Israel seems to be living up to its reputation of being the land of milk and honey. Long known for its lush agricultural produce from arid soils, Israel has recently discovered extensive reserves of natural gas and oil around 80 miles off its northern coast. The Leviathan offshore gas field, named after the mythical sea serpent of Hebrew mythology, is the world’s biggest deepwater natural gas discovery in a decade with an estimated 16 trillion cubic feet of gas reserves. And with tests revealing that there could be an additional 4 billion barrel cache of oil beneath the underwater gas field, the stakes are high.
Could Israel be transformed from a country dependent on oil producing nations for energy to an energy exporter? If yes, the scenario could lead to a repositioning of the geo-political chess pieces in the Middle East. Until now, Israel has been importing nearly all of its oil from Egypt, Norway, the United Kingdom, West Africa and Mexico. So Leviathan has the potential to empower Israel in the region.
In fact, Israel’s hostile neighbors, like Iran and Lebanon are already lining up to counter Israel’s newfound advantage, and stake a claim of the bounty. Nabih Berri, the speaker of Lebanon’s parliament and Hashem Safieddine, executive council chief of the Islamic movement Hezbollah, told international media that, in fact, part of Leviathan belongs to Lebanon and not Israel. Tehran’s ambassador to Lebanon, Qazanfar Roknabadi has gone so far as to claim that three-quarters of the Leviathan field belongs to Lebanon. Uzi Landau, the Israeli infrastructure minister, responded that Israel has the rights to the maritime area where the field is located, and warned Lebanon that Israel will not hesitate to use force to protect its mineral rights.
There have also been issues between the Israeli government, and the companies owning the drilling rights for Leviathan, namely Delek Group Ltd., Noble Energy, Inc., and Ratio Oil Exploration. With the energy leases and the tax regime unchanged since the 1950s, the Israel government is up against a road block when it comes to profiting from the gas find. Finance Minister Yuval Steinitz said he was considering changing terms retroactively, which means the Israeli government could enjoy better terms on previously assigned leases. Noble Energy and Israeli oil executives have been lobbying against such changes. Israeli Prime Minister Benjamin Netanyahu has since declared that Israel is sovereign, and is free to change its tax regime. When it comes to heated drama, the Middle East does not fail to disappoint.
The drilling of Leviathan commenced in October 2010. But last year’s Gulf of Mexico oil spill has ignited concerns over deep sea drilling, not only within the environmentalist community, but also among the ranks of energy companies and governments. This includes the Israeli Minister of Environmental Protection, Gilad Erdan, who is advocating legislation to manage environmental aspects of offshore oil exploration. That said, Leviathan has certainly stirred up enthusiasm not only over the strategic implications of this energy discovery, but also over the prospects of trading in Israel’s energy sector. It just remains to be seen if Israel’s role in the energy saga of the Middle East shapes up to be that of a side character or a lead player.
Postcards from Around the World
Subscribe to get our global publications by email.