Pioneering role of Noble Energy Inc. In Israel's energy miracle
By Charles Constantinou
Summary
April 2014
Until recently Israel had no indigenous resources of oil, gas, coal, or hydro-power and had to depend on imports that by the 2012, cost $11.54 Billion or 4.5% of GDP and an astonishing $1,425 per capita with a population of about 8 million.
In the past five years, however, the land of miracles discovered at least 33 Trillion
Cubic Feet of natural gas, with good prospects of reaching about 122 TCF in the future. At the same time Noble Energy Inc. (NBL) which has been the pioneer company that made all the discoveries in Israel and #1 in Cyprus, announced that it will start deep drilling on the offshore border with Cyprus with expectations of discovering 3 billion barrels of oil, which could provide Israel with recoverable oil for 10 years of its 2012 consumption.
Israel has already started gas production in one field and LNG exports are being planned.
Before the final decisions are made the author recommends that Noble Energy Inc. and/or the Government of Israel conduct a feasibility study on Gas-To-Liquids (GTL) in order to determine whether diesel can be produced profitably as already done in countries such as South Africa, Qatar, Malaysia and Nigeria in order to meet at least part of the inevitable oil shortage and need for expensive oil imports.
Lack Of Indigenous Resources Has Required Extensive Imports, Especially Oil
The historical land of miracles seems ready for yet another one. This time it has nothing to do with the after-life, but with oil and natural gas, which are essential for the existence and economic growth and prosperity of the countries of Eastern
Mediterranean including Israel.
As shown in Table 1, Israel depends on imported oil for 54.84% for its energy needs.
Oil is supplemental by 35.48% of imported coal and 9.27% of imported gas.
Until recently Israel had no indigenous energy resources- no oil, gas, coal or hydropower. Oil consumption remained static at about 90 million barrels per year but very high prices since the low of $23.74 per barrel in 2002 to $109.08 per barrel in 2012, the foreign exchange bill for this essential commodity climbed from $2.25 billion a year to $11.54 billion during the same period.
With a population of 8.1 million and GDP of $257.6 billion in 2012, oil imports cost
4.5% of GDP and an amazing $1,425 per capita. Any future economic growth would inevitably be affected quite adversely because of the expected increase in oil consumption.

Discovery of Massive Natural Gas And Possibility of Discovering Oil Change the
Energy Picture.
However, the miracle of remarkable natural gas discoveries has already reached about 33 Trillion Cubic Feet in the statement on December 16 th, 2012 by the CEO of
Noble Energy Inc. announced that deep offshore drilling is expected to start in late
2014 or beginning 2015 with considerable hope that a discovery of 3 billion barrels of oil could be achieved on the Israel/Cyprus offshore border. If such a discovery is made it may be expected that up to 2 billion barrels could be recoverable with Israel thus sharing on a 50/50 basis or 1 billion barrels. This would be equivalent to 11 years of current Israeli oil consumption with an estimated value of about $100 billion.
Future gross revenues from the discovery of 32 trillion cubic feet of natural gas could be at least $320 billion and would enable Israel to become a major exporter of
LNG and, in the author’s opinion diesel, which could be economically produced at higher profit margins than LNG.
Recent Actions In The Development of Discovered Natural Gas (See Map 1)
The discovery of about 33 TCF of gas in Israel has led to quick action for their development. As reported by the Wall Street Journal in its article “Land Deal with
Jordan Turns Israel into Gas Exporter” the two countries are reaching an agreement between Israel’s Delek Group Ltd. (DLEKG:IT) and Noble Energy Inc. and the Arab
Potash Co., a fertilizer company with a plant in Jordan to extend a gas pipeline from an Israeli chemical plant to APC, located across the Dead Sea In Jordan.
Similarly on February 24, 2014, it was reported that Noble Energy Inc. has signed a pact with Australia-based Woodside Petroleum Ltd (WP.LAX) to sell offshore Israel gas licenses for over $1billion in upfront payments and future shared revenue.
Under the terms of the non-binding pact, four companies, including Noble, are participating as sellers of their 25% interest in the licenses to Woodside. Noble says it intends to continue as an upstream operator with 30% working interest, and following the completion of the deal Woodside will operate any liquefied natural gas
(LNG) development of the field. In February 2014, Noble said total compensation is anticipated to include $525 million in cash payments plus $502 million in shared futures revenue. An additional payment of $19 million, net to Noble, will be made should Leviathan exceed the set target.
Already, natural gas has been discovered in seven Israeli offshore fields (Leviathan,
Tanin Tamar, Kovish, Tamar SW, Dolphin and Dalit) by Noble Energy Inc. of which only Tamar has initiated production. (Noble Energy Inc., 10k form 2013) (See Map1)

