Israel Natural Gas Demand Forecast 2014-2040
January 26, 2014
This report is provided for information purposes only, and does not constitute any recommendation or advice for any purpose .
This report relies on publicly available information and other sources of information, including information provided by Noble Energy Inc, Delek Drilling LP (Delek Drilling), Avner Oil Exploration LP (Avner Oil, and together with Delek Drilling and each of their respective affiliates, the Delek Parties) and/or Isramco and/or Dor (collectively, the Project Co-Sponsors), and which Economic Models Ltd. believes is reliable, without any independent verification of said reliability, unless specifically noted otherwise. The information provided in this report does not purport to include all elements that a prospective investor may desire and thus does not replace the need for a full analysis of all the facts and details appearing herein .
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The economic forecast herein represents our understanding only and includes our forecasts of the Israeli economy and electricity and gas markets therein. Different methods of estimating and different assumptions are liable to lead to different results. The information contained herein is subject to change and may be rendered irrelevant at any time .
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Prepared by Dr. Yacov Sheinin and Chen Herzog
Table of Contents
1 METHODOLOGY 6 2 EXECUTIVE SUMMARY 12
2.1 GAS DEMAND FORECAST SUMMARY 13 2.2 NATURAL GAS DEMAND COMPETITIVE ENVIRONMENT 22 2.3 DEMAND FORECAST BY SECTOR 26
3 ELECTRICITY DEMAND FORECAST 43 3.1 INTRODUCTION 44 3.2 INTERNATIONAL COMPARISON 48 3.3 ELECTRICITY DEMAND FOR DESALINATION 58 3.4 DEMAND FOR ELECTRICITY IN THE PALESTINIAN ECONOMY 60 3.5 DEMAND SENSITIVITY ANALYSIS 61
4 ELECTRICITY SUPPLY FORECAST 64 4.1 INTRODUCTION 65 4.2 COAL TO GAS CONVERSION 66 4.3 PROJECT D 69 4.4 ELECTRICITY SUPPLY BY IPPS 70 4.5 ELECTRICITY SUPPLY BY COGENERATION 71 4.6 RENEWABLE ENERGY SUPPLY 72 4.7 FUTURE NUCLEAR ENERGY 75
5 ISRAEL NATURAL GAS DEMAND FOR ELECTRICITY FORECAST 77 5.1 INTRODUCTION 78 5.2 THE DEMAND FOR NATURAL GAS 80 5.3 DEMAND FOR GAS FOR COGENERATION 83
6 GAS DEMAND FOR CHEMICALS AND TRANSPORTATION 85 6.1 DEMAND FOR GAS FOR TRANSPORTATION 86 6.2 DEMAND FOR GAS FOR CHEMICAL INDUSTRY 89 6.3 GLOBAL DEMAND FOR AMMONIA 92 6.4 THE MARKET FOR AMMONIA IN ISRAEL 93 6.5 POTENTIAL PRODUCTION OF AMMONIA IN ISRAEL 94 6.6 THE GLOBAL METHANOL MARKET 96 6.7 METHANOL AS A TRANSPORTATION FUEL 98 6.8 THE POTENTIAL FOR METHANOL IN ISRAEL 99 6.9 PRODUCTION OF METHANOL-BASED OLEFINS (MTO) 101 6.10 GAS TO LIQUIDS (GTL) 102
7 GAS DEMAND FOR EXPORT 104 7.1 JORDANIAN NATURAL GAS DEMAND 105 7.2 ISRAEL'S LNG EXPORT ALTERNATIVES 109 7.3 LNG EXPORT THROUGH EGYPT'S EXISTING PROJECTS 112
8 COMPETITIVE ENVIRONMENT 115 8.1 ISRAEL GAS RESERVES 116 8.2 GAS SUPPLY AND DEMAND 118
9. FORECAST TABLES 122
Abbreviations used throughout this document: IEC Israel Electric Corp.
