The deep-water gas fields, discovered in 2009 and 2010, will soon turn Israel into an energy exporter, putting the Jewish state in the enviable but tricky position of trying to sell billions of dollars in surplus gas to neighbors that range from cool to downright hostile.
The questions are: To whom will it sell? And how?
Some Israeli leaders have suggested a “gas for peace” strategy whereby Israel provides gas at competitive rates to neighbors that want to buy.
But they also acknowledge that some Arab countries might refuse gas — at any price — from Israel. For years, many oil-rich Arab nations have declined to directly supply Israel with oil.
“There is an interesting cocktail of possibilities,” said Pinhas Avivi, political director of multilateral, global and strategic affairs at the Israeli Foreign Ministry. “The trick is to use the gas to solve problems, not create new problems.”
The Israeli leadership will soon announce how much future production it will allow companies to export. At the same time, politicians have begun to think about what to do with the billions of dollars that the state will take in royalties and taxes.
Economists are advising that the windfall be stashed in special funds for future pensions or rainy-day needs, as Norway does with its oil wealth, so as not to flood the Israeli economy with gas money. A rapid infusion of petrodollars could inflate the value of the Israeli shekel to the point that it hurts the country’s export competitiveness in other areas — a phenomenon known as “Dutch disease,” which Israel’s central bank says it does not want to catch.
The first major Israeli gas field, called Tamar, began production in March, and natural gas is now flowing from sea to land. Prime Minister Benjamin Netanyahu hailed it as “an important step toward energy independence.”
A far-larger offshore find, appropriately called Leviathan, holds a gas reservoir the area of Las Vegas and is scheduled to go onstream in 2016. When it was discovered in 2010, Leviathan was the world’s largest deep-water discovery in a decade — it held enough gas to meet all of Europe’s needs for a year.
Reversal of fortune
The discoveries represent a twist of fate for a country that until recently relied on imported coal, diesel and heavy fuel oil to generate electricity. Israel has been vulnerable not only to the vagaries of the global energy market but also to attacks on the infrastructure that keep the country running.
Two years ago, Israel was getting 40 percent of its natural gas from Egypt. But in the aftermath of the popular uprising that toppled President Hosni Mubarak, Egypt’s pipeline across the turbulent Sinai Peninsula to Israel was sabotaged by militants more than a dozen times. Last year, Egypt canceled its contract to sell gas to Israel.