geologist who first recognized its potential, began in 2010. The search was led by Israeli entrepreneurs and British Gas, which disbanded after a number of years.
In 2007, the search was renewed under the management of a new partnership - the American company Nobel Energy holding a 36% stake in the field, and the three Israeli partners - Delek Drilling (31%), Isramco (29%) and Dor Alon (4%).
After two years of expensive and exhaustive oil explorations, in 2009 the news broke that gas, and a lot of it, had been found.
Underwater drilling - which reached depths of almost 5,000 meters (roughly 3.1 miles) below sea level - revealed evidence hinting at the existence of large quantities of natural gas.
It is currently estimated that there are 270 billion cubic meters of natural gas at the Tamar field.
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Tamar's oil rig (Photo: Albatross)
Short term profits
The primary and immediate benefit of Tamar's natural gas is a drastic reduction in electricity generation costs.
In 2005, when gas from reservoirs in the Sinai Peninsula began reaching Israel, the IEC began generating more and more electricity from natural gas. Until 2011, 40% of electricity consumed in Israel was generated by natural gas costing $5.5 per unit of energy.
However, in 2011 the gas flow from Egypt was abruptly halted, after a number of explosions damaged the Sinai pipeline to Israel. Later, in wake of the Egyptian revolution, Cairo canceled its contract with the Israeli government.
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Noble Energy team in Tamar control room (Photo: Noble Energy)
The result: A 24% increase in electricity rates. Faced with a shortage of natural gas, the IEC was forced to return to diesel-based electricity, which costs about $26 per energy unit, more than four times than natural gas.
Royalties
The Tamar gas field also shepherds in royalty payments, which will fill state coffers. Estimates put the value of the Tamar gas field at about $10 billion, $125 million of which will go to the state.
The eventual cherry on top is that in addition to the royalties, partners owning the field will pay taxes on their profits from gas sales, but this is expected to take some time.
According to the law regulating taxation on natural gas profits, which was drafted in accordance with the recommendation of the Sheshinski committee, the companies involved will be exempt from sales tax until they earn double their initial investment on drilling and explorations.
The profits from gas sales are expected to reach the much anticipated 200% in 2023. Until then, the state will not exact a toll on their profits via tax but only through a 12.5% royalty payment on the gas sales themselves.
Hence, for now, Tamar is not expected to make the state richer, forcing it to wait until the much larger Leviathan gas field (450 million squared meters) is ready.
Most importantly, Tamar's gas pumping brings Israel new found energy independence, which is expected to hold until 2035. Israeli electricity will no longer be dependent on raw materials imported from other nations, and will cost much much less.
Energy and Water Minister, Silvan Shalom, said in response: "This is Israel's energy independence day. It is truly a historic event – Israel has received energetic freedom, and gas from Tamar will lead to a drastic decrease in the IEC's production costs, hence a future reduction in electricity costs for the average Israeli consumer."
Yitzhak Tshuva, the owner of Delek Group, which owns Delek Drilling, said: "Today should inspire pride. A vision has become reality. Today, once again, we leave enslavement towards freedom: From dependence on foreign energy sources to independence in locally-made natural gas.
"This is a momentous achievement for Israeli economy," Tsuva continued, saying a "new era| has begun, which "will change the face of the Israeli market" and "open new opportunities for Israel's economy, allowing it to take advantage of the natural gas in the environmental, geo-political, social and economical spheres, turning Israel into an important international player."
Charles D. Davidson, chairman and CEO of Noble Energy said: “I congratulate the people of Israel on this transformational achievement, which significantly moves them toward energy independence and away from reliance on imports. Utilizing natural gas from Tamar will provide cleaner air, save the state billions of shekels in energy costs and be an engine for economic growth."
