* IEI says could produce 50,000 bpd at cost of $35-$40/bbl
* Rupert Murdoch, Jacob Rothschild are key investors
By Ari Rabinovitch
JERUSALEM, April 27 A subsidiary of U.S.-firm
IDT Energy (IDT.N) is leading a push in Israel to tap into the
country's vast deposits of oil shale.
The company, Israel Energy Initiatives (IEI), has already
invested "tens of millions of dollars" in preparing a pilot
project it hopes to launch by the end of 2011, CEO Relik Shafir
"If successful, in a few years IEI could start producing
50,000 barrels of oil a day, or 20 percent of Israel's
consumption, for 30 years," Shafir said.
The division of IDT that owns IEI is called Genie Energy,
and it has already brought investments from financier Jacob
Rothschild and media mogul Rupert Murdoch. Together they own a
5.5 percent stake worth $11 million, according to a company
statement from November.
Murdoch, upon joining Genie Energy's advisory board last
year, said the group would "spur a global, geo-political
paradigm shift by moving a major portion of new oil production
to America, Israel and other Western-oriented democracies."
Rothschild made similar comments.
Israel's oil shale deposits have been known about for
decades. A 2005 U.S. Geological Survey report listed Israel
among 14 countries with serious oil shale potential but they
only became commercially viable since the price of oil
skyrocketed. U.S. crude CLc1 is currently above $110 a barrel.
Israel's Infrastructure Ministry says subsurface oil shale
covers 15 percent of the country, and the amount in the area of
IEI's licence alone is comparable to the oil in Saudi Arabia.
Relik said his company could produce high-quality oil on a
large scale at a cost of $35-$40 a barrel.
There is strong government support to pursue oil shale,
which together with newly discovered off-shore natural gas
fields, would move Israel closer to energy independence. But
there are also some major obstacles.
IEI's exploration licence covers an area near the biblical
Ellah valley just outside Jerusalem where it is believed David
fought Goliath. Residents and powerful environmental groups
oppose even the small pilot project.
Further complicating the progress, a small oil shale mine in
the southern Negev desert run by Israel Chemicals (ICL.TA)
caught fire earlier this year. It took weeks to extinguish the
blaze, causing environmental damage and fueling opposition.
Since then, the company said it might close the mine.
IEI says it uses a much newer technology, similar to what
oil giant Royal Dutch Shell (RDSa.L) uses in the western United
States and is trying to introduce in neighbouring Jordan. In
fact its chief scientist, Harold Vinegar, for years held the
same position at Shell.
Most of the work will be done below the surface. In the
pilot, IEI will drill 250-300 metres deep, inject heat, and come
away with five barrels a day. It will simply be graded up for
the commercial stage.
Israel's Infrastructure Ministry told Reuters it would
consider granting further licences for oil shale exploration,
though other foreign firms will likely wait to see IEI's fate.
(Editing by Jason Neely)