HomeBusinessThis is how natural gas will help the Israeli economy

In April of this year, Greek energy producer Energean discovered a significant natural gas reserve off Israel’s coast in the North Karish gas field. Initial estimates put the numbers between 28 to 42 billion cubic meters (bcm) of natural gas. This is not the first large deposit of natural gas discovered near the shores of Israel; 45 bcm was previously discovered at Karish and an additional 22 bcm was found at the Tanin gas field. 

When Israel first struck gold (aka gas)

Israel’s first major discovery of offshore gas reserves was in 1999, when the Tethys Sea Partnership discovered the Noa field near Ashkelon. A year later, a second gas reservoir, the Mari-B field, was discovered southeast of Noa. In 2009, Noble Energy and its partners discovered the Tamar field, which has approximately 240 bcm of gas reserves. At the time, it was the largest discovery of natural gas in Israeli territory. However, the Leviathan structure was discovered a year later, and it has an estimated 500 bcm of natural gas, making it the largest natural gas reserve in Israel to date.

No longer dependent on external providers

From 2005-2012, Israel’s main source of natural gas was Egypt and was imported via the al-Arish-Ashkelon pipeline. That, however, can to an end during the Egyptian Crisis, which lasted from 2011 to 2014. But the timing was fortuitous, since large natural gas reserves had been discovered earlier and were then being extracted for both domestic use and international export. 

What do the discoveries of natural gas mean for the Israeli economy?

For starters, these discoveries give Israel the opportunity to be energy independent, which is a pretty big deal. No more paying millions of dollars to other countries; Israel will now be the one selling abroad and using reserves domestically. According to Forbes, Israel will earn approximately $20 billion in taxes and royalties from selling natural gas, and at the same time, save $9 billion that would have been spent purchasing more expensive fuels. However, this great news also comes with expectations; tax paying citizens in Israel will expect to benefit from this new found resource with lower energy costs. 

This will provide a great boost for the Israeli economy; it will simultaneously have geopolitical repercussions. Countries with a history of aggression toward Israel may soon be cozying up to her in need of natural gas; or new alliances may be formed, perhaps in favor of Israel or perhaps not. While Israel’s natural gas reserves are making the country an economic force to be reckoned with, it’s hard to tell how it will play out down the geopolitical road. 

Plans for distribution

Israel plans to sell its natural gas to nearby countries, including Jordan, Egypt, Turkey, Greece, and Cyprus. The latter two have already met with Israel and agreed to build the EastMed pipeline for $7 billion. The pipeline will stretch 2000 kilometers and transport 10 bcm of natural gas to the two countries every year. 20 billion cubic feet of natural gas will also be sent to Europe via an intersection of the EastMed pipeline with the Poseidon pipeline. 

But Israel doesn’t plan on neglecting its neighbors, Egypt and Jordan. Israel and Jordan already have a natural gas agreement, which they signed five years ago; the agreement is worth $10.5 billion. Recently, Israel signed a $15 billion deal with Egypt. In short, Israel’s natural gas supply is translating into major international energy deals.

The next step

Israel’s Ministry of Energy recently held a second round of bids for offshore exploration rights; as of now, two bids were received. The small number of bids is disappointing, especially since ministry leaders met with representatives from several international energy companies. Even ExxonMobil purchased the tender documents. 

However, Minister of National Infrastructure, Energy and Water Resources Yuval Steinitz was clear about the country’s goals. “We are continuing to work to make Israel into a regional energy power,” he said. And as more natural gas reserves are being discovered, that goal is certainly attainable.