Will Leviathan Oil Shale Discovery Make Israel the Next Energy Giant?

by Mark Ingebretsen | April 12, 2011 12:59 pm

Talk about a game changer. Last year while prospecting the aptly nqmed Leviathan Field in the waters between Israel and Cyprus, Texas based Noble Energy (NYSE: NBL[1]) discovered a gargantuan deposit of natural gas buried a mile beneath the ocean floor and beneath an additional 20,000 feet of rock.

The Israel oil find, estimated at some 16 trillion cubic feet, is large enough that Israeli Prime Minister Benjamin Netanyahu told CNN interviewer Piers Morgan that his nation could forego building additional nuclear reactors and enjoy generations of natural energy, instead.  “It is only a matter of time before Israel becomes a big gas exporter,” said Philip Wolfe, an energy banker at UBS, the investment bank” was quoted[2] on the UK financial Web site Fullermoney.com

But the bigger news was still to come.  Harold Vinegar, formerly Royal Dutch Shell’s chief scientists and currently chief scientist for Israel Energy Initiatives (IEI), “has devised an ambitious plan that would, if successful, turn Israel into one of the world’s leading oil producers,” according to[3] the Energy Tribune. Vinegar believes that the oil shale deposits within a 238 sq km area known as the Shefla Basin hold some 250 billion barrels of oil, an amount roughly equal to Saudi Arabia’s proven reserves.

While a debate is currently being waged among Israelis over how royalties from these newly discovered energy riches should be utilized, some early winners are have already become apparent. IEI, for example, is a division of the U.S. owned telecommunications firm IDT (IDT), whose stock has risen from below $24 in mid March to nearly $30 in April, while Noble Energy (NYSE: NBL[1]) has gone from a mid-March price of around $88 to a March 30 high of $98.

Heavy hitting individuals have also moved into position. The Australian reports[4] that “In November, 2010, an 11 per cent stake in Genie Oil & Gas, the division of IDC that is the parent company of IEI, was acquired for $US11m… by Jacob Rothschild, the banker, and Rupert Murdoch, chairman of News Corporation.”  Genie’s advisory board also includes the likes of Dick Cheney and hedge fund investor Michael Steinhardt, according to the article.

Following the excitement of the natural gas find, Delek Drilling, part owner of the Leviathan Field, has seen its share price drop from a high near $1,600 last fall to just over $1,400 in recent trading. Pink sheet stock Avner Oil & Gas (PINK: AVOGF[5]),  another company involved with the Leviathan field has also seen a modest fall from its November highs. (Drilling at the field was recently halted due to technical reasons, Offshore Energy Today reports.[6])

It’s important to note that exploitation of Israeli’s newly discovered energy riches has yet to begin in earnest, so even these falling stocks might pay off handsomely once a full blown extraction begins. Meanwhile, should energy revenues begin pouring into the Israeli economy, the energy boom will extend to the many high tech firms involved in energy exploration and recovery related robotics and other infrastructure plays related to moving Israel’s oil and gas to energy hungry Europe.

To be sure, there are some clouds on the horizon, as Fast Company points out[7], “Leviathan straddles the Israeli-Lebanese maritime border. Israel is currently in a state of war with Lebanon and does not recognize the de-facto Hamas Palestinian government in the Gaza Strip.”

But compared to the turmoil raging elsewhere in the Middle East, this is a small issue. Moreover, it doesn’t take a State Department analyst to realize that all things being equal, Europe will seek energy from a stable supplier, and that makes Israel’s newly discovered energy wealth a geopolitical and economic game changer.

Source URL: https://investorplace.com/2011/04/israel-shale-oil-leviathan-field-crude/

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