Currently, about 60 percent of the electricity produced in Israel comes from the natural gas produced by the Tamar reservoir in the waters off the Mediterranean coast. Production costs for electricity are at a fraction of what they once were. However, all the gas consumed by the country is coming through that single pipeline to Tamar. It is a major security risk.
An additional pipeline from Tamar must be built, and a third that will connect to Leviathan – which can itself supply the entire Israeli economy for decades – must follow.
In order to justify the expense of developing the Leviathan reservoir, the partners won giant export contracts, signing letters of intent to sell gas to Egypt, Jordan and the Palestinian Authority. It is estimated the sales will add $70 billion to the nation’s coffers over the coming decades.
At the start of negotiations the government aimed at forcing the members of the Leviathan group to compete with each other for sale of gas to the domestic market 10 years after the mammoth reservoir is developed. The group, however, was unwilling to invest in the process for so little return, saying it preferred “decades” of certainty before moving on.
This week, the latest compromise agreement includes the sale of the Karish and Tanin gas reservoirs, and separate marketing from the Leviathan field in the future. The gas companies explain the reason for the delay is due to the “complexity” of the model.
Government sources have told Globes they believe Delek and Noble Energy have an interest in delaying the sale of Karish and Tanin, in order to prevent the buyer from competing for domestic contracts with the Tamar reservoir.
But the discussion is now focused on the timetable for the sale: the government wants to see the two reservoirs sold within 18 months. The group is holding out for a sale in six years. A more important timetable, however, is how quickly the government can end the nightmare and allow business to proceed.