How much added value has been created for the Israeli economy by the huge investments in the Tamar and Leviathan gas fields beyond lowering energy prices and tax revenues? This question must be asked now before development of the Leviathan field gets underway.
To mark the signing of the Memorandum of Understanding with Australia's Woodside Petroleum Ltd. (ASX: WPL), Delek Group Ltd. (TASE: DLEKG) controlling shareholder Yitzhak Tshuva repeated the stately tone that he reserves for such special occasions. While Delek Energy senior executives Gideon Tadmor and Yossi Abu focused on the contribution of Woodside to the Israeli economy and its gas and oil exploration sector, Tshuva chose to talk about Woodside's contribution to the Israeli economy, and the "tens of billions" that will be invested in Israel in the coming years.
However, on this point a far-reaching change of approach is required. It is the government's duty to ensure that Israeli companies and professionals will win the biggest possible share of the more than NIS 20 billion that Woodside and its partners will invest here in the coming few years.
Israel can produce much more from its gas than tax and royalty revenues. As with the sovereign wealth fund, so Norway can serve as an example. The country of just 4.5 million citizens took advantage of the oil that was discovered in the North Sea to train up a skilled work force specializing in working alongside the international companies that implemented the deep sea drilling.
Within 20 years, Norway grew from nothing to a full gas and oil service industry. This comprises hundreds of companies that have developed expertise in fields such as drilling engineering, building infrastructures and rigs, planning projects and more. This is an export-led industry that can continue to flourish long after Norway's gas and oil fields are empty. The number of jobs added to Norway's economy is estimated in the tens of thousands and that energy services industry already generates more added value than the drilling and production itself.
Taxi drivers and helicopter pilots
Noble Energy Inc. (NYSE: NBL), the operator of the Tamar well, which came on-stream in 2013, is proud of the fact that most of the workers employed on its production and conveyance installations are Israeli. Noble and its partners like to remind us that development of Tamar was the largest infrastructure project ever undertaken in Israel - valued at $3.5 billion. But how many of these billions are destined for the pockets of Israeli entrepreneurs, companies and professionals? We haven't managed to get an answer to this question.
Israeli companies specializing in gas and oil services have not been established following the gas discoveries. The main people who have profited from the billionaires who have invested here so far have been the "small time" service providers as happens in third world countries, such as taxi drivers, helicopter pilots and port services providers. Serious companies that asked to take part in the development of Tamar knew that the address for their requests was not in Israel but in Houston, Texas in the US where Noble Energy is headquartered.
Woodside continues to work hard to maintain a very low profile in Israel. A team of six employees headed by vice president Greg Mogan is in Israel and has been looking for offices for several months and has even yet to hire a media consultant. Woodside promises that after the final agreement is signed, they will dramatically expand their activities. Woodside, in contrast to Noble Energy, is talking about hiring Israeli engineers and acquiring knowhow and technology from Israeli companies.
Published by Globes [online], Israel business news - www.globes-online.com - on February 9, 2014
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