Israel's strategic natural gas reserves should come from fields such as Tamar and Leviathan, while companies who develop small fields can export the gas at high prices, outgoing Petroleum Supervisor Dr. Yaakov Mimran told "Globes".
In the interview ahead of his departure, Mimran provided a glimpse into the discussions underway at the Ministry of National Infrastructures over how much natural gas Israel should set aside as a strategic reserve.
Geologist Michael Gardosh will take over from Mimran as Petroleum Supervisor next week. Mimran leaves behind a small unit of four and a half employees who work very hard under a huge workload. During his seven years in the post, Israel's oil and gas industry has undergone a revolution: the Tamar discovery, the Leviathan discovery, and huge interest in the licenses that followed them.
"There couldn’t be a more ideal situation, and I, as a religious man, thank God every day," said Mimran with a smile. Mimran has almost total discretion on the division of oil and gas exploration leasing rights and approving the transfer of rights. He is considered the quintessential public servant and a pleasant man who was able to solve several confrontations through compromises.
Notwithstanding his modesty, Mimran will be mainly remembered by oil and gas explorers for his toughness on the threshold terms for receiving exploration licenses. "Whereas receiving an exploration license was once as easy as getting a license for a scooter, it is now like getting a pilot's license," says one explorer. Whereas once it was possible to receive a license almost without question, now applicants must prove financial wherewithal and high professional capability that only a few companies can meet.
Mimran does not conceal that his motive in setting the new rules was the gas exploration shares bubble on the Tel Aviv Stock Exchange (TASE). "There were cases of TASE-listed companies gambling in licenses," he says.
"Globes": What do you mean?
Mimran: "When you look at the stock charts, you can see how they are affected by all kinds of notices to the TASE. The Ministry of National Infrastructures was criticized about speculators seeking and obtaining licenses. As you know, licenses are not paid for, but are granted subject to demonstrating capabilities. That is why the new threshold conditions were published, and in October we stopped the process. We haven’t awarded new licenses, and the market is a lot calmer."
Mimran, a geologist by training, joined the Mines Division in April 1997, when Ariel Sharon was Minister of National Infrastructures. He replaced Charlie Druckman as Petroleum Supervisor on May 1, 2004.
"Mody Zandberg (Minister of National Infrastructures at the time) reminds me that I told him in my acceptance interview that I was pinning a lot of hopes on Tamar. The global average of finding oil and gas with the first exploratory well is 10%. British Gas calculated 27% in an in-depth study. I don’t know why they decided to leave, but their professionals told us that the company would come to regret it."
What about Leviathan?
"We didn’t know about Leviathan then, because we didn’t know about the potential of the Tamar sands, where are at a depth of 5,000 meters beneath the Mediterranean. It seemed like a nice theory. It excites the imagination, especially in view of the soaring price for oil. No one had the motivation to act. Michael Gardosh names the structure Leviathan, because its shape reminded him of the mouth of a whale, and there was already another structure in the area called Jonah."
When do you estimate that Leviathan will be developed?
"We're talking about 2016-17. The insane timetable for Tamar (where the gas flow is scheduled to begin in the first quarter of 2013) will not be repeated. All the parties involved are working round the clock to get Tamar online in time. I can give you a good word about Noble Energy Inc. (NYSE: NBL) and its partners - they are doing an extraordinary job so that the gas will arrive on time."
What about foreign companies? Do you see them coming here?
"Several serious foreign companies already operate in Israel besides Noble Energy. I am talking about ATP Oil & Gas Corporation (Nasdaq: ATPG) of the US and Caspian Drilling Company, a subsidiary of State Oil Company of Azerbaijan Republic (SOCAR), one of the world's largest oil companies. True, none of the majors have come here, but I won't rehash old news. It's clear to me that anyone seeking adventure in Israel will almost certainly lose options in countries hostile to Israel, and 70% of the world's oil reserves are located in such countries."
What is the Petroleum Supervisor's most important job?
"The regulator's job is to wonder about the potential pitcher we're sitting on. Today, behind every license, there are commitments to invest tens of millions of dollars. If, heaven forbid, there are several expensive dry wells, I think that the number investors currently sitting on the fence will get cold feet. I believe that we should encourage this wave of interest and willingness to invest in order to know where we sit. Anyone going out to explore for gas in Israel now is set for 25 years."
In other words, you support allowing new companies to export gas?
"That's a consequence. That's my logic. We're in a wave of interest, and we should ride it. We're not defrauding anybody; we're not giving out goodies. The Sheshinski committee basically said: there aren’t many Leviathans, but there are a lot of smaller structures, and Israel very much wants them developed."
Friendly relations with Cyprus
In addition to his day job, Mimran is working on relations with Cyprus to develop natural gas fields. The talks have already yielded an agreement on the border between the two countries' special economic zones, signed last summer.
"We have really friendly relations," says Mimran. He confirmed foreign media reports that Israel and Cyprus are working on a cooperation agreement that will allow joint development of reserves that straddle the border of special economic zones. "We're at a very advanced stage, and I believe that we'll reach a deal within weeks," he said.
The industry you supervise has become capital rich. Have you faced any pressure from developers?
"When I was appointed Supervisor of Mines in 1997, I was constantly warned about threats I could expect against me and my family. It never happened neither then nor now. It seems that there are people who project their paranoia and there are people whose faces show that it's a waste of time. I can tell you that I've received all kinds of offers in recent weeks. I told them, 'I've been a civil servant for 43 years and I'm not about to leave with a stain on my clothes.'"
What will you do now?
"I intend to continue working, but not at the crazy pace I've worked until now. I can say that I am pleased as punch."
What are the chances of more discoveries?
"I'm very optimistic about both gas and oil discoveries. We're in a good place on the road. I also have faith in onshore wells by companies such as Globe Exploration LP (TASE: GLEX.L) and Zion Oil & Gas Inc. (AMEX:ZN), which are targeting deep strata. As for Leviathan, even if no oil is found, we've still opened new horizons."
Published by Globes [online], Israel business news - www.globes-online.com - on May 26, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011