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Monday, January 13, 2014

Israel To Become Major Exporter of Natural Gas

As someone who grew up on heavy gassy Jewish food, it is no surprise that Israel is developing into a natural gas exporter. The gas finds have been developed by Noble Energy which has been operating in the Mediterranean Sea, offshore Israel, since 1998. They have a 47 percent interest in the Mari-B field, the first offshore natural gas production facility in Israel. Production from Mari-B began in 2004 and sales volumes increased as Israel's power demand and pipeline infrastructure have expanded tremendously. A string of successful exploration wells offshore Israel and Cyprus has resulted in the discovery of approximately 35 Tcf of new gas resources for this region.(Tcf=one trillion cubic feet of natural gas which is a lot of kishke)  Sales from Tamar began in March 2013,  just over four years from discovery. 

As reported in the Motley Fool:
Not all of us can be born into riches, most of us have to go out and create our own wealth. Turns out we are in luck, as one company's namesake may just be able to lift investors into royalty as Noble Energy's (NYSE: NBL ) strategic investments around the world could propel this stock higher.

Just off the coast of Israel and south of Cyprus, Noble Energy has made several of the biggest finds in decades. Noble Energy discovered the Tamar gas field in 2009, which houses around 10 trillion cubic feet of natural gas. Other major finds include the Leviathan field, which houses around 18 trillion gross cubic feet of gas (7.5 trillion net) and the 5 trillion gross cubic feet of gas found near Cyprus.

The treasure hunt gets even better, with several other major finds bringing the total amount of natural gas discovered in the region to 35 trillion cubic feet. This represents a huge opportunity for Noble Energy, and Israel recently gave the green light for 40% of its gas output to be exported. Being able to export natural gas will allow Noble Energy to access several markets and further increase output capacity.
In Cyprus, Total SA (NYSE: TOT ) signed a tentative deal to discuss building an LNG export terminal on the island. Total's commitment is dependent on its exploration efforts in the region, which begin in February. Depending on whether or not Total is able to find recoverable resources in the two blocks off of Cyprus' coast decides if the LNG facility will be created, but if Total is able to replicate Noble Energy's success, then both will be able to take advantage.

Noble is hoping Total goes through with its plans, so it can expand into other markets without having to build its own LNG export facility. Investors will have to wait and see if Total is successful.

In the Tamar field, Noble Energy is pumping out roughly 750 MMcf/d  (millions of cubic feet of gas per day) with the capacity to increase that by an additional 250 MMcf/d. Looking out to 2016, Noble Energy hopes to increase that to 1.5 Bcf/d as more long term contracts justify the expansion. As Noble Energy ramps up production in the area, expect tidal waves of cash to wash over investors.

The Leviathan field holds around 7.5 trillion net cubic feet of natural gas, and will begin production around 2017. While the primary purpose of the gas field is to service Israel's domestic demand, Israel's neighbors want to get in on the action as well. Noble Energy could service Turkey, Jordan, Palestine, Egypt and Cyprus, which could provide demand north of 2 Bcf/d through LNG export facilities and domestic electricity needs.
Most of the world is aware of Israel's tensions with Palestine, but that didn't stop a historic $1.2 billion deal from being signed. Palestine Power Generation Co plans on purchasing 168 billion cubic feet of natural gas from Noble Energy and its partners (who also have a stake in the Leviathan field) over the course of 20 years. Hopefully this deal will help bring some peace to region while promoting economic cooperation.

Clearly the major natural gas finds are more than just another source of power, it has the ability to reach across borders and open up dialogue, all while making you money. Palestine is going to receive the gas via pipeline, but if Total builds an LNG export facility then Israel will be able to create new economic acquaintances/friendships worldwide.
As Israel develops its ability to mine and export fuel, it could also mean a shift in the politics of the Middle East. It will be very interesting to see how/if Europe will change it's anti-Israel stance as Israel becomes a more important exporter of energy.

More about Noble energy's drilling off the coast of Israel, Below:

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