Israel's Bet on Oil

The drifting sands of the Sinai Peninsula had not yet settled over the wreckage of Arab war machines in 1967 when Israel and Egypt became locked in another fevered contest. Since the Suez Canal was closed indefinitely by the Six-Day War, forcing oil tankers to make the long and costly journey around the Cape of Good Hope, both countries hastily revived plans to build pipelines. These lines were intended to transmit Middle East oil more quickly and cheaply to the Mediterranean for shipment to Europe and the Western Hemisphere. Last week Egypt's plans were still on the drawing board, but oil was flowing through the Israelis' underground pipeline, which stretches 159 miles from the Port of Eilat on the Gulf of Aqaba to Ashkelon on the Mediterranean.

The Israelis clearly are gambling that they will get enough business from oil shippers to make the line pay off. A tantalizing question is the source of the oil now streaming through Israel's line. In the best tradition of Middle Eastern intrigue, Israel refuses to disclose the names of the oil companies using its pipeline, apparently believing that this would subject them to intensified Arab threats. The only major non-Arab producer in the area so far is Iran, and some of its oil might trickle into the Israeli pipeline. But major drillers of Iranian oil --British Petroleum, Shell, Gulf, Jersey Standard--also operate in Arab countries and are not likely to risk their concessions by openly doing business with Israel. The Israelis, however, are obviously getting oil from somewhere.

The 42-in. "sausage," as Israeli officials call the pipeline, is their country's largest single construction job. The line was built by Mekorot, Israel's water-development company, which set a round-the-clock working schedule. The mammoth earth-moving equipment gouged great ditches across the harsh route, while 180 metalworkers, a third of them American, worked in 104DEG heat. In the rush to finish, welders were offered $10 extra for each weld that they made over 60 during a single shift; some of the men earned $3,000 a month, plus expenses and amenities. Even ice-making machinery was carted along to meet the parched Americans' demands for ice water.

The project was completed last December, and the first load of crude oil was unloaded at Eilat from the Israeli tanker Nivi early this month. The line cost $67 million and can presently convey 133 million bbl. of oil a year. By the addition of more pumping stations, the capacity of the government-owned line could be raised by 1975 to 420 million bbl. That would be just about enough to fill the needs of a country the size of Italy.

Search for Customers. By contrast, construction of Egypt's 42-in. pipeline, which will extend 207 miles from a point south of Suez to Alexandria, has been long delayed. Building is now scheduled to begin next October. The line is also expected to have an eventual capacity of 420 million bbl. a year. If and when the Suez Canal is reopened, Egyptian officials have elaborate plans for widening and deepening it. Even with that, it might not accommodate fully laden supertankers of more than 200,000 tons. Egypt expects oil from the larger tankers to be drained into its pipeline at the Gulf of Suez and then be reloaded aboard vessels in the Mediterranean. The Egyptians, though late to finish, may have less trouble than the Israelis in finding pipeline customers. About 75% of the oil now produced in the Middle East comes from Arab countries, which would certainly give Egypt preference.

Still, outwardly optimistic Israeli officials claim that they have already lined up enough customers to start thinking about expanding the line's capacity. Some oil from Egyptian-developed fields in the Western Sinai, which was taken by Israel in the 1967 war, may be funneled into the pipeline. Test drilling is planned for the Negev Desert this year, and an offshore oil rig is now on its way to the Gulf of Suez to begin exploratory operations. A subsidiary of Denver's King Resources Co. surveyed the Sinai for Israel, and company officials reported recently that the area has enormous potential for oil.

The new line will also contribute to the nascent petrochemical industry centered in Haifa. To capitalize on the increased flow of crude oil, Israel is also building a big refinery at Ashkelon to supplement one operating in Haifa; together these facilities will give Israel one of the largest refining capacities in the Middle East. Even after taking care of its own growing needs, Israel expects, by 1973, to export more than 14 million bbl. of refined products yearly, bringing in considerable amounts of foreign currency. Underlying all this activity is Israel's worried awareness that the Arabs' political influence in the West is based largely on oil. "With a major oil facility," says one Israeli pipeline executive, "the Western powers will think twice before they let Israel go down the drain."

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