Israel: The New Saudi Arabia?

NEW YORK (May 1, 2011) — Together with large natural-gas reserves recently found off Israel’s Mediterranean coast, a new technology that may yield billions of barrels of oil in Israel may make the nation a global energy powerhouse.

"Israel could attain energy independence," Dr. Yuval Bartov, chief technology officer and chief geologist at Israel Energy Initiatives — one of the companies pursuing oil in Israel — recently told The Jerusalem Report.

But the potential oil rush is a mixed blessing for Israel: Although the country stands to reap tremendous financial awards — per capita, it could catapult itself into the top tier of the wealthiest nations in the world, joining the likes of oil-rich Qatar and tax-haven Luxembourg — Israel also may further damage its ecosystem, its landscape, its water supply and its air quality for all of its citizens. That's because the oil isn't crude; it's shale oil.

While Saudi Arabia has about 260 billion barrels of proven crude-oil reserves, it's estimated that Israel could have about 250 billion barrels of shale oil. That would give Israel the third-largest shale-oil resources in the world, behind the United States (an estimated 3 trillion barrels) and China (an estimated 355 billion barrels). Worldwide, there are an estimated 4.8 trillion barrels of shale oil dispersed among 38 countries.

On Friday, oil closed at about $114 a barrel, meaning that potentially there's $28.5 trillion of oil in Israel — or about $3.8 million for every Israeli — at today's present values. Of course, if all of that oil were extracted and those profits realized, most of the money would go to the corporations that extracted and sold the oil. The public would stand to benefit, though, through the royalties collected by the government on oil proceeds. Monetarily, shale-oil extraction in Israel may have an even larger economic impact — and potential social benefit — than the $300 billion in natural-gas finds.

Oil-Shale Fracking

Shale oil comes from oil shale — rock saturated with kerogen, an organic pre-oil substance that can be converted into shale oil through heating, basically speeding up the natural oil-formation process by millions of years. Because kerogen isn't in gas form, the only way of extracting it has been conventional surface retorting — digging up all the rock, bringing it to the surface and heating it to about 900º F. This process is different from how natural gas is extracted from shale. Through a process known as hydraulic fracturing — AKA hydrofracking, frac'ing, or just plain fracking — a well is dug and water, sand, chemicals and even diesel fuel are used to blast cracks in rock, thereby releasing the gas.

Large oil-shale deposits have been known for years — indeed, people have been burning oil shale since prehistoric times — but conventional retorting is so expensive that developing oil-shale fields has been cost prohibitive since the end of World War II. The game changer for oil shale is that, after successful test runs in Colorado, North Dakota and Texas, companies have learned how to successfully use in-situ retorting — converting the oil shale into shale oil while it's all in situ, in place, underground.

The first in-situ retorting was conducted by the Germans during World War II — and in 1940 the Swedes conducted in-situ retorting with electricity — but feasible methods haven't been developed until now: Drilling a well to gain greater access to the oil shale and heating the rock underground to about 600º F, thereby converting the kerogen into shale oil though pyrolysis, a form of decomposition without oxygen. In contrast to conventional surface retorting, today's in-situ retorting methods heat the shale for longer periods of time — months, or even years — at lower temperatures.

Because the technology is new, the best method of in-situ retorting hasn't been determined yet. Sometimes companies start in-situ retorting with hydraulic fracturing in order to open up cracks in the rock and then heat the rock to create more cracks and convert the kerogen. Other times, companies substitute explosives or high-pressure carbon dioxide for hydraulic fracturing. And other times they bypass the hydraulic fracturing step altogether and just heat the shale in the well. In the latter case, it's the heat and not the water-chemical mixture that fractures the rock — think of it as hydraulic fracturing without the water as part of the fracturing process. With any method of in-situ retorting, water is still used, though, in the clean-up process to steam the wells after extraction is complete to help remove oil residue. Water also can be used in the creation of a freeze wall — a perimeter barrier around the site of pumped-in refrigerated liquids designed to contain oil and gas within the designated site and to freeze groundwater before it can enter the extraction area. Additionally, water is used in the final step of refining the shale oil and in separating natural gas from the shale oil.

The process for heating the rock varies, but it's always energy intensive. In some cases, radio waves or microwaves are sent into the earth to heat it; in others, an inert gas is heated and circulated through the shale; and yet in others, water is superheated and circulated through the shale to heat the rock. A fourth method is to insert electric heaters into the ground, an approach favored by Israel Energy Initiatives, which likely will use natural gas to power electric heaters. That means that they will be trading natural gas for oil. Because oil sells for so much more money than natural gas, the trade makes economic sense. But because oil burns less efficiently than natural gas — creating more pollution and releasing more greenhouse gases into the atmosphere — the trade makes poor environmental sense. Either way, in the end both will be burned, which is problematic from an environmental perspective.

