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Will Israel Be the Next Energy Superpower?

Arthur Herman

They will feast on the abundance of the seas, and on the treasures of the sands.

—Deuteronomy 33:19

Tamar sits 56 miles off the coast of Israel, an offshore gas platform rising up from the Mediterranean like a white steel beacon whose roots reach down 1,000 feet to the seabed. Named for the natural-gas field beneath the sea floor, Tamar is the symbol of a bright future for Israel if Israel is ready for it: as the newest energy producer and exporter in the Middle East, and potentially the most important.

A classic quip since the creation of the state of Israel in 1948 has been that Moses brought his people out of Egypt to the one spot in the Middle East that didn’t have oil. “We proved that joke to be wrong,” says Gideon Tadmor, chairman of the Delek Group, one of a consortium of companies that built the Tamar platform. Delek and its partners began extracting gas from Tamar in March 2013 and has been doing so with the natural gas from three other fields as well. Ten years ago, Israel was a country 80 percent powered by coal, with the remaining 20 percent from oil—all of which had to be imported. Now, natural gas supplies half those energy needs. The known fields could contain more than 900 billion cubic meters of natural gas. In global terms, that’s not much—roughly the amount the United States consumes in a year. But for a country of only 8 million people, it’s an energy bonanza. And, according to the U.S. Geological Survey, the Levant basin in which Israel’s fields sit may contain a total of 3.5 trillion cubic feet of natural gas—about half the reserves in the United States with a fraction of the demand.

Nor is that all. Even before the first discoveries of natural gas in 1999, geologists had determined there were huge oil-shale fields stretching along Israel’s coastal plain. Those fields contained recoverable reserves, according to the latest estimate, of up to 250 billion barrels—almost equal to Saudi Arabia’s.

In short, Israel is poised not only for future energy independence, but for becoming a major regional energy player—maybe even, if it uses its resources wisely, the next energy superpower. The looming question, however, is not whether the world is ready for Israel to be the next Texas. It’s whether the Israelis are ready.

I got my introduction to the Tamar platform, and to Israel’s adventure in becoming an energy player, even before my wife, Beth, and I arrived in Israel, on the plane from Newark bound for Tel Aviv. The passenger sitting next to us looked as if he was headed for a country-music festival. He wore a baseball cap with the logo of Noble Energy—one of the key players in the natural-gas revolution. We learned he had spent 30 years in the oil and gas business as a platform operator, including in West Africa and Thailand, before Noble had sent him out to Israel. Now he works on the Tamar platform. After 28 days there, he’ll head home to Louisiana for four weeks to see his family and kids; they will be able to afford college thanks to the money he’s earned working for Noble in Israel.

He also pointed out his fellow workers on the plane scattered among the Orthodox and Hasidic passengers—“roughnecks” (members of a drilling crew), “tool pushers,” and mechanics. They all hailed from Texas, Oklahoma, and his native Louisiana, and one or two wore baseball caps with Hebrew lettering. These are the migrant laborers of Israel’s newest industry, and proof of how much Israel depends on the United States for exploring, drilling, and developing its new-found energy resources. That may change as Israel’s talent for innovation gets focused on energy technologies; Israelis themselves may accelerate the transition to faster, more efficient, and environmentally safer exploitation of both deep-water gas reserves and what are called the “unconventional oil sources,” meaning oil shale and oil sands.

Indeed, it is in oil shale that the story of Israel’s energy revolution really begins.

Israel has had a long and bitter history of looking for oil and finding none. Beginning in 1953, the National Oil Industry began launching a series of exploratory drilling holes. In just over 33 years, it sank more than 410 wells—and found exactly five gas fields and three oil fields. The country’s most productive oil field is near Helez, and it wasn’t even discovered by Israel; Iraq Petroleum found it before 1948 and then sealed it up when Israel achieved its independence. Since the Israelis opened it again in 1955, Helez has produced 17.2 million barrels—an amount that would power Israel’s current economy for only five weeks. In 1986, the Israeli government finally gave up and suspended its three-decade ritual of frustration.