IPP Independent Power Producers
LDC Low pressure gas distribution companies (distribution to small
commercial and industrial gas customers)
PUA Public Utility Authority
FO Fuel Oil
Economic Models is a leading Israel macroeconomic research and economic consulting firm. It is best known for its exclusive macroeconomic model and its
forecasts of fundamental economic indicators such as: GDP, employment,
foreign trade, investment and inflation.
The firm develops and maintains comprehensive models for various Israeli
industries, and provides detailed demand forecasts such as: energy, electricity,
communication services, cargo shipping, housing, and cement.
1. Over 20 years of providing long-term electricity demand model.
2. Long-term demand for fuels.
3. Economic analysis of IPP projects.
4. Analysis of desalination projects, and demand for desalination.
This analysis is based on Economic Models' long-term macroeconomic model of the Israeli economy. In preparing this analysis we have incorporated only
official data and plans which were publicly published by IEC, the PUA and the
Ministry of Energy and Water Resources and the Central Bureau of Statistics
Our detailed macro-economic forecast assumption is presented in a separate
presentation document. The following tables summarized the main
characteristics of our forecast.
Macro-Economic Forecast Summary
2013 2015 2020 2030 2040 CAGR 2013-40
Gross domestic product (2012 NIS bills.) 1,026 1,074 1,300 1,906 2,782 3.8%
GDP per capita (2012 kNIS) 127.3 128.7 143.2 180.5 229.4 2.2%
Population (thousands) 8,056 8,348 9,076 10,560 12,125 1.5%
Households (thousands) 2,339 2,428 2,672 3,231 3,881 1.9%
Participation rate 63% 63% 63% 64% 64% 0.1%
Civilian labor force (thousands)
3,654 3,761 4,080 4,901 5,758 1.7%
Average annual growth rate Cumulative 2013-2015
Gross domestic product
2.3% 3.9% 3.9% 3.9% 3.8% 3.9% 171.2%
2.9% 3.4% 3.5% 3.9% 3.8% 3.8% 161.0%
3.0% 3.9% 4.0% 4.1% 4.0% 4.0% 181.0%
Fixed investment 3.4% 6.1% 3.6% 3.5% 3.3% 3.2% 180.4% GDP per capita 0.5% 2.2% 2.3% 2.4% 2.4% 2.4% 80.2%
The charts below illustrate our methodology. Our demand model is based on
the bottom-up approach, including several main demand components:
a) Residential demand for electricity (private consumption), based on
demand models for main appliances, factoring penetration rates, usage
intensity and energy efficiency.
b) Demand by the government sectors, commerce and services, based on
our Israel macro-economic model.
c) Demand by the industry, based on our macro-economic model, factoring
in the relative energy intensity of various industries.
d) Demand for desalination and water pumping based on our
macroeconomic forecast and demand for water forecast
e) Palestinian demand currently included within Israel demand. We
assume that the Palestinians will shift to self-generation of electricity in
10 years (assuming normalization of the defense situation).
Our electricity demand model is based on a bottom-up approach, which
includes the effect of energy efficiency improvement, along with the effect of
increased penetration rates and usage of household appliance. The results
indicate convergence to demand levels in regions with comparable weather
such as the US "Sun Belt" States (see detail in chapter 3).
For natural gas demand estimate purpose, in this study we see the electricity
generation sector (IEC and IPP's) as a single demand source. Assuming similar
generation technologies, the demand for gas is not sensitive to the potential
market share of new entrants to the electricity generation sector (see chapter 4
The explicit assumption is that all the increase in Israel's electricity supply
throughout 2040 will be generated by natural gas (except from renewable
energies that may reach 10% of Israel's electricity supply, and nuclear power
stations that could be built in 2031 and beyond).
The main assumptions are outlined in the corresponding chapters through our
Electricity Demand Model Methodology
Natural Gas Demand Model Methodology
2 Executive Summary
2 Executive Summary