"The Leviathan field extends into the waters of Cyprus, and Noble has agreed to complete an exploratory drilling program there by 2013. Any attempts by Cyprus to develop its end of the field, or to reach an agreement with Israel for a pipeline or liquefied natural gas terminal, is likely to anger Turkey. Turkey already has condemned a recent maritime border agreement between Israel because it ignored the unrecognized Turkish Cypriot section of northern Cyprus, NPR reported. ... The implications for both the region and the oil industry are as huge as the Leviathan field itself, and the full economic and political impact probably won't be known for years. "This is the beginning of the story," Wurmser said" - Houston Chronicle Jan 2011Natural gas to flow forth off Israel | By LOREN STEFFY Copyright 2011 Houston Chronicle
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Natural gas to flow forth off Israel
By LOREN STEFFY Copyright 2011 Houston Chronicle
Jan. 4, 2011, 11:22PMA Houston energy company may have altered the economic landscape in one of the most troubled regions of the globe.
A natural gas discovery off the coast of Israel by Noble Energy may reshape that country's economy and open the eastern Mediterranean to investment by U.S. oil companies.
Last week, Noble Energy reported well results that confirmed estimates of 16 trillion cubic feet of gas in the Leviathan field.
The discovery means that Israel, a country that imports most of its natural gas from Egypt, is about to become a major producer in the region, said Delphi Global Analysis Group founder David Wurmser, who provided Noble with strategic analysis on the project.
"This field is far beyond anything that Israel's economy can absorb over any reasonable period of time," he said. "This is essentially going to lead to Israel as an exporter of gas."
Earlier last year, Noble confirmed another big find, the Tamar field, which is believed to hold about 8 trillion cubic feet of gas. That field and another recent discovery are enough to meet Israel's domestic energy needs, said Michael Economides, an energy expert and professor at the University of Houston.
"It's really a game changer in many ways," he said.
Israel lacks the capital and the technical expertise to develop the fields, which means it's likely to turn to Western oil companies. At the same time, other companies may snap up offshore leases looking to cash in on Noble's coattails.
"There's an awful lot of fields out there that have neither operators nor sufficient investors," Wurmser said. "I think you're going to see a lot of prospecting."
Caution likely
Economides, though, said the influx of oil companies is likely to be limited to independents, and even they may move cautiously because of the political implications of the discovery. Major oil companies, he said, aren't likely to sign a drilling concession with the Israeli government.
"They don't want to upset Arab countries," he said. "I'm not sure you're going to see people jumping in right now."
The allure of huge reserves, though, may prove attractive to companies frustrated by drilling delays in the Gulf of Mexico in the wake of the BP oil disaster.
The changes from the Leviathan discovery have repercussions throughout the region. Egypt may bristle as Israel replaces its imports with domestic production, and Israeli exports could result in lower prices for Egyptian gas in other markets. Already, neighboring Lebanon already accused Israel of drilling in its waters, which Israel denied, and the discovery could further strain relations between Israel and Turkey.
Cyprus' role
The Leviathan field extends into the waters of Cyprus, and Noble has agreed to complete an exploratory drilling program there by 2013.
Any attempts by Cyprus to develop its end of the field, or to reach an agreement with Israel for a pipeline or liquefied natural gas terminal, is likely to anger Turkey. Turkey already has condemned a recent maritime border agreement between Israel because it ignored the unrecognized Turkish Cypriot section of northern Cyprus, NPR reported.
In 1974, Cyprus was divided into the Greek Cypriot south, which is a member of the European Union, and the Turkish Cypriot north, which is recognized only by Turkey.
Regardless of the broader geopolitical implications, the discovery means natural gas production will become a much larger industry than any that Israel has ever had, which will "drive a fundamental change within Israel," Wurmser said.
Huge implications
The implications for both the region and the oil industry are as huge as the Leviathan field itself, and the full economic and political impact probably won't be known for years.
"This is the beginning of the story," Wurmser said.
Loren Steffy is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@chron.com. His blog is at http://blogs.chron.com/lorensteffy