Then, just two years later, the ground shifted, almost literally, under the government’s feet. The very first comprehensive geological survey of Israel, including the coastal plain, revealed the existence of large deposits of oil shale, or kerogen.

Kerogen is a pre-petroleum organic compound of dead algae from long-extinct bodies of water. It is, in effect, a precursor to oil. Under great pressure and heat, kerogen can turn into the same kind of hydrocarbon compound as conventional petroleum. Rich kerogen deposits are found all over the world, from the Green River formation in Colorado to the Jordan River valley, including Israel.

Once the discovery was confirmed in 2006, the Israeli government began looking for partners in the United States. American companies had been wildcatting in Israel for decades. But while most knew how to drill, they were clueless about where. Instead, like Zion Oil’s John Brown, they were managed by Christian fundamentalists who were literally relying on the Word of God as their guide. One wildcatter in the 1960s was led by a passage from Deuteronomy to conclude there was oil located somewhere on the ancient lands of the tribe of Asher, on “the foot of Asher” between Haifa and Caesarea. No luck.

In 2007 the search for an American partner brought an Israel Petroleum Authority official to Houston and the offices of Shell Oil. It was a smart choice. Shell had been making breakthrough discoveries in how to produce oil from shale rock, thanks to its chief scientist, Harold Vinegar. He had modified a process, developed by the Swedes during World War II, of distilling kerogen into a usable fuel—an innovation that made the extraction of oil shale in Colorado’s Green River formation feasible and economical.

Vinegar had been working in Colorado when he learned about the rich kerogen deposits in Israel that extended into Jordan. Shell had already partnered with Jordan’s King Abdullah—and Vinegar, a Jew, was unhappy that the project didn’t include Israel, especially since the best shale rock was known to be on the Israeli side of the border. But he also knew that Shell, like all the other major oil companies, feared offending the Saudis by involving itself in Israeli oil speculation. Vinegar knew the Israeli official was on a fool’s errand.

One night the official came to dinner with Harold and his wife, Robin, and pressed Vinegar again and again. “Are you sure you can’t get Shell to come to Israel?” Vinegar had to keep repeating, no there was no way that was going to happen.

So the official suddenly changed gears. “Then you come!” he urged Vinegar. “Start a company. Put in an application for oil-shale exploration rights.”

Vinegar had been to Israel exactly once, back in 1972. His roots were in America. He had never formed a company in his life. But as Vinegar tells the story, the Israeli wouldn’t take no for an answer. Finally the Israeli took his leave, but not before he made one last pitch: “You just come,” he told Vinegar. “The money will find you.”

On October 31, 2008, Vinegar wrapped up his job at Shell and made the move. He was joined soon afterward by Yuval Bartov, who was teaching petroleum geology at the Colorado School of Mines. With backing from an American investor named Howard Jonas, whose path he had crossed working in Colorado, Vinegar was able to raise the money to create Israel Energy Initiatives in 2009, with Yuval Bartov as its first employer.

Today Israel Energy Initiatives sits in Har Hotzvim, the modernistic office park outside Jerusalem where many of Israel’s most innovative high-tech companies have their headquarters (some have taken to calling it “Shalom Valley”). Vinegar is a broadly girthed, vigorous, and gregarious sixtysomething with a shock of white curly hair and a loud, infectious laugh. He reminded me instantly of Herman Kahn, whose iconoclastic theories of thermonuclear warfare sent shock waves through the American public consciousness—just as Harold Vinegar and his investors are sending shock waves through Israel’s.

Sitting down to an afternoon with Vinegar and Bartov means having an engaging seminar not just on the technology of oil shale and its extraction, but on the opportunities as well as obstacles to their vision of an oil-rich Israel. The company drilled a test well in the Elah Valley southwest of Jerusalem. Based on the information they gleaned from that test, Bartov now thinks there are at least 40 to 60 billion barrels of recoverable oil there—about one-quarter of the 250 billion barrels Bartov and the Israeli Geological Survey estimate are within Israel’s reach.

But here is the problem. Current techniques for extracting oil, including the relatively new method called fracking, won’t work with kerogen. And it is too time-consuming and expensive to mine the kerogen and then, after pulling it up, apply the heat and pressure necessary to turn it into oil.

