Israel Capable of Producing 250 Billion Barrels of Oil (INN) ISRAEL NATIONAL NEWS) By Ben Bresky 03/20/12)
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Dr. Harold Vinegar of Israel Energy Initiative Ltd. in Jerusalem is
optimistic about Israel´s potential in the oil industry. He spoke to
Israel National Radio´s Goldstein on Gelt show with Douglas Goldstein
about energy independence and the "black gold" that is underfoot.
Dr. Vinegar was the chief scientist of Royal Dutch Shell until his
retirement in 2008. He was born in Brooklyn, New York and recently
made aliyah. Now, he is the chief scientist of Israel Energy
Initiative Ltd. in Jerusalem, which is developing Israelís
unconventional oil reserves.
Douglas Goldstein: What are unconventional oil reserves?
Dr. Harold Vinegar: Conventional oil is what everyone imagines. You
drill a well and oil comes out of the well under the natural forces
in the ground and you basically have an oil and gas well, but thereís
a whole other class of oil called ďunconventional oil.Ē This means
that when you drill those wells, the oil will require some special
treatment in the sub surface in order to get it to move.
There are two classes of unconventional oils. One is the heavy oils
in tar sands such as you find in Canada. These are extremely viscous
molasses-like oils that need heating in the sub surface in order to
get them to move, and the other class is the oil shales of the world,
and these have the organic matter that makes up the carriage. Itís
solid and it requires heating to a high enough temperature so that
the solid basically becomes a liquid in the sub surface and then gets
produced as conventional oil once itís been heated. Those are the
unconventional sources of oil.
Israel has oil shale. It doesnít have much heavy oil, but its oil
shale resources are world class, one of the largest and best in the
Douglas Goldstein: Why are we only finding out about this now? Whatís
the history of oil in Israel?
Dr. Harold Vinegar: The oil shales were basically not developed in
Israel for two reasons. The first is that basically for as long as I
can remember the real price of oil was $130 per barrel, going way
back in my career. Itís always been roughly $20 to $25 per barrel in
inflation-adjusted terms. Thatís just not high enough for the capital
cost required to produce unconventionals. You need something of the
order of $30 per barrel and starting around 2003, the price of oil on
the marketplace started rising and itís been going up continuously
since then and probably will continue to go up. Right now, we see
Brent Crude at about $120 per barrel. The time has come that
unconventionals are actually economic to develop and this plays in
Israelís favor because it has enormous quantities of this oil shale.
Douglas Goldstein: When you say enormous, what are the specs of that?
Dr. Harold Vinegar: Our company has mapped over 250 billion barrels
of recoverable oil in Israel and thatís a conservative estimate. To
put that in perspective, Saudi Arabia has about 250 billion barrels
of conventional oil reserves in the ground.
What has happened with time is conventional oil has gotten more
expensive and unconventional oil has gotten less expensive because
thereís a small amount of conventional oil left in the world. Its
price is driven by scarcity and as it becomes scarcer, the price goes
up. Whereas unconventionals have enormous reserves, they swamp the
amount of conventionals. Orders have more magnitude but their cost is
driven by technology and if technology improves, the unconventional
gets cheaper. Starting a few years ago, theyíve crossed over. The two
supply curves have crossed so that marginally the conventional oil
that the companies are going after in the Arctic, deep offshore, are
actually more expensive than the development of the unconventional,
such as the tar sands in Canada and the oil shales in Israel. Itís a
flip. Things have changed.
Douglas Goldstein: One of the big complaints that people have about
oil shale is that the technology to get it out of the ground can have
some bad environmental effects. Is this true or are there ways of
dealing with that?
