Game changer: Israel’s new vast deposits of natural gas 

Israelis have always lamented that Moses led the ancient Israelites to the one patch of land in the Middle East bereft of energy resources. It turns out the sea offered more promise. At the end of December, a huge
natural-gas discovery was confirmed in the Eastern Mediterranean inside Israel’s territorial waters.

Once referred to as an “energy island” that not only lacked energy reserves itself but was also cut off from the huge energy resources of the nearby Arab nations, Israel may well become an energy exporter over the next decade. The discovery of the Leviathan gas deposit in the Levant Basin marks a major development for Israel, with the potential for significant economic and strategic advantages, as well as implications for Europe, Russia and the natural-gas market.

Natural gas was first discovered off Israel’s coast in 1999, but the quantity was so small that until recently Israel was still contemplating importing natural gas from Russia by pipeline and liquid natural gas by tanker. Now Jerusalem’s plans are beginning to change. The Leviathan field, discovered by a consortium led by Houston-based Noble Energy, is the world’s largest offshore gas find in the past decade and vaults Israel into the ranks of the largest gas reserve holders in the world. (There are some indications that Leviathan might contain a world-scale oil deposit as well.)

Analysts believe that Leviathan could provide Israel with anywhere from 50 to 200 years of gas, at current levels of use, and will  more than meet growing demand for decades. In a few years, Israel will no longer need gas from Egypt, which since 2008 has fueled 16 percent of Israel’s electricity and provided 40 percent of its natural gas. Israel plans to continue to buy Egyptian gas for the purpose of diversification and political ties, but the recent cutoff following sabotage of the gas pipeline in the Sinai highlights the dangers of dependence on Cairo.

Leviathan’s abundance means Israel could export natural gas later this decade, most likely to Europe, which will face a widening gap between supply and demand. The most economical way to export to Europe would be by converting the gas to liquefied natural gas and shipping it by tanker.

Leviathan will enhance Israel’s strategic position in at least two important ways. First, it should lead to improved ties with other nations beyond the region. LNG exports could encourage improved political ties with potential buyers, such as Greece and other European countries. Israeli relations with Cyprus have already become closer; the two nations are negotiating a maritime border demarcation and a joint agreement to develop an LNG facility.

Israeli gas exports to Europe would compete with, and lead to reduced demand for, Russian gas, and thereby reduce Russia’s political influence in European capitals. And since Israeli gas exports would be priced by the gas market, they would further erode Russia’s beneficial gas export pricing, which has been uniquely pegged to oil prices, which are higher than gas prices.

Despite some drawbacks and details to be worked out, there’s no mistaking the fact that the Leviathan find represents a landmark event in the history of the state of Israel. Perhaps after all, on the matter of energy, Moses deserves greater navigational credit.

Michael Makovsky, a former energy market analyst at investment firms, is the foreign policy director of the Bipartisan Policy. This article appeared in The Weekly Standard.

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