Essentially, the newly discovered feasibility of in-situ retorting makes oil-shale extraction nearly as easy and affordable — and potentially dangerous — as the now-common gas-shale extraction that has caused earthquakes in Arkansas and Texas, as well as water and air pollution in Pennsylvania, Texas and across the United States. In the last few years, Brazil, China and Estonia have restarted oil-shale exploitation. The last time companies were majorly investing in developing U.S. oil shale was during the 1970s and early '80s oil crises, but with high gas prices and new technology in hand, companies are looking to start oil-shale fracking in America too. Australia, Canada, France, Germany, India, Kazakhstan, Mongolia and Thailand — and, with an oil-shale agreement signed last year, Egypt, Jordan, Morocco, Syria and Turkey — are all set to follow.

The "Black Globe"

The potential environmental threat is so severe that Life and Environment, the Israeli green-nonprofit umbrella organization, gave its "Black Globe" award for environmental harm to Israel Energy Initiatives.

Representatives of Israel Energy Initiatives dismiss concerns about fracking in Israel leading to the gas-shale fracking problems plaguing America by comparing Israel’s geography to the largest oil-shale deposits in the United States and the world, the Green River Formation, a geologic formation underneath northeastern Utah, southwestern Wyoming and northwestern Colorado.

"In Colorado, the aquifer flows through the same layer as the oil shale, while in Israel, it flows far below," Bartov told The Jerusalem Report. "That means that the water is completely separate from the oil shale."

The Israel Energy Initiatives pilot project — in Aderet, about 15 miles southwest of Jerusalem — includes a 270-day heating phase. If the pilot goes well, full-scale production is scheduled for 2015.

The length of time that the earth will be heated also concerns Israeli environmentalists, who say that unplanned surface cracks could develop, allowing for poisonous and combustible gases to escape and possibly ignite. Industry executives say that such unintended consequences aren't possible, but recent history proves otherwise: In November, a fire broke out at a mining operation in the Negev when oil shale combusted in the ground, leading to a plume of smoke over the largely immigrant community of Dimona. The Israeli Ministry of Environment said that cracks in the ground were to blame for the fire.

The oil-shale operation outside of Dimona was used to fuel a six-megawatt oil-shale plant that powered an Israel Chemicals fertilizer factory. The oil-shale power plant started out in 1982 as a government-funded test facility that escaped public attention because of its scope: Its original output was a mere tenth of one megawatt, and most of the resulting ash has been processed and exported to Europe as cat litter. In 1990 it was upgraded to a production capacity of one megawatt. This past March, Israel Chemicals announced that it would be closing its oil-shale plant and replacing it with a new natural-gas power plant.

Also in March, Givot Olam Oil Exploration announced that it was producing 785 barrels of crude oil a day though hydraulic fracturing near Rosh HaAyin, just to the east of Petah Tikva. But that's not from oil shale, so the amount of oil present at the site is likely limited in nature. In August the company speculated that there were 1.5 billion barrels of crude oil at the site, but that only 10 to 20 percent would be recoverable. Investors don't have much confidence in the project, which plans to begin commercial production soon; the company's shares closed Thursday at six and a half agorot on the Tel Aviv Stock Exchange.

These developments lead many to question the feasibility of oil-shale extraction, but the current oil-shale projects being explored in Israel are the first major attempts to extract oil shale that may have the technology to succeed.

Many other companies, such as Ratio Oil Exploration, are working on oil extraction in Israel, and most of them are also working on natural-gas extraction, including the Delek Group (and its subsidiary, Delek Energy, and sub-subsidiaries, Delek Drilling and Avner Oil Exploration), Isramco Oil and Gas, Lapidoth Heletz, Jerusalem Oil Exploration (and its subsidiary, formerly government-owned Naphtha Israel Petroleum Corporation), and Zion Oil & Gas. The world's largest oil companies — Exxon Mobil, BP, Royal Dutch Shell and their ilk — remain on the sidelines for now, possibly out of fears of angering oil-rich Arab states. In the meantime, Israel Energy Initiatives — a subsidiary of Genie Energy, which in turn is owned by telecommunications-giant IDT Corporation — is commanding the most attention at the moment, mostly because of its superstar cast: Mega-philanthropist Michael Steinhardt chairs the board of Israel Energy Initiatives and news-magnate Rupert Murdoch, former U.S. Vice President Dick Cheney and Rothschild family-heir Lord Jacob Rothschild sit on Genie Energy's advisory board as major investors.

