ISRAEL AT WAR - DAY 64

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Natural gas royalties jump 23%, top NIS 1 billion in first half of year

Israel expects to collect a total of NIS 2 billion from gas and other natural resources royalties in 2023 as additional exports to Egypt okayed

Sharon Wrobel is a tech reporter for The Times of Israel.

An Israeli Navy Sa’ar 6-class corvette guards the Energean floating production, storage and offloading vessel at the Karish gas field, in an image published by the military on April 23, 2023. (Israel Defense Forces)
An Israeli Navy Sa’ar 6-class corvette guards the Energean floating production, storage and offloading vessel at the Karish gas field, in an image published by the military on April 23, 2023. (Israel Defense Forces)

Israel collected more than NIS 1 billion ($263 million) in natural gas royalties in the first half of the year, representing an increase of 23 percent over the same period in 2022, the Energy and Infrastructure Ministry said on Tuesday.

The increase in revenue from royalties was attributed to the rise in the amount of production of natural gas for exports, the production of hydrocarbon liquids, as well as the weakness of the shekel versus the dollar, according to a report by the Energy Ministry’s Division of Royalties, Accounting and Economics.

More than half of the revenue from natural gas royalties, some NIS 590 million ($155 million), was generated from exports mainly to Egypt and Jordan, according to the report. For 2023, Israel is expected to collect a total of NIS 2 billion ($526 million) from natural gas and other natural resources royalties, the ministry estimated.

The boost in royalties comes as natural gas from Israel’s offshore Karish field started flowing in October 2022, which generated NIS 145 million ($38 million) from the production of about 1.97 billion cubic meters (bcm) of natural gas and about 947,000 barrels of hydrocarbon liquids.

Karish is Israel’s third offshore field after the Leviathan natural gas field, the nation’s largest, started pumping in December 2019, and natural gas started to flow in 2013 at the nearby Tamar well, the second largest, which holds some 10 trillion cubic feet (tcf) of natural gas, half of the amount held in Leviathan.

Royalties collected from the Leviathan reservoir rose by 6.4% in the first half of the year and amounted to about NIS 482 million ($127 million) from the production of about 5.44 bcm of natural gas. Most of the revenue from Leviathan reservoir royalties came from export sales and the remainder of about 13.88% came from sales to the domestic market.

View of the Israeli Leviathan natural gas field gas processing rig as seen from Dor Habonim Beach Nature Reserve, on January 1, 2020. (Flash90/File)

Royalties generated from the Tamar gas field were up by 3.4% and amounted to NIS 379 million ($100 million) from the production of 4.91 bcm of natural gas.

Last week, Energy and Infrastructure Minister Yisrael Katz gave approval for the expansion of natural gas exports to Egypt from the Tamar reservoir off the country’s Mediterranean coast. The permit is for additional natural gas exports of about 3.5 bcm annually over the next 11 years from the Tamar field, located some 90 kilometers (55 miles) west of Haifa in northern Israel.

“The export of natural gas, on which I decided together with the Prime Minister, is a dramatic step that will bring in billions of dollars for the benefit of Israeli citizens, will help in the fight against the cost of living and will strengthen ties with our neighbors in the region and European countries,” said Katz on Tuesday. “My policy is to ensure the supply of natural gas to the Israeli economy for the next decades, and to bring in money in the fight against the [high] cost of living.”

About one-third of the additional natural gas produced from the Tamar rig will be allocated to the domestic market, according to the ministry. Overall, natural gas production from the Tamar field from 2026 will increase by 60%, or 6 bcm annually.

On Monday, Prime Minister Benjamin Netanyahu held a review of Israel’s natural gas export policy, which included a presentation by Katz on the country’s current gas reserves, export volume, and demand forecasts for the next 25 years.

They also discussed the political benefits and means of exporting gas to Mediterranean countries and further into Europe. Netanyahu ordered the establishment of a team consisting of the Energy and Finance ministries, as well as the National Economic Council, to examine future policy and impact on the economy.

Illustrative: The Tamar gas field. (NewMed Energy/Delek Drilling)

In Israel, growing domestic energy needs have sparked heated discussions over the allowance of natural gas exports. Back in June, Israel’s budget director, Yogev Gardos, said there was an “immediate need for the examination” of export policy and warned that exporting too much “could endanger Israel’s energy security” and lead to higher electricity prices, according to a letter he sent to the Energy Ministry’s director-general.

Israel’s natural gas operations have in recent years put the country on a path to energy independence — and have shielded it from the worst of the energy crisis sparked by the Russian war on Ukraine — in a region with few natural resources. To date, it has collected a total of over NIS 11.7 billion ($3 billion) from natural gas royalties, the Energy and Infrastructure Ministry said.

Israel has been exporting gas from the Tamar field to Jordan since January 2017, and the Leviathan field started exports to Egypt in January 2020. The Leviathan deals are considered to be bigger and more significant for the economy.

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