Israel’s Natural Gas Discoveries Are Bridging Political Divides And Are Forging Economic Ties

Even more natural gas has been found off Israel’s coastline, which may help shift the global energy paradigm. Greek oil and gas developer Energean has discovered what it says is between 28-42 billion cubic meters of natural gas, all on top of the 67 billion cubic meters that it has already located.

The discovery comes atop earlier ones a decade ago that are getting tapped and will be eventually distributed to former adversaries of Israel: Jordan and Egypt. And there are also plans to sell the natural gas to Turkey, Greece and Cyprus. Indeed, if Israel blossoms into a regional energy powerhouse, it could have profound implications for geopolitics — and possibly extend as far as East as Iraq. 

“We are delighted to be announcing this significant new gas discovery at Karish North, which further demonstrates the attractiveness of our acreage offshore Israel,” says Mathios Rigas, chief executive of Energean, on Monday. We will “safely and economically develop both Karish North and future discoveries,” he adds, noting that its most recent finds have been purchased under contract. 

Greece and Cyprus have met with Israel and have agreed to build a 2,000 kilometer, $7 billion EastMed pipeline, which will transport 10 billion cubic meters of natural gas to those countries each year. The line will then intersect with the Poseidon pipeline, sending 20 billion cubic feet of natural gas throughout Europe.

Next up is Jordan and Egypt. About five years ago, Israel and Jordan signed a natural gas agreement worth $10.5 billion and just recently, Israel and Egypt inked a $15 billion deal. It is worth noting that the Trump administration has placed strict trade sanctions against Iran, which sells 28 million cubic meters to Iraq and which gets 45% of its electricity from Iranian-produced natural gas. While Saudi Arabia has said it would step up, it does leave open the remote chance for a newly-forged relationship between Iraq and Israel.

Iraq has been granted a waiver to continue buying its natural gas from Iran, although that reprieve ends in June. The United States, in fact, is helping Iraq capture the natural gas it now flares while it is drilling for oil. Israel gets much of its oil from Iraq’a northern territories controlled by the Kurdish; about half of its crude makes its way to Israel, says the analytics firm Clipperdata.

“Countries that engage in discussions of the topic at hand often wind up discussing other matters of broader interest,” says Bar-Ilan University Professor Yossi Mann, in Bloomberg. “It is a relationship-builder.”

The Israeli Dilemma

Israel was always thought to be bereft of any energy resources. But then in 1999, U.S.-based Noble Energy and Israel-based Delek Group discovered the Noa gas field off the shores of Ashkelon. And in 2009, as much as 10 trillion cubic feet of natural gas was found in the Tamar region and shortly thereafter, 16 trillion feet of natural gas was located in the Leviathan field. The newfound riches have now attracted ExxonMobil, which will submit a bid in June so that it can possibly explore off the shores of Israel.

Israel now has to decide just how much of the natural gas it will keep for its own purposes and how much it will export throughout the Middle East and North Africa, as well as to eastern and western Europe. Russia, too, may need to cozy up to Israel so that it help distribute that newfound natural gas.

Israel is already making use of the natural gas discovered off of its coastlines. About 70% of Israel’s electricity is now fueled by those resources, says Norman A. Bailey, professor The Institute of World Politics, for the Jewish Policy Center. Soon, he adds, it will be 100%. Even its commercial and public vehicle fleet will ultimately run on natural gas while private cars will be electric or hybrids.

Moreover, Israel will receive about $20 billion in taxes and royalties while saving $9 billion that would otherwise be spent on more expensive fuels to make electricity. At the same time, it is reducing pollution levels as a result of its switch from coal-to-natural gas. In the five years since the Tamar field went on line, he says that pollution levels have dropped by 48%.

Will Israel be able to leverage its natural gas discoveries with other nations in its region — ones that have been historically hostile to it? Yes, but political risks remain while logistics are problematic.

“Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have formed a front against Iran and its Gulf ally Qatar, bringing them ever-closer to Israel politically and militarily …,” says Professor Bailey. But “if Israel is forced into a war with Iran or with a terrorist organization such as Hezbollah, Hamas, Islamic Jihad, al-Qaida or ISIS, both offshore and onshore facilities are at risk, including all offshore platforms.”

Israel has been blessed with new natural gas discoveries, including the latest announced this week by Greek oil and gas developer Energean. The findings have not just reshaped Israel’s electricity portfolio but they could also potentially alter the region’s geo-political dynamics. Former enemies, in fact, may become trading partners and go on to form long-lasting economic ties.