Israel Facing Blackouts as Natural Gas Shortage Looms
07/11/2012| 01:37pm US/Eastern
By Sara Toth Stub
JERUSALEM--Israel is likely facing rolling electricity blackouts this summer as a heatwave and natural-gas shortage could result in energy demand outstripping supply, the state-run Israel Electric Corp. Ltd. said Wednesday.
The electricity shortage results from both a shortage in natural gas provisions and lack of sufficient infrastructure, including power stations, the electric company said, although any blackouts would only likely last for one hour each day, and occur in one geographic region at a time, the state company said.
Moreover, economists contacted by Dow Jones Newswires Wednesday said blackouts would not likely impact the economy, with the problem only being short-term. Since Israel's Tamar natural gas field is scheduled to start production next year, the country will have enough gas to be self-sufficient for up to 30 years, according to Ayelet Nir, chief economist at Psagot Investment House in Tel Aviv.
"It's important that we have these new discoveries [Tamar, which contains 9 trillion cubic feet of natural gas, and the neighboring Leviathan field, which contains 17 trillion cubic feet of natural gas] coming online," said Roni Biron, senior analyst at UBS Israel. "It should allow Israel to be self-sufficient for gas consumption for a number of decades."
The Tamar reserve, off the coast of northern Israel about 1,700 meters deep in the Mediterranean, was discovered to contain large, commercial amounts of natural gas in 2009. The Tamar field was second only to Israel's other large gas field, Leviathan, in terms of natural gas fields discovered in the last decade, said Amit Mor, CEO of Eco Energy Ltd., an Israeli strategic and financial consulting firm for the energy sector.
"The connection of the Tamar field to the electricity grid is a major step in Israel's energy independence," Mr. Mor said. By 2016, Israel is expected to rely on natural gas for 70% of its electricity generation, up from its current level of 40%, Mor said.
But Israel will face the challenge of keeping the Tamar field, which will be its only source of gas until production can start at Leviathan some years later, secure from geopolitical risks, as it is located just 10 miles offshore from Gaza, Mor said. Noble Energy Ltd. (>> Noble Energy, Inc.) owns 36% of the Tamar field. Delek Group Ltd. (DLKGF, DLEKG.TV) subsidiaries Avner Oil Exploration (AVNRL.TV) and Delek Drilling (DEDRL.TV) each own 15.6%, with several other companies holding the remaining stake.
Meanwhile, Israel Electric Corp has called on consumers to conserve power to help avert blackouts.
Since early 2011, Israel's natural gas supply from Egypt has been interrupted dozens of times due to a series of attacks on the pipeline in the Sinai peninsula, a problem exacerbated by the fall of former president Hosni Mubarak's regime.
This has forced the electric company to increase prices so it can buy more expensive sources of fuel, including diesel. Indeed, this week the electric company raised $2.9 billion in a bond issue to ensure positive cash flows amid the shortage of gas.
The electric company also lacks enough power stations that can use alternative fuels, such as diesel, the company said, meaning that the gas-only stations can't operate fully during a gas shortage. The electric company is currently converting at least one major power station that runs on natural gas to also run on diesel, in addition to building more power stations.
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