For years Israelis have watched their oil-rich Arab neighbours and envied their abundant energy supplies and the political clout that they bring. More than 400 onshore and 25 offshore oil wells have been drilled in Israel since the 1950s – all to no avail. But recent developments are prompting some to think there could be a new natural gas kingdom – and a Jewish one at that.
A report just published by the United States Geological Survey (USGS) suggests there may be 122 trillion cubic feet of natural gas in the area between Israel, Cyprus and Lebanon. That is more gas than the whole world consumed and produced in 2008, and according to the agency, it is “bigger than anything we have assessed in the United States”. According to these estimates, only half of the potential gas belongs to Israel and then there’s the problem of how to drill for it successfully and carry it to shore.
But now the Israeli government has confirmed that the Russian energy giant Gazprom is negotiating for drilling licences in the few gas fields that are already operational in Israeli waters. But nobody believes that such a big player would want to come to Israel unless it was convinced there was more potential than that. All of these events have electrified the sector.
Until 2009, Israel was almost entirely dependent on energy imports. But then gas fields were found, attracting local moguls such as Isaac Tshuva, owner of the Plaza Hotel in New York, and also global players such as Noble Energy, whose CEO Charles Davidson said last month that “Israel is now the best place to be in”.
Finding adjacent gas fields increases the probability of finding even more in the same region, and the Tel Aviv stock exchange reacted accordingly. The value of gas-related companies has soared 720 per cent since the beginning of 2009.
And the economic implications for Israel are huge, says Amit Mor, CEO of financial consultants Eco Energy. “The benefit to companies such as Israel’s Electric Corp of not needing other energy sources would save them tens of billions of dollars over the next 20 years.” But this gas rush also has far-reaching strategic implications, says Dr Shmuel Even, an economist specialising in Middle East energy and security issues. “Becoming independent of energy import is a historic revolution for Israel,” he says, “especially because of its geographical location in an unstable region.
“ Some critics warn of a gas speculation bubble. But even more interesting is that Israel’s lack of natural resources has actually been one of the main causes of its economic success – it forced policy makers and businessmen to be ever more innovative and focus more on science and technology. It will be a challenge for Israel to become self-reliant in its energy policy, and still retain its competitive edge. But that would be a nice problem to have.