Israel—New natural gas producer in the Mediterranean

1. Introduction

For most of its history, Israel has been an energy-poor state, relying almost completely on imported fossil fuels to meet its energy needs. Due to the state of war and conflict with most of its neighbors, Israel has also functioned as an ‘‘energy island,’’ not linked to energy infrastructure in neighboring states, with the exception of gas supplies from Egypt. Israel has two additional energy security challenges: ensuring energy supplies for the military during times of conflict and ensuring the physical security of its energy infra- structure, which can be targeted during war or by terrorists. More- over, Israel fears denial of supplies more than most energy importers, due to a history of embargos by Arab oil producers and previous attempts to block Israel’s ports in times of conflict.

In 2009, Israel’s energy supply options changed dramatically when major offshore natural gas deposits were discovered near Israel’s port city of Haifa. When brought to market, this gas will satisfy a large portion of Israel’s domestic energy consumption needs for a number of decades. The government and the companies that hold the exploration licenses are also considering exporting some of the gas.

Explorations are continuing off Israel’s coast, and there are strong indications that additional reserves of natural gas and perhaps of oil will be discovered. Lebanon and Cyprus have also initiated exploration off their coasts, and there may be additional major natural gas and oil discoveries in the Eastern Mediterranean in coming years.

This article will examine Israel’s newly discovered natural gas reserves and the implications of this discovery for Israel, the Middle East, and the Mediterranean region. The article will discuss Israel’s energy security approach; Israel’s new natural gas reserves; the role of natural gas in Israel’s energy consumption patterns; the organization of Israel’s natural gas sector; regional political and security implications of the natural gas discoveries (including potential conflict with Lebanon); prospects for natural gas export; and the outlook for various natural gas markets. Most of the academic literature published to date on Israel and energy focuses on its predicament as an energy-poor state, centering on its drive to achieve access to energy supplies,1 its attempts to serve as an energy transit state,2 or how energy needs have constrained Israel’s security and foreign policy.3 This is one of the first articles to reflect the significant changes that have occurred in light of new natural gas discoveries off the coast of Israel.

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