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  • prophecy_hunter prophecy_hunter May 1, 2013 7:30 PM Flag

    Tapping the Promised Land: Can Israel Be an Energy Giant?

    One day in August 2009, a geologist named Yuval Bartov sank a drill into the ground southwest of Jerusalem, pulled up a cylinder of rock and, in the same motion, turned the world upside down. The rock contained oil, something that Israel has never had. The oil did not happen to be in liquid form, but the geologist knew someone with a plan to change that.

    Bartov works with Harold Vinegar, an oil-industry legend who during a career as chief scientist for Shell helped pioneer methods to basically melt oil out of rock while it is still underground, then pump the liquid to the surface for collecting. Now, working for a company called Israel Energy Initiatives (IEI), both men are preparing to test the method in hopes of exploiting Israeli oil reserves that, in the form of rock, appear to be as large as the oil that sits below the surface of the Saudi Arabian desert in liquid form.

    “We think that within a decade we can get 50,000 to 100,000 barrels a day,” says Relik Shafir, IEI chief executive officer.

    The product is called oil shale, and unhelpfully so, because that’s far too easily confused with shale oil, which is something else altogether (shale oil exists in liquid form, but in tiny amounts that must be loosened before being harvested; it’s also known as tight oil). The better term for the form Israel’s oil takes may be kerogen, the name for the organic matter embedded in rock — any rock, not necessarily shale — that, were it buried a few hundred meters deeper in the earth, would have melted into petroleum. What IEI proposes to do is to warm it up right where it is, by drilling hundreds of holes into it, then slowly heating them up, through stainless steel cables unspooled to a depth of 300 m (990 ft.), where the oil-bearing rock stands. After about three years, the oil will be seeping out and can be pulled to the surface.

    “Very light. Superhigh quality,” says Vinegar, holding a test tube of a sample produced by heating a slab of kerogen in a lab. “Surprisingly easy to refine, it turns out. Which makes it even more valuable.”

    If this seems too good to be true, managers at IEI say Israeli officials are among those pinching themselves, even as they facilitate preparations for a test well. Not having oil has always been part of the Israeli identity. Between 1948 and ’86, when Israel’s state petroleum effort was finally abandoned, 440 wells were sunk in the Jewish state, every one a dry hole. Israelis joke that Moses led the Israelites into the only place in the Middle East with no petrochemical potential. Lack of oil was one more thing that separated Israel from its Arab enemies, who had lots of it. The apparent absence of oil below ground helped impel Israelis to develop alternatives — from miraculous desert agriculture to the armaments industry that spawned the “start-up nation,” including an electric-car enterprise, Better Place, marketed in part as a comeuppance to Arab oil.

    All that began to change when natural gas was discovered 80 km (50 miles) off Haifa in 2009. The Tamar gas field came online in March, to great satisfaction across Israel. The gas will raise Israel’s GDP a full percentage point, the Bank of Israel says, and along with a second gas find another 50 km (30 miles) out, called Leviathan, could turn Israel into an energy exporter — without stealing any thunder from the kerogen find. Vinegar says the gas would provide the power to heat the subterranean kerogen fields, at least until gas released as a by-product of the kerogen harvest is repurposed for the job.

    “From our viewpoint, it couldn’t be better to have discovered all this natural gas,” he says, noting a pipeline would run only 55 km (35 miles) from the coast to the work site.

    Environmental concerns loom large. Israeli groups challenged IEI in court, but the high court was comforted by geological evidence that the Mountain Aquifer — which lies under the kerogen, and supplies most of Israel’s drinking water — is protected by some 200 m (660 ft.) or more of impermeable rock. A similar layer lies above the kerogen, ostensibly protecting the surface from noxious emissions, another concern.

    But can it be done? And at a profit? “The challenge is, Is it technically recoverable?” says Simon Henderson, energy specialist at the Washington Institute for Near East Policy. IEI is now awaiting a license from Israel’s Interior Ministry for a pilot project, which will occupy a few square meters, all the scientists say they need for a single well. That will take three years, and will be informed by Vinegar’s three decades of experience with Shell, which developed test sites on more complicated terrain in the American West, where a vast kerogen field lay in western Colorado’s Piceance Basin.

    The economics are likewise provisional. IEI estimates melting the oil in Israel’s Shelfa Basin will cost about $40 a barrel — too much when oil was selling for about that, but attractive since the price has nested north of $100. Analysts expect it to stay in that vicinity. But as liquid oil grows harder to find and more expensive to extract, alternate approaches like tar sands (which contain extremely viscous oil that must be released at considerable expense) and tight oil (reached through horizontal drilling and hydraulic fracturing) have become cost effective. Advances in technology may make them even more so, according to Fadel Gheit, senior oil-and-gas analyst at Oppenheimer & Co.

    “The people who were talking about peak oil 20 years ago are eating their words,” Gheit tells TIME, referring to dire predictions of decline as civilization passed the halfway point of earth’s total supply of liquid oil. Gheit notes that the percentage of liquid oil recovered per deposit went from the low 20s to the mid-70s in the past half century, and “unconventional” oil is delivering profits while recovering much lower levels per deposit. “So imagine the upside potential in recovery — and it’s not going to take 50 years,” Gheit goes on. “There are thousands of engineers and scientists working on this 24/7. One of them is going to reach the Promised Land sooner or later.”

    Perhaps literally. IEI is mostly owned by Genie Energy, but investors include Jacob Rothschild, whose family built much of Israel, and the hedge-fund legend Michael Steinhardt, who chairs the IEI board. Vinegar, who is also Jewish, went to Israel after a career in an industry that, aligned as it was with the Arab world, was only too happy for an excuse to avoid working in the Jewish state. But the kerogen find in what the Bible calls Elah Valley — where David slew Goliath — not only allowed him to put his life’s work into practice, it also dovetailed with a political dream.

    The kerogen formation that geologist Bartov first confirmed in 2009 extends beyond Israel. It runs across the few kilometers east to the Palestinian West Bank — Vinegar flourished a sample from there, darker than the chalky Israeli sample — and into Jordan, where the known kerogen formation is as large as all of Israel itself. Shell is working with King Abdullah II to develop it, in a country that has almost no mineral resources. Egypt has potential as well.

    “The truth is, Israel is sitting on the best,” says Vinegar. Its oil could well lock in the energy independence that’s promised by natural gas — an independence that’s first of all economic: every dollar’s worth of oil or gas Israel produces is a dollar of hard currency available for other uses. But in Israel’s case, energy independence also involves military security. When the country fights wars, as it has every few years, insurance companies bar oil tankers from venturing into its ports. As a practical matter, that limits a war to the length of time it takes Israel to burn through petroleum it has stored.

    But Vinegar sees a potential beyond hard currency, or even the brand of security provided by military assets. He envisions Israel, with its existing complex refineries, excellent infrastructure and seaports as a natural nexus for “an integrated energy zone” that spans borders and unites countries no longer quite at war, but not terribly close, either.

    “Longer term, security will also come from Israel helping the countries around it,” Vinegar says. “That’s a world state I would love to see.”

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