The trick, as Vinegar and Bartov explain it, is heating and pressuring the kerogen while it’s still in the ground. To do so, they would use a series of heater wells, each six inches in diameter, driven down into the kerogen. The wells would act like a pot still for whisky, literally cooking the shale at around 300 degrees Celsius until its various components are distilled and collected. Those include natural gas, water, and hydrogen sulfide (which is highly toxic but can be isolated to make by-products such as fertilizer).

But mostly, the process (called “retorting”) would produce oil—roughly 25 barrels per ton (which equals roughly a cubic meter of oil shale). It would come out as a translucent golden-brown liquid instead of the typical black sludge that passes as crude oil—ready to go to one of Israel’s two refineries for conversion into fuel.

The process is expensive, but it can still produce oil at $40 a barrel, well below the current global price of $80–$100 dollars a barrel. If it sounds complicated or wasteful, consider: A single square kilometer of shale could supply enough oil to meet Israel’s entire needs for a year. That’s because horizontal drilling—the other technology besides hydraulic fracking that’s opened up oil and gas reserves once considered inaccessible—enables the direction of drilling to turn sideways, allowing a much wider area of shale rock to be exposed. In effect, a single well can spread its drilling tentacles wide and deep underground, making development not only more efficient, but also economical in terms of land use.

For now, Vinegar and Bartov envision a pilot program involving a series of wells in the Elah Valley heating a 30-meter zone and producing the first 500 barrels in the first year, in order to establish the commercial viability of the oil-shale project. And with reserves holding the equivalent of 250 billion barrels, that would just be the start.

In the meantime, however, their discoveries have been overshadowed by natural gas.

As with oil shale, Israel’s natural-gas story involves Israeli and American entrepreneurs working together to change the country’s energy fortunes.

The Israeli in this case was Gideon Tadmor, a former lawyer who in 1991 set up his own gas-drilling company, on the bet that the same offshore fields that provided Egypt with its natural gas from the Nile Delta might extend into Israeli territorial waters. Like his Israel Petroleum Authority counterpart, he then set off on a pilgrimage to America to find a company bold enough to open the offshore fields, and brave enough to defy any possible Arab boycott.

That company was Noble Energy of Houston—an oil-drilling company founded in southern Oklahoma by Lloyd Noble in the 1930s that had expanded its operations to offshore natural gas. For its CEO, Charles Davidson, the Israeli offer was an opportunity to use their deep-water expertise to make some money while helping the state of Israel.

Noble engineers arrived in 1999 and, with deep seismic testing, confirmed the existence of hitherto unknown deposits of natural gas just a few miles off the Israeli coast. Noble helped to sink Israel’s first offshore gas well in 2002, called Noa, followed by Mari-B in 2004. Then in 2009, Noble’s geologists disclosed to Tadmor and the Israelis that they had found a much larger field named Tamar, with roughly 10 trillion cubic feet of gas. Those were reserves rich enough to invest in erecting a $3 billion offshore platform to which gas from the entire Tamar field could be piped—the biggest infrastructure project in Israeli history. Divers operating as deep as 800 feet installed 457 miles of pipe and 1,200 miles of umbilical tubing to move the gas from fields 90 miles out to shallower water where the platform sits—the longest undersea “tie back” in the history of the offshore-energy world. The platform itself weighs 34,000 tons, and from sea floor to the tip of the platform measures 950 feet, 150 feet higher than Israel’s tallest skyscraper, the Moshe Aviv Tower in Ramat Gan.

Fifty workers labor around the clock, monitoring the flow from six principal wells—some more than 20 miles away and three miles below the seabed—to the platform, where various contaminates (sand, water, sulphur, and extraneous gases) are extracted so the final product can be shipped via a 150-kilometer pipeline to a terminal at Ashdod, from which it is fed to power stations that supply Israel’s electrical grid.

Tamar opened for business in March 2013. It currently pumps 1 billion cubic feet of gas a day, more than enough to serve Israel’s natural-gas needs—even though, thanks to Tamar and Mari-B, almost 40 percent of Israel’s electricity supply has now switched over to natural gas. The opening of Tamar was pronounced “historic” by Prime Minister Benjamin Netanyahu’s office. It was the crucial element in the Netanyahu government’s 2010 plan to enable Israel to achieve energy independence in 10 years.

