Special report: Israel’s hidden depths

As announcements go, it was almost lost in the sea of news, but as far as implications go, it could be one of the great defining moments in Israeli history.

So it was that Yuval Steinitz, Israel’s reluctant energy minister, told the world – via the IDC Herzliya Conference last month – that there was now a good chance that Israel had four times as much gas under its seabed as first thought.

Large deposits of natural gas off Israel’s Mediterranean coast have long been known about. The Leviathan field, which alone could meet all of Israel’s energy needs, was once dubbed a “gift from God” by Benjamin Netanyahu.

But if Steinitz is right, there could be “2,200bcm still to be explored”. Put another way, that’s the equivalent of another four Leviathans.

It could, Steinitz said, kick-start a stuttering economy, and be a “huge growth engine” at a time when investments and exports are increasingly proving insufficient to meet Israel’s needs. “Over the next two years, it will save us from zero growth per capita,” he swooned.

But Steinitz doesn’t have his eye just on domesticity. The new gas could prove Israel’s newest weapon, and by far her most potent.

Among her neighbours, many of whom are oil-rich energy giants, Israel is known for its military might but its energy needs. In short, it has only ever carried big sticks. Now it dangles a large and juicy carrot, too. If the gas could be exported via pipeline at reasonable cost to places like Egypt, Jordan and Turkey, it could have a transformative effect.

Steinitz is in no doubt what this means for his homeland, and now that the long-drawn-out process of developing a framework finally seems to be over, he says the work – and benefits – will soon be seen.

“In terms of Israel’s position in the world, this has great advantages. We could even become a significant exporter to western Europe,” he says, in a reminder to British listeners that the North Sea oil reserves are dwindling.

“If you can liquefy it, you can export it anywhere in the world. Without a doubt, this could position Israel completely differently vis-à-vis Europe and the Middle East. We will never be an energy superpower, but in the next ten years we could become a significant actor. If this materialises, it would be a dream.”

It’s nice that the minister is dreaming, says Eitan Cabel, a fiery member of the Knesset, but now he needs to wake up. “There’s an energy crisis in Israel. People actually feel it. The economic reality is that factories and plants are not connecting to gas. There’s nothing in our hands yet. All we have are stories. When will this change? How long does it take?”

An exasperated Cabel, who blames both the government and the private sector, is expressing the frustrations of many, after years of wrangling over how best to exploit the resource. But Yossi Abu, chief executive of Delek Drilling, whose company has been closely involved in what is, by some distance, Israel’s largest infrastructure project to date, has his own frustrations.

“Fifteen billion shekels, this is what they said we’d save,” says a raging Abu. “For five years we’ve had people calling us saying to us ‘give us gas’. We say ‘we can’t, we’re waiting for the framework, it’s stuck with the regulators’.”

The six-year process, a legal quagmire of drafting contracts, is widely perceived as a commercial and legislative nightmare, says Dror Strum, president of the Israeli Institute for Economic Planning. “The story of gas so far has been the saddest story,” he said. “Dozens of factories in Israel sit in need of gas, while they use methanol, crude or diesel.”

Far from Steinitz’s vision of exporting it far and wide, he says: “We need to first look at our own needs, develop our own economy. Our only growth at the moment is due to our domestic consumption. We should not be looking outwards for export, but looking inwards.”

Orit Farkash-Hacohen, the former chair of Israel’s Public Utilities Authority, agrees that Israeli industries such as glass, pharma- ceuticals, refining and petrochemicals are “suffering” as a result of hold-ups. It all comes down to the price of gas as stipulated in the contracts and as compared to global energy prices, she says.

“We’re competing with gas from the world market. The price of gas in Israel is increasing, but the price of gas on the world market is falling, and will continue to fall. So we need to make sure we’re not signed up to artificially high prices.”

Israel’s resources “should have given us a competitive edge,” she says. “But they haven’t. It comes down to price.

“The government has a monopoly, and this affects prices. The government needs to go back; it needs to look at what it did and ask what it is going to do now.”

Meanwhile, the drillers stand ready, says Abu. “More than 500 million shekels will be invested by the end of the year. This is drama. There will be a rig, the tendering process is nearing completion. The time for talk is over. It’s time for action.”