Israeli Gas Has Wider Strategic Importance - US Moniz
US Energy Secretary Ernest Moniz stressed the importance that his country attaches to development of gas fields in the eastern Mediterranean at an event this week in Israel during his two-day visit in which he signed an extension to a US-Israel energy agreement. He also said that investors in Israel's upstream sector needed business confidence.
"Producing more natural gas -- and possibly other yet to be discovered [deposits] – in Israel is very important… it's obviously very important for Israel in terms of security and economy," Moniz told the 2016 National Energy Conference of Israel, hosted by the Institute for Energy and Environment.
"But the importance goes beyond Israel, to the extent to which there are exports, a strategic commercial relationship [and] whether it is LNG ends up going to Japan or pipes that ends up connecting to the European system," added Moniz: "The energy security of our allies and friends, Israel, Japan, Europe, and other partners in this region, is very important to us."
Sharing a platform with Israeli energy minister Yuval Steinitz, Moniz largely avoided the recent wrangle over Israel's natural gas framework. In a reference to the framework's stability clause though, the US energy secretary said that the issue has to be solved in "a timely manner" and that stability is essential because of the enormous capital involved: "Stability, business confidence in Israel or in the US is absolutely essential for the kind of large capital investments we need in the energy business."
He also recommended that gas developments in the eastern Mediterranean should be based mostly on local markets with "a major export component."
American energy revolution
Moniz described the last 10 years as an energy revolution in the US, particularly for gas, since it "has led to a revival of our manufacturing sector adding about 700,000 jobs" and has contributed significantly to reduction of carbon dioxide emissions: "Our energy revolution is also in energy efficiency as we have increased the energy productivity in our economy."
He emphasised the development of renewables, with solar energy deployment increasing by a factor of 20 in just a few years and already employing 300,000 US workers. "The rate of job creation there is much greater than in the economy as a whole. So it is really a major energy revolution and we think to continue this to meet our environmental goals, to meet our security goals, to meet our energy resilience goals," he said. "We are going to have to keep innovating very aggressively and to continue to drive down the costs of all these platforms of energy in the future."
Oil prices won't return to $100/b
Moniz underscored the differences in pricing oil and gas. "The oil price is global because the costs of transportation of oil are very small compared to the value of the product," he said. He warned against predicting oil prices, but cautioned against bullishness: "The fundamentals that we see right now certainly do not suggest major changes in the oil prices because it remains in a situation of over-production with regard to demand globally. There is no structural reason to see a major change over a couple of years really. But there are always surprises in this business."
Gas however has not that same global price structure, said Moniz: "The US is an anomaly in having extraordinary low prices compared to others. But in the world today, the crises in the European and East Asian markets have been tied to the oil price. And certainly if that is sustained then again in five years, it will be very different price structure."
Natural gas global demand keeps growing
Moniz said that global gas demand would keep growing for at least two drivers: "Many think that in China coal use has already peaked much earlier than what was expected one or two years ago and part of this was driven by the severe air pollution problems. Natural gas has tremendous advantage in that regard. And the second issue is that US substitution of gas to coal has lower CO2 emissions and, in the aftermath of Paris, every country in the world is focusing on lowering CO2 emissions. That substitution for coal is going to create a major demand for natural gas."
Ya'acov Zalel