Oil and Gas in Israel

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Israel has traditionally been short of energy sources. Despite being in the Middle East, surrounded by oil-rich neighbors, only the most negligible oil or gas had ever been found in Israel. For a short period after the Six Day War and before the peace agreement with Egypt, Israel benefited from the oil in the southern part Sinai.

Oil Rig

Over the years, oil & gas has been one of Israel’s main imports. Most people had given up on the hope of ever finding significant energy in Israel. Then, in 2000, a small gas field was revealed off the coast of Ashkelon, in Southern Israel. That field was found to contain 33 BCM. In 2009, a new field was located 60 miles off the coast of Haifa. That field was much larger containing 223 BCM, and was named “Tamar”. An even larger field called “Leviathan” was discovered and was estimated to have 621 BCM. A number of smaller fields were identified at the same time.

Tamar began production in 2013, and has begun to supply all of Israel’s domestic gas needs, including a steady increase in the percent of Israel’s electric plants that run on gas.

Israel’s total gas reserves are estimated to be valued at around $240 billion.

The question of ownership and price of the gas has been a major political issue in Israel. In addition, the gas companies signed a long-term contract to supply the Israel Electric Company with gas at what now turns out to be above market rates. This has been a factor in the recent increase in electricity rates in Israel. This agreement has been heavily criticized.

A committee was created in 2010 to determine what royalties the gas companies should provide the Israeli government. Under the new law, adopted based on the findings of the Sheshinski Committee, royalties on the gas are set at 12.5%. In addition, the state will take up to 62% of what is described as excess profits. Israel has established a sovereign wealth fund for profits the gas is expected to provide. To date, no money has been invested in the fund, as the state has repeatedly pushed back the date it expects to start receiving funds. The Leviathan field is expected to start producing gas by the end of 2019.

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