Israel Energy Initiatives also has the potential to become the biggest of the bunch: Its license from the Israeli government allows it to search for oil shale over 92 square miles of the Shefla Basin, underneath the Judean Hills. The company estimates that each well dug only heats the rock in a 50-meter perimeter, so to fully exploit the oil shale through in-situ retorting will involve lots and lots of wells across the Judean Hills.

The Great Green Hope

Fortunately, Israeli oil-shale fracking isn't going unopposed. Grassroots organization Citizens' Committee to Save Adullam has formed with the explicit purpose of stopping fracking in Aderet — near Adullam Grove Nature Reserve and the Elah Valley, where David fought Goliath — and the Judean Hills. Although Elah Valley is zoned by the government in its master plan as green space, the 1952 Oil Act creates an exemption for energy-resource exploration. Israeli Minister of Environmental Protection Gilad Erdan is trying to change the law to include environmental considerations. In the meantime, Save Adullam has a petition (which you can sign here) and the group has been very successful so far in putting the issue of oil shale on the Israeli public agenda. In December, the group teamed with the Society for the Protection of Nature in Israel (SPNI) and the Mateh Yehuda Regional Council for a 1,000-person protest.

"In Israel, it's such a small country, the scale is so small, that everything that we do affects its surrounding much more immediately," Save Adullam representative Rachel Jacobson told Israeli television network IBA English News. Instead of investing in new oil technologies, Jacobsen advocated investing in renewable-energy technologies. "We need to find long-term sustainable solutions for energy."

Many of the world's largest solar-energy projects, from California to Spain, are being built by Israeli companies, many of which are worldwide leaders in solar-technology development. Israel is blessed with plenty of sun, yet its solar technology has mostly been an export. Today, less than one percent of Israel's grid is powered by solar. But it's possible for Israel to source its power 90 percent from renewables, according to a new report to be published soon by the National Solar Energy Center at Ben-Gurion University of the Negev. So, when we're trying to wean ourselves off of oil — with Israeli scientists close to making algae jet fuel a reality, Israeli technology making solar-energy production economically feasible, and with Israel poised to launch the first-ever nationwide electric-car network — why go back to the well?

"If Israel envisions weaning itself from hydrocarbon fuels as part of its strategy, oil shale might be problematic," Dr. Jeremy Boak, director of the Center for Oil Shale Technology and Research at the Colorado School of Mines, told environmental blog Green Prophet. But, he said, oil-shale extraction may become a moot point. "In the grand scheme of energy consumption, the world is likely to need to address carbon emissions on a large scale long before oil shale becomes a major contributor to emissions."

Last summer Life and Environment joined forces with Green Zionist Alliance sister-organization Israel Union for Environmental Defense, SPNI and Save Adullam to challenge Israel Energy Initiatives's oil-shale extraction process in Israel's Supreme Court, which meets in a building paid for by Jacob Rothschild's distant cousin, Dorothy de Rothschild. The green groups are arguing that oil-shale drilling projects should provide the government with full plans that include an environmental-impact assessment, and that the company should be required to receive permission from the Ministry of Environment as well and not just the Ministry of National Infrastructures, which issued the existing permits. Israel Energy Initiatives and the Ministry of National Infrastructures have countered that because the company's plan is at its pilot stage, it should be allowed to move forward as an experiment to see what it finds.

Dr. Orit Skutelsky, an ecologist with Save Adullam and a former instructor at the Arava Institute for Environmental Studies, says that who is conducting the pilot project makes a difference.

"It's not an academic experiment … it's a site of technology development for a company that has financial interests," Skutelsky told IBA English News. "The pilot site itself is not planned to check the environmental implications and impacts."

In Israel's independent but sometimes slow-moving judicial system, a decision is pending.

A Green 2011?

This year stands to be a green one for Israel: In March the Knesset approved doubling the government’s share of profits from natural-gas sales; Jerusalem’s light-rail system is due to go online for partial operation any day now; and Better Place anticipates that it will begin selling electric cars to the Israeli public in August. If the Israeli green NGOs win in court, then 2011 also may become the year that unregulated oil-shale exploitation was stopped. If the court rules in favor of the oil-shale industry, Israel may be facing a fiscally richer but environmentally poorer future.

Cross-posted from GreenZionism.org

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