Israel is a nation that has built its economy on downstream industries, being traditionally bare of natural resources and primary materials. Now, thanks to offshore discoveries of massive natural gas reserves, the tiny Mediterranean country is hoping to change that.

Thanks to the estimated 2.4 trillion cubic feet of natural gas lying in the Karish and Tanin gas fields, along with the previously-discovered Tamar and Leviathan deposits (found in 2009 and 2010, respectively), Israel is looking to become energy-independent for the first time in the nation’s history, and they’re not stopping there. The economically ambitious country is already organizing a push into foreign markets, becoming an exporter of natural gas.

Back in 2016, Israel approved the sale of the Karish and Tanin fields to Greek gas exploration firm Energean Oil & Gas PLC in an effort to move a step closer to their goal of domestic energy independence. Now, in March 2018, the board of directors at Energean has finally given the official green light on a final investment decision (FID) to move forward with their funding of $1.6 billion into the development of the still-untapped Karish and Tanin natural gas fields. The Greek firm has publicly stated that they’ve already secured long-term agreements with some of Israel’s largest private power producers who, in combination with some big-name Israeli industrial companies, have contracted purchases of 61 billion cubic meters of natural gas over 16 years. Related: The Truth Behind Oil’s Recent Price Spike

Energean, which recently raised over $400 million for the project in a recent initial public offering (IPO) of shares in London, will be developing a floating production, storage and offloading facility that will have the capacity to treat 8 billion cubic meters of natural gas per year. The Greek company also announced plans to build a 90-kilometer pipeline to transport the gas from the offshore facility to the Israeli mainland, allowing connection to the domestic gas grid. Drilling at the Karish field is slated to begin in 2019, and Energian has projected that their gas will hit the domestic market in the 2021. This will be followed by the drilling of 6 wells in the Tanin field, to be connected to the floating production and offloading facility.

Energean will be working in competition with the already-established and much larger fields of Tamar and Leviathan (estimated to hold up to 8.4 trillion and 18.9 trillion cubic feet of gas, respectively), controlled by the stakeholders of U.S. firm Noble Energy Inc. and units of Israel’s Delek Group.

In addition to these domestic-market developments, Israel has also cut a deal with Egypt to export natural gas, despite the North African nation’s own massive gas reserves and the two nations’ shaky diplomatic relations. Private Egyptian gas supplier Dolphinus Holdings agreed to a $15 billion deal to buy gas from Noble Energy and its partners from Leviathan and Tamar on February 19. The deal is groundbreaking in several ways, not the least being the economic exchange between former political enemies. Related: China's Oil Futures Launch With A Bang

On one hand, the deal allows Israel to advance its goal of becoming a player in the global gas market for the first time ever. On the other hand, however, it helps Egypt reinforce its position as a major gas hub in the region, which could lure potential customers away from Israel’s new gas exports. This month a $19.5 billion dollar and 15-year deal for with a Spanish company fell through, as the company decided against Israeli gas and moved their sights toward Egypt’s giant Zohr field instead.

Despite this pitfall, Israel is making huge gains in the natural gas industry overall, especially considering where the country was just a few years ago, with virtually zero natural resources to its name. Now, with a major deal with Egypt under their belt and significant developments underway in their newly discovered gas fields, Israel is charging forward toward a future in the energy sector. Prime Minister Binyamin Netanyahu has discussed possible future deals with Bulgarian President Rumen Radev, and Royal Dutch Shell is considering a 15-year deal with Israel to feed its Egypt-based liquefied gas plant.

The question is whether this momentum will last. As Egypt continues to explode into the regional natural gas hub next door, it will remain to be seen whether Israel will continue to benefit from foreign interests in the region or be left behind.

By Haley Zaremba for Oilprice.com

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