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Facing east: What Asia means to the Israeli energy market

Israel's growing natural gas stores create an unprecedented opportunity to penetrate the vast markets of the East
An Israeli Navy Sa'ar 5 corvette defends a natural gas extraction platform off Israel's coast, in an undated photograph. (Israel Defense Forces)
An Israeli Navy Sa'ar 5 corvette defends a natural gas extraction platform off Israel's coast, in an undated photograph. (Israel Defense Forces)

The future of Israel’s gas exports to Europe depends largely on the progress of the talks between Israel and various European countries. Much has been written about the possibility of laying a gas pipeline to Cyprus, Greece and Italy. During his recent visit to Bulgaria, Prime Minister Benjamin Netanyahu held meetings with representatives of several Balkan countries regarding the purchase of Israeli gas.

However, at this time, it is important to look eastward as well, to the vast markets in Asia. Asia is home to the world’s largest energy importers. The growing economies of India, China, Japan and Korea need to import increasing quantities of natural gas and, for strategic reasons, to diversify their sources. This presents an opportunity for Israel to penetrate these markets.

The Ministry of Foreign Affairs has long recognized both the opportunities and the challenges created by Israel’s tremendous gas discoveries, and a special energy envoy, Ron Adam, was appointed several years ago. Mr. Adam works in coordination with the Ministry of Energy to formulate an Israeli energy diplomacy and to promote gas exports, taking into account strategic and diplomatic aspects, by identifying potential markets and locating global companies interested in coming to Israel.

On 25 November, Israeli Minister of Energy Yuval Steinitz announced a second round of tenders for exploration blocks in Israel’s economic zone for gas and oil exploration and production. So far, the reservoirs discovered hold about 900 billion cubic meters of natural gas, with an estimated potential capacity of another 2,000.

Israel recognizes Asia’s growing importance on the world stage, and the strengthening of ties between Israel and Asia should be expressed not only in increasing exports, establishing free trade zones with Asian countries, operating direct flights, attracting investments and increasing tourism but also in the field of energy.

Israel’s ambassadors in Asia were asked to contact the relevant officials in the countries in which they are serving, for the purpose of locating international companies capable of deepwater drilling and production; identifying potential markets and customers for Israeli gas; and locating companies that specialize in natural gas liquefaction (LNG – Liquefied Natural Gas).

Mega-corporations in Asia are likely to be interested in Israeli gas and should be encouraged to come to Israel to explore and produce it. In April 2018, Israel granted an exploration and production license to a consortium of Indian companies to operate in one of the blocks that opened in the first round of tenders. Gas companies in other countries are already expressing interest in the blocks that opened in the second round.

It is clear that Israel will not be able to export gas to the Asian continent via a pipeline because of the distance. Therefore, Israel will have to authorize Asian companies to come to Israel to develop the reservoirs, set up an offshore LNG facility, and ship the gas to Asia.

The world’s largest LNG importers – Japan, Korea, China and India – are a huge potential market for Israeli gas. Large companies from Korea, Singapore and Australia have developed expertise in natural gas liquefaction. For Israel, a number of liquefaction options are available in existing facilities in Egypt, or perhaps in Cyprus, as well as in a future offshore facility in Israel. Experts on the subject have no doubt that, by 2025, most of the world’s natural gas trade will be in liquid gas.

The enormous energy reserves that have been discovered on our shores, the advanced technologies that enable deepwater gas pumping, and the decisions made in recent years by Prime Minister Netanyahu and the finance and energy ministers to open the sea to gas exploration provide a tremendous opportunity for the Israeli economy. In addition to ongoing commercial activity with countries in Europe and the eastern Mediterranean, it is important that we take advantage of the current momentum to boost the ties between Israel and Asia’s major economic powers and to encourage investment in the growing Israeli gas market.

About the Author
Gilad Cohen is Deputy Director General for Asia and the Pacific at the Ministry of Foreign Affairs.
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