Business & Technology 6/28/99
Holy oil? The faithful may yet be rewarded
A natural-gas discovery buoys Israeli oilmen
BY ELISE ACKERMAN
For decades, Israeli oilmen kept the faith, doggedly drilling one dry hole after the next. Most Middle East countries were blessed with copious deposits of oil and gas, they reasoned. Why should Israel settle for milk and honey? The discovery of a productive oil field not long after the establishment of the state in 1948 fueled visions of Israeli gushers, but as the years passed those came to be seen as pipe dreams by all but die-hard believers. International oil companies brushed off local oilmen peddling investment prospects. Even the Israeli public lost hope, scoffing at reports that high-quality oil had been recovered in December.
But the news last week that an American-Israeli consortium had struck a substantial amount of natural gas off the coast of Israel has encouraged both hard-nosed investors and dreamers alike. The consortium includes two Houston-based firms: Samedan Mediterranean Sea and R&B Mediterranean, and two Israeli firms: Avner Oil Exploration and Delek Drilling. Officials said the Noa 1 well near the beach town of Ashkelon produced gas flows ranging from 10 to 30 million cubic feet per day in recent tests. At current gas prices the field could yield more than $25 million per year.
In the zone. After decades of failure, the Israeli oil patch is now bristling with optimism–and derricks are likely to follow. British Gas has received a permit to search for oil and gas in the 3,860-square-mile area that makes up Israel's territorial waters. In August, Isramco, a Nasdaq-traded company that absorbed the Israeli National Oil Corp. when it was privatized in 1997, will also start drilling in the waters near the newly discovered gas well. "We are drilling deeper," says Yossi Levy, an Isramco official who has spent his life searching for Israeli oil. "We are going to the oil zone."
Experience has shown that oil fields often lie underneath gas deposits. But for Levy and other Israeli geologists, the presence of oil under Israel has long been an article of faith. "From the standpoint of geology, there are very good reasons why we should find oil in Israel," says Gdaliahu Gvirtzman, chairman of the board of Israel's Geophysical Institute. Israeli Oil Commissioner Yehezkel Druckman estimates Israel has 5 billion barrels of reserves or roughly the same amount as Indonesia. By comparison, the United States has an estimated 22 billion barrels of reserves and Saudi Arabia has an estimated 259 billion barrels.
In the past, major international oil companies have shunned Israel to avoid offending Arab governments. The 400-plus dry holes that mock Israeli dreams of petroleum wealth were drilled by government-owned companies or by small independent wildcatters often motivated by biblical beliefs. "God has shown me that the greatest oil field in the world is in the southwest corner of the Dead Sea," declares Hayseed Stephens, a former pro-football player and independent oilman from Willow Park, Texas, who has a drilling license for the area and intends to spud a well there this fall. Stephens cites biblical passages, like God's promise to Moses, recorded in Deuteronomy, that the descendants of Joseph will be given "precious fruits . . . from the deep that lurks below." He says these verses refer to oil fields.
Such beliefs, ridiculed by secular oilmen, have kept the Israeli oil industry alive. In fact, a well drilled six months ago by an Orthodox Jewish geophysicist was the first indication in many years that Israel had significant petroleum reserves. Tovia Luskin, director of Givot Olam Oil Limited, extracted 15 barrels of high-grade oil from a test well northwest of Tel Aviv. He estimates that the underground structure could contain up to a billion barrels of oil and 4 trillion cubic feet of natural gas. Luskin also draws inspiration from Deuteronomy. But more important, he says, are extensive geological, geophysical, and paleontological studies that seem to confirm that Israel is connected to the oil-rich Paleozoic petroleum system. This system, which extends from Saudi Arabia through Iraq to Syria, is the source of most Middle Eastern oil.
The claims of Israeli oilmen will soon be put to the test. Oil- and gas-related shares surged last week on the Tel Aviv Stock Exchange, and the Israeli government's approval of British Gas's exploration permit marks the first time a major international energy company will prospect in Israel. Soon everyone will know whether the faith in Israeli oil is founded on hydrocarbon riches or ordinary bedrock.
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