Home Business An American Energy Giant Sees Israel as a Springboard to Europe

An American Energy Giant Sees Israel as a Springboard to Europe

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An American Energy Giant Sees Israel as a Springboard to Europe

Six miles off the coast of Israel, beyond the brightly colored sails of wind surfers, an ungainly steel structure looms above the blue Mediterranean.

This 200-foot-tall stack of living quarters, tanks and pipes regulates and processes a torrent of natural gas from wells at the sea bottom around 70 miles farther offshore.

Largely because of Leviathan, as this gas field is known, Israel has far more natural gas than it can consume or its limited network of pipelines can hold.

“You can only shove so much into it,” said Jim Hebert, a Louisianian who manages the platform and its crew of around 120 people for Chevron, the American energy giant.

Chevron finds itself with a trove of gas on Europe’s doorstep that Russia’s brutal war in Ukraine has made more valuable. Flows of gas from Russia, long the continent’s main supplier, have plummeted as Moscow sought to use the fuel as an economic weapon, driving up prices last year and creating a rush to find sources of energy elsewhere.

The company’s Israeli operations are helping fill the need. Chevron exports sizable volumes to Egypt, which has facilities to convert the fuel to liquefied natural gas and send it on to European ports. Steps like expanding production at Leviathan and streamlining the pipelines between Israel and its neighbors are expected to potentially allow such exports to more than double, to a level that could meet the needs of a country like the Netherlands, a major user of the fuel, though it would amount to only a fraction of the missing Russian gas.

The Leviathan gas field is massive, producing revenue of $2.5 billion last year, with much more potential. In this corner of the world, where many interests compete and commercial ties have only recently sprung up between countries that once fought each other in wars, issues of increasing gas production and bringing it to market are the subject of complex discussions. Among the interested parties are Chevron, other energy companies and several governments including those of Israel, Egypt and Cyprus.

Chevron, which now has rights to gas deposits in all three countries, says it is confident that it can help this often politically tense region gel into what could be one of the world’s last major petroleum hubs.

“We have got a very large resource base there,” said Robert C. Neff Jr., Chevron’s president for international exploration and production. “That gas resource is going to be needed by the world.”

The intense interest among countries for control of the riches “won’t necessarily make it easier to get projects done,” said Alex Munton, head of global gas at Rapidan Energy Group, a consulting firm.

Still, Chevron’s recent, stepped-up activity in this gas-rich area, known as the East Med, has raised expectations. “They have the muscles to do big things,” said Alaa Arafa, chairman of Blue Ocean Energy, which buys Israeli gas and sells it in Egypt.

Chevron, based in California, began producing natural gas in Israel nearly three years ago with its $4 billion acquisition of Noble Energy, a small American company that helped turn Israel into a nascent gas power. It has a nearly 40 percent operating stake in Leviathan and 25 percent of another large Israeli field, called Tamar.

Chevron also has a share in an undeveloped gas deposit in Cypriot waters as well as a string of offshore blocks off Egypt, where the company has already found gas.

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The bountiful gas is changing how Israel produces electricity. Once reliant on coal-burning power plants, Israel now generates around 70 percent of its electricity from gas, and expects it will need more power to charge electric vehicles.

Most of the additional gas Chevron plans to produce, though, is likely to be exported. How it reaches other markets is not yet determined.

Already Chevron sends about half its Israeli gas via pipeline to Egypt and Jordan.

Egypt, in particular, is an energy-hungry nation with a population of close to 110 million — more than 10 times Israel’s. It is a major gas producer, and its president, Abdel Fattah el-Sisi, has ambitions for his country to be a center for gas trading. To make that happen, Egypt will want volumes from the rest of the region to flow through its network to the two L.N.G. facilities on the Mediterranean coast. Part-owned by Shell and Italy’s Eni, they are the only such units in the East Med. Cairo will also want plenty of gas for factories and power plants.

Chevron says that bringing greater quantities of Israeli and potentially Cypriot gas to those terminals in Egypt is among the possibilities it is considering.

Chevron and its partners are also considering installing an L.N.G. facility in Israeli waters. It would allow Chevron to control “where the L.N.G. goes after we process it,” said Jeff Ewing, the company’s managing director for the Eastern Mediterranean. That would reduce Egypt’s influence and allow Chevron to export gas at world prices — a bonanza at times, like last year when Europe was willing to pay almost anything for gas.

Some doubt that Chevron will spend huge sums for an L.N.G. facility in Israel when units that could chill additional gas already exist next door.

“I don’t believe anybody is going to invest $5 billion to $6 billion in an L.N.G. project when you have idle capacity,” said Mathios Rigas, chief executive of Energean, which produces gas in Israel.

Whatever Chevron winds up doing, the East Med’s prospects as an energy center have soared. Two decades ago, Israel was one of the few countries in the Middle East without significant discovered petroleum resources. Now, gas has become a mainstay of the Israeli economy, hugely reducing dependence on imported coal to generate power.

On the Leviathan platform off the city of Haifa, operators in a control room coordinate gas output to match demand from electric utilities and other customers.

Reflecting the perils of the area, the structure bristles with security equipment including twirling radar antennas and a device designed to stun attackers with blasts of sound. Armed guards in black shirts roam the decks, and gunboats from a navy base in nearby Haifa patrol.

Yet Leviathan is clearly also a tool for fostering improved regional relations. Other commercial ties are emerging: An Abu Dhabi investment company called Mubadala has invested in the Tamar gas field, and Adnoc, the emirate’s national oil company, is negotiating to buy a 50 percent stake with BP in NewMed Energy, a partner in Leviathan.

Nearby, an arrangement with Israel reached last fall, opened the way for exploration in Lebanese waters by international companies, a move encouraged by Washington.

“You really have a level of regional cooperation which is quite unprecedented,” said David L. Goldwyn, president of Goldwyn Global Strategies, an energy advisory firm, who was a special energy envoy for the State Department during the Obama administration.

Yet the clock may also be ticking on whether Israel and the wider region can become a major source of gas exports.

Although the European Union wants to encourage gas flows to Europe from Egypt and Israel, Brussels also seems determined to replace the fuel with cleaner energy, including wind, solar and hydrogen power. Europe’s consumption of gas fell 14 percent in 2022 and is continuing to fall.

There are also signs of unease within Israel over moving from one fossil fuel to another.

“Gas is taking us toward less pollution than coal, but it is not getting us out of pollution completely, and it is not getting us to cleaner energy,” said Yael Cohen Paran, a former Israeli lawmaker, in an interview at a beach resort where the Leviathan platform was visible in the distance.

Environmentalists say that the dominance of gas in powering the Israeli economy and the influence of the petroleum industry mean that insufficient resources are going into developing clean energy.

“We are hostages in a way,” said Elad Hochman, executive director of Green Course, an advocacy group.

As for Chevron, though it does not disclose financial results from its Israeli operations, its executives say it is a profitable business that can be a springboard for expansion.

“It is a very nice, attractive position,” Mr. Neff, the Chevron president, said, adding that the company has the opportunity “to grow our business substantially in the next few years.”

Gabby Sobelman contributed reporting.

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