But nothing prepared anyone for the next discovery, dubbed Leviathan. Found in 2010, Leviathan is more than double the size of Tamar, with 16 to 18 trillion cubic feet of gas. The full extent of the field is still unknown, but energy consultant Paul Mecray told me it’s easily one of the biggest offshore gas discoveries in a decade.

Together with Tamar, Leviathan is big enough to supply all of Israel’s energy needs for decades, even if everything in the country is switched over to natural gas from electricity to cars—and with plenty left over for a booming export business. Noble’s estimate is that Israel will be looking at $145 billion in energy savings and in revenue from taxes.

As Noble awaits approval of a lease to develop the massive field, a wealth of options open up, both for Noble and her Israeli partners Delek Drilling and Avner Oil and Gas Exploration, and for Israel. Almost all involve exporting the bulk of Leviathan’s gas. As Amit Mor, former assistant to Israeli Ministry of Energy and Infrastructure and now CEO of Eco Energy, says, “We now have gas for 50–60 years, in terms of domestic reserves, and that’s even with the most [pessimistic] figures.”

One option involves building an export pipeline to Turkey, which would want the gas as a cheaper alternative to buying from Russia. Given Israel’s up-and-down state of relations with Turkey, however—and a lack of encouragement from the current Turkish government—that option has few supporters.

More attractive is building a pipeline to Egypt, where facilities already exist to collect and process the gas—a special irony considering Egypt was once Israel’s own longtime source of natural gas until the now-ousted President Mohammed Morsi cut off the supply in early 2013.

A third option would be to create a major liquid-natural-gas hub in conjunction with Cyprus, only 250 miles as the crow flies from Israel. The island nation has recently discovered its own huge offshore fields—more than 500 billion cubic feet’s worth. The government of Cyprus would love to see that gas exported as a way to resuscitate its economy, but it needs 600 billion cubic feet to build an export facility that’s economically feasible. If Israel supplied that extra 100 billion, and shipped its own gas to the same facility, Israel and Cyprus together could become important players in the European energy market. Russia is now the principal supplier, at more than three times the global market price for natural gas—and Vladimir Putin is not afraid to use the threat of cutting off supplies for political leverage.

A European Union market for Israeli liquid natural gas could have huge geopolitical ramifications in changing Europe’s perception of the Jewish state. It’s one reason the Israeli government is negotiating with Woodside Petroleum, an Australian company that specializes in building liquid-natural-gas facilities, for a 30 percent stake in the development of Leviathan. Such a market might even make internal European pressures to boycott Israel go away. Yet Cyprus’s close ties to Russia, and its dealings with Russia’s state-run gas monopoly Gazprom, raise questions about whether relying on the Cypriot connection might be sowing the seeds of trouble later on.

Another idea I discussed with Noble officials would be to construct a floating liquid-natural-gas plant (or FLNG) that would collect, process, and liquefy natural gas for export directly from a Leviathan-based platform. FLNGs are huge and expensive—the one Royal Dutch Shell is building in South Korea for the western Australian gas fields is the size of six aircraft carriers—but it costs less than an onshore facility. A Leviathan-based FLNG could serve as the anchor for processing and liquefying Cypriot gas as well—except under Israel’s control instead of Cyprus’s.

These and other scenarios have one thing in common: the assumption that exporting a sizable portion of Israel’s gas finds is the key to getting the most out of the discoveries, financially as well as politically, and that includes exporting to Israel’s more immediate neighbors.

One of those is Jordan. Israel now has a fast-growing network of gas pipelines running from Noble and Delek’s processing center at Ashdod up the coast, and across to the east. Extending the pipeline into Jordan would help not only to create an economic bond between the two countries but also to stabilize Jordan’s economy and King Abdullah’s government, especially since Jordan’s own oil-shale project, so elaborately put together with Shell, might not produce anything until the 2020s.

