Rupert Murdoch is one of the world's best known media barons and may or may not be a bud to Steve Jobs. But as hype swelled around his iPad digital project, The Daily, Murdoch was also investing in an Israeli-American oil shale company with ties to Dick Cheney. Can his legendary business savvy help out an upstart oil firm?
Oil shale may be the answer to worries about peak oil, but it is highly expensive to extract and has a high ecological cost.
Lord Jacob Rothschild and Murdoch just purchased a joint 5.5% stake in Genie Oil and Gas Inc., a division of the IDT Corporation. The equity stake purchase by Murdoch and Rothschild is worth approximately $11 million. Genie is a new face in the energy market; the company just launched this summer.
Murdoch is slated to join Genie's advisory board. Other members include:
American Shale Oil CTO Alan K. Burnham
Former Vice President Dick Cheney
Genie chairman and Midland, Texas mayor Wes Perry
Former Exxon Mobil executive vice president Eugene A. Renna
Allan Sass, former president and CEO of Occidental Oil Shale
Hedge fund investor and philanthropist Michael Steinhardt
Stephen M. Trauber of UBS Investment Bank
Harold Vinegar, former chief scientist at Royal Dutch/Shell
American Shale Oil is a joint venture between IDT and French firm Total S.A.
Public statements by both Genie and their investors have stressed the firm's American and Israeli (read: non-Arab, non-Iranian, non-Venezuelan) roots. According to a statement by Murdoch, "I believe Genie Energy's technologies and vast shale oil licenses have real potential to spur a global, geo-political paradigm shift by moving a major portion of new oil production to America, Israel, and other western-oriented democracies." Murdoch also said that "Covering and distributing news has been my life's work […] If Genie's effort to develop shale oil is successful, as I believe it will be, then the news we'll report in the coming decades will reflect a more prosperous, more democratic, and more secure world."
Perry was even more explicit, stating that "Both America and Israel have significant shale oil reserves. It’s difficult to overstate their potential to improve our respective economies and national security. […] Genie Energy is developing the technologies America and Israel want to make rapid progress toward energy independence, while IDT Energy is poised for continued growth in the consumer market. I’m very excited to work with their management team to help meet the energy needs of the U.S. and Israel for decades to come."
Genie is currently working on two oil shale exploration projects in the United States and Israel.
In Colorado, Genie is involved in American Shale Oil's extraction testing project in Colorado's Green River Formation. The Green River Formation is the largest oil shale deposit in the world and is believed to contain anywhere between 1.2 and 1.8 trillion barrels of oil. Much of the oil is currently inaccessible; however, even the currently accessible amount of 800 billion barrels in Green River exceeds Saudi Arabia's explored oil reserves. American Shale Oil is one of four companies that was given a tender to develop the Green River Formation; the firm's portion of Green River is believed to contain 10 billion barrels of oil.
Meanwhile, Genie is embarking on a large-scale project that could turn Israel into a major oil producer. Genie is the 89% owner of Israel Energy Initiatives (IEI), which just landed a shale oil exploration and production license covering 238 square miles in the Judean Hills. According to Amiram Barkat of Israeli business publication Globes, "The company believes that its shale oil cracking technology can free the world from dependence on Arab oil and turn Israel into an energy powerhouse able to produce 300 billion barrels of non-conventional oil at a cost of up to $40 per barrel." IEI is embarking on a pilot project in the Valley of Elah in the Judean Hills to produce 500 test barrels of oil, despite fierce residential opposition. Communities around the Valley of Elah have become well-off bedroom suburbs of Jerusalem and are home to a large nature reserve and a thriving wine industry.
Geopolitical troubles may prove to be a future headache for Genie: The shale oil formation their Israeli tender gives license is adjacent to the border between Israel proper and the West Bank. Areas of the shale oil formation may spill over into the West Bank; the separation wall between Israel and the West Bank runs adjacent to the believed oil-containing lands.
According to Rothschild, "Rupert Murdoch's extraordinary achievements speak for themselves and we are very pleased he has agreed to be our partner. Genie Energy is making good technological progress to tap the world's substantial oil shale deposits which could transform the future prospects of Israel, the Middle East and our allies around the world."
[Photo via World Economic Forum]