Dr. Harold Vinegar: Itís true that oil shale has to be heated in the
subsurface in order to convert it to oil and gas. One has to be
careful in terms of the technology thatís deployed and the local
geology to be sure that there are not any negative environmental
effects. Israel is blessed by having a geological and hydrogeological
situation where the aquifers are far below the oil shale and
separated from it by 200 meters of impermeable rock, so that there
will not be any environmental issues associated with the Israeli oil
shale. Thatís different than some of the other oil shales in the
world, where the aquifer actually flows through the oil shale. Then
you have to be very careful about what technology is used to develop
it. Israel is in a very good situation that way, enormous reserves,
very high quality oil, and very safe environmental issues.
Douglas Goldstein: Why is this not being actively pursued?
Dr. Harold Vinegar: Weíre starting up our program here. The first
thing that has to be done of course is to appraise the resource. Is
it really there? You have to convince yourself that itís as large and
of high quality as Iíve indicated. Our company has been doing an
appraisal program. We drilled six appraisal wells in the Shfela
Basin, taken thousands of feet of core, and it really is a world
In the laboratory, weíve heated the oil shale up and we produced the
oil from it. Itís very light. It almost looks like a rosť wine. The
thickness of the resource is 300 meters thick. Itís enormously rich
and has a very small surface footprint, which is the characteristic
of oil shale in general. Itís the densest fossil fuel resource in
the world so that projects that are done in oil shale donít have a
very large surface footprint compared to conventional oil.
Douglas Goldstein: Are we seeing companies like Royal Dutch Shell
come in with tens of billions of dollars of investment to get the oil
out of the ground?
Dr. Harold Vinegar: Youíre not seeing Royal Dutch Shell coming into
Israel, but they are in the sister deposit in Jordan. During the
cretaceous period, about 70 million years ago, Israel and Jordan both
were under the sea and they both had simultaneous deposition of the
oil shale. They both have equivalent and sister deposit
characteristics, and Royal Dutch has been drilling in Jordan for the
last few years. They have drilled hundreds of wells and Jordan also
has extremely rich oil shale.
What youíre not going to see in Israel is any of the major integrated
oil companies coming here. When you do a lot of business in the Arab
world, itís just not advisable for these companies to enter the
Israeli market, but the smaller independent oil companies that arenít
doing business there are definitely interested and weíve had a lot of
interest in our company. Weíre traded on the New York stock exchange
under Genie GNE and our particular company is valued at $250
Douglas Goldstein: Does your company do the research?
Dr. Harold Vinegar: We are a RND and exploration company focused on
oil shale and other unconventionals in Israel and other countries of
the world. Itís the only pure play that I know of in the oil shale
domain. A lot of major oil companies have very small roots in the big
companies that work on oil shale, but we are the only company thatís
focused entirely on oil shales. We have a lot of intellectual
property here. Weíre doing research on improving the technology for
developing the oil shales and weíre searching for oil shales that
meet the characteristics where the technology will be effective and
Douglas Goldstein: How can people follow your work or follow whatís
going on in the Israel shale oil area?
Dr. Harold Vinegar: Our company has a website, http://iei-energy.com,
and you can read about our developments here. I think the takeaway
message that I would like to give is that Israel has an extremely
bright energy future. The growth of the natural gas discoveries and
the Mediterranean as well as the enormous oil shale deposits on shore
means that Israel is going to be a major oil and gas exporting
country in the future. Things are really exciting here.
Douglas Goldstein, CFPģ, is the director of Profile Investment
Services and the host of the Goldstein on Gelt radio show (Monday
nights at 7:00 PM on www.israelnationalradio.com. He is a licensed
financial professional both in the U.S. and Israel.
For past episodes of Goldstein on Gelt click here.
Disclaimer: This document is a transcription and/or an educational
article. While it is believed to be current and accurate, divergence
from the original is to be expected. The original podcast can be
heard at https://sites.google.com/site/goldsteinradioshows/. All
information on this website is purely information and should not be
used as the sole basis for making financial decisions. The opinions
rendered herein are those of the guests, and not necessarily those of
Douglas Goldstein, Profile Investment Services, Ltd., or Israel
National News. Readers should consult with a professional financial
advisor before making any financial decisions. (IsraelNationalNews ©
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