Is Israel facing a great opportunity in the gas market?

 

By: Gaston Saidman

 

In recent weeks, the Persian Gulf was the scene of violent events that are viewed as acts of aggressive offensive by Iran in response to US sanctions, and it is obvious that the tension influences the energy market. However, the price of crude oil did not rise as expected.

The Iranian attacks on the oil tankers undoubtedly influence the market and harm the oil traffic in the Gulf of Oman, although there are other non-violent factors that are important enough to influence the price trajectory without the need to shoot a single bullet. We are talking about OPEC, OPEC +’s  reduction policies and of course, the behind  the scenes games that the major oil companies belonging to these organizations are playing to prepare themselves for any crisis in the future.

Throughout this period we ask ourselves why, how is it possible that the price is almost unchanged in such a conflicting time? There is no logic. If the sanctions make it difficult for producing countries like Venezuela and Iran, OPEC began its reduction plan and the United States did not use up all of its inventories, then how is it possible there is literally no change in the price? Are we really getting closer to the peak oil demand? If so, how will it affect energy related companies in the next decade?

The answer to the last question is one of the reasons why the price did not rise according to expectations. The decreased oil demand caused uncertainty in the big oil companies that began to search for different investment sources in the energy sector, since the growth of natural gas production and new renewable energy projects seem more and more promising, contrary to the fragile market that is not promising a secure future.

With everything that happened, the remaining oil producing companies found themselves facing a market that was not interested in their product. We are even talking about refineries that start working only with natural gas and others that reduced the purchase of crude oil.  This led speculators to a massive sale in the oil field.

Winds of war

In a critical situation where war could be used as the ultimate solution to the problem, different media outlets reported only the position of the Iranian side, since the American position is very clear. Now, the Western media reported that the US sanctions would have managed to get Iran to minimize its threats in some way. The media is trying to convince the reader that Iran in the face of the approaching economic crisis might not want to enter into a conflict and would be doing everything possible to stop another war from happening in the Persian Gulf; the latest attacks are disproving this claim.

To understand this we must know that the Middle East countries do not only use their armies while responding to wars. There are also terrorist organizations that are aligning themselves to a country in the area, and that is what happens with Iran, who has no problem opening other fronts through organizations like Hezbollah fighting in Lebanon and Syria, Iran has many combat capabilities, a lot of them beyond the borders of the Middle East. For example, In Yemen, the Islamic Republic of Iran assists the Houthi rebels, in Iraq, the Shiite militias operate under their orders and in the Gaza Strip, they have a great influence on the Islamic Jihad. In addition, they have invested and trained several terrorist cells in the world which can be activated at any time. The war in the Middle East can be carried out from many fronts of combat.

That is why we are not surprised that President Trump has canceled the imminent attack, although this could be a truce before the battle or, as it is known in the Middle East, “Hudna”.

Israel looks to the future

This situation created a reality in which raising the oil price is not an option at the moment, and now we can see that the prediction of some of the analysts that in the beginning of the year warned us that in mid-2019 there will be a  great demand for gas  wasn’t a mistake.

This reality is changing especially in the energy market field. The scenario that the demand for oil will decrease and the demand for natural gas will grow is going to present a great opportunity for Israel.

The energy market map is unclear, especially today when the most important mineral called black gold is no longer a relevant player. If we look at what I explained before, we can understand why the reduction of its production and transportation is no longer the strategy that benefits the great giants. The fact that today these big companies and even governments begin to utilize other sources for the development of energy was what surprised the investors; the oil price has fewer sources to rely on.

As we all know Israel found a large natural gas reserve in the maritime zone that it shares with Cyprus. Although part of the land is still under discussion due to the claim of rights that Turkey and Lebanon demand in a large part of the deposits, the perforations began to bear fruit and contracts were finalized for the construction of pipelines that connects this mineral with Egypt and Jordan. There is also the ambition to have the pipelines reach Europe, something that is very difficult, but today no longer impossible.

If Israel becomes a strong player in the energy market, it means that it will have to become a producing country without ignoring the international policy that influences the energy world. Especially since Israel is the country that unites the West with the Middle East, and it is precisely what makes a future trade with a Europe more possible.

Israel will not only become a powerful influence in the energy field. We expect that, as with every achievement, it will try to share their find with the rest of the world as much as possible. This discovery aroused the interest of many investors and along with that the initiative to create the “The Excellence in energy, engineering and water Center.” This project will be carried out in cooperation with the United States in order to promote the energy security and economic development of Israel together with the United States through cooperation in the research and development of innovative technologies of companies, research institutions and universities in Israel and the United States. The center will deal with fossil energy (mainly natural gas), cyber protection for water and energy facilities, water and energy interfaces and energy storage.

Even though this is a very confusing time in the energy market, where “oil versus new technologies” is losing its importance, Israel begins a new stage that will only benefit the rest of the world.