Conclusions and the Future
The possible discovery of about 2 billion barrels of recoverable oil reserves on the offshore border of Cyprus and Israel announced by the CEO of Noble Energy In on
Dec 16, 2012 would provide a supply of half of this oil or 1 billion barrels to Israel which could meet demand for bout 10 years at the 2012 level (See Table 3)
The discovery of at least 33 TCF of gas inevitably would lead to exports even after meeting increasing national demand. In this respect, it should be recalled that the US
Geological Survey in March 2010 published an “Assessment of Undiscovered Oil and
Gas Reserves in the Levant Basin Province, Eastern Mediterranean” with a mean of
122 TCF of recoverable gas. Consequently, much more gas and even oil may be expected to be recovered in offshore Israel with additional drilling as further reserves may be required by the world markets.
It must be admitted that the word “miracle” is already applicable as described previously.
Before concluding this paper, however, the author believes strongly that Israel should not only think of LNG exports and some sales to the Palestinian Authority and Jordan. The country’s number one priority is to seek ways to reduce expensive oil imports since possible local discoveries are most unlikely to meet national demand. Therefore, available technologies of Gas To Liquids (GTL) should be studied urgently either by the Government or Noble Energy Inc. in order to establish priorities in the development of the vast natural gas discoveries. GTL plants are already commercial in Malaysia, Qatar, South Africa and Nigeria and Sasol of South
Africa is planning a GTL plant in Louisiana, USA for a capacity of 96,000 barrels of diesel per day and another one in Turkmenistan, which has 618.1 TCF of natural gas proved reserves which are hardly used. This is an enormous amount and
Turkmenistan it is third in the world as compared to Iran’s 1,187.3 TCF, the Russian
Federation’s 1,162.5 TCF and USA’s 300.0 TCF.
GTL diesel is sulfur free and selling at premium in the USA. High official of Shell has declared that GTL diesel is economical as long as oil prices are in the $40-70/barrel range and I have not seen any forecast recently projecting prices less than
$70/barrel. Therefore, a feasibility study for a GTL plant in Israel is a must-not a choice.
It should also be noted that, according to Noble Energy Inc.’s 2013 10-k form (pg.18) by December 31, 2013 gas production, mainly from Tamar had started and reached
209 million cubic feet per day and selling at $5.02 per 1,000 cubic feet which implies that GTL diesel would he very profitable.

2002
2003
2004
2005
2006
2007
2008
2009
2010
Year
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Table 1. Israel: Energy Consumption By Source
2012-Barrels Of Oil Equivalent (BoE)
Year-Million BoE Per Day BoE %
Oil 99.69 273,123 54.84
Nat Gas
Coal
Hydropower
*Renewables
Total
16.86
64.50
---
0.73
181.78
46,192
176,712
---
2,000
9.27
35.48
---
0.40
498,027 100.00
Source: BP Statistical Review of World Energy, June 2013
*Wind, geothermal, solar, biomass and waste.
Table 2. Israel: Natural Gas Consumption
Billion Cubic Metres Billion Cubic Feet
*
*
1.2
1.7
2.3
2.8
4.1
4.5
*
*
42.36
60.01
81.19
98.84
144.73
158.85
5.3
5.0
187.09
176.50
2.6** 91.78
Source: BP Review of World Energy, June 2013
*Less than 0.05 billion cubic metres
**Interruption of pipeline imports because of political crisis in Egypt
Year
Table 3. Israel: Oil Consumption
Thousand
Barrels/Day
Million
Barrels/Year
Import Costs $
Billion
260
267
251
94.90
97.46
91.87
2.25
2.61
3.09
257
251
264
259
244
236
93.81
91.62
96.36
94.79
89.06
86.14
4.63
5.63
6.57
8.94
5.47
6.72
Price*
$USD/Barrel
23.74
26.78
33.64
49.35
61.50
68.19
94.34
61.39
78.06

2011
2012
249 90.89 9.65
289 105.77 11.54
Source: BP Review of World Energy, June 2013
*Dubai Crude Oil Price per barrel
106.18
109.08

Map. 1
Year
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Table 4. Israel: Coal Consumption
Million Tonnes of Oil Equivalent
7.6
7.9
8.0
7.9
7.8
8.0
7.9
7.7
7.7
7.9
8.8
Source: BP Review of World Energy, June 2013
Million BoE
55.71
57.91
58.64
57.91
57.17
58.64
57.91
56.44
56.44
57.91
64.50
Source: Ministry of Energy and Water Source Israel

Map. 2
Source: Ministry of Energy and Water Source Israel