The other is the Palestinian Authority. Its own offshore gas fields, Gaza Marine, lie untapped and unexplored because Hamas refuses to allow anyone to get near them—largely because Hamas’s patron, Iran, has ordered that they lie fallow. So while Hezbollah and Hamas are managing to keep Israeli gas out of Gaza and Lebanon, at least for now, Israel is opting instead to pump to the West Bank. Noble already signed a 20-year contract to supply the Palestine Power Company, starting in 2016 or 2017. A similar contract with Jordan is in the works.

There is time to weigh all options. No supplies from Leviathan can start flowing until Noble and its partners have built an onshore terminal in Israel for supplying the domestic market (two sites are now pending). That won’t happen before 2017. A FLNG couldn’t begin operating until sometime in 2018. A link-up with Cyprus would not come until after that.

All the same, combined with the promise of oil shale, Tamar and Leviathan together seem an unbelievable bonanza for the state of Israel, including its foreign relations. Back in his office at Har Hovitzim, Vinegar sees the two projects working together in harmony. “The natural gas in the Mediterranean will have a very favorable impact on the economy; but this will have a greater effect,” Vinegar told me. “[The kerogen production] means energy security for Israel, almost forever. It means an enormous continuing source of income. It means so many jobs—in both primary and related industries.” But with a wry smile, he adds, “I wish it were going faster.” The fact is, many Israelis are skeptical about Vinegar’s project and Israel’s offshore gas prospects.

And, incredibly, there are even some who’d like to put a halt to the entire proceedings.

During our visit to Israel, friends took my wife and me to a large beach north of the city of Benyamina that sits within walking distance of their former kibbutz. They explained that this beach was one of the sites where Noble Energy had proposed building a reception terminal for Leviathan, until residents and communities banded together to say no, and in a series of furious public meetings blocked the plan.

For many in the Benyamina area, including our friends, the words Noble Energy are dirty. Listening to the roar of the surf and watching the sun set in an explosion of orange and pink over sand dunes that have been largely untouched since Phoenicians came to trade here three millennia ago, it was easy to see why.

The sudden oil and gas explosion has set off a predictable blowback from elements of the Israeli public, and the Israeli political class, especially on the left. It’s not just the “not in our back yard” mentality and fears of burgeoning industrial sites where there used to be pristine beaches, or the specter of historic sites in the Holy Land destroyed in a reckless quest for oil (Elah Valley is where the Bible tells us David fought Goliath). It has also triggered a furious campaign from environmentalists, who’ve gone after the oil-shale project with the same rage and determination as opponents of fracking in this country.

Leading the environmentalist charge since 2011 has been Orr Karassin, who represents the Green Zionist Alliance on the board of directors of the Jewish National Fund. She spearheaded a high-profile report opposing oil-shale production and Vinegar’s pilot program. “There are too many questions,” she told the Jerusalem Post, “regarding the environmental consequences,” especially regarding safety concerns, including pollution of the water table, the possibility of underground fires, and even, she says, “very substantial indications of seismic activity, to the point of earthquakes.”

Others share her apocalyptic vision of what might happen if Vinegar and his team get their way. “The Elah Valley will be turned into a great oil-shale production site,” an article in Haaretz claimed. “Its vistas will likely be ruined, its soil and groundwater polluted by heavy metals, and its clean air will become a distant memory.”

Vinegar rolls his eyes at the suggestion that his production method will trigger earthquakes. The retorting process he and his team would use is “environmentally sound,” he says emphatically. Since the process is operated at pressures below hydrostatic pressure, any flow will be into the heated zone, not out into the aquifer, which is protected by thick layers of impermeable rock.

In addition, he points out, unlike conventional oil drilling, the retorting process will leave a tiny environmental footprint: less than a square kilometer over the life of 30 years of production, thanks to horizontal drilling.

Karassin and her supporters remain unconvinced. Any oil-shale pilot program, she says, “must be defined to the point where the impact of the technology is clear.” But as Vinegar and Bartov point out, there’s no way to understand the impact without a pilot program: “I’m sure we’ll have a very small impact on air and no effect on water. But the pilot has to show it.”

It’s a classic catch-22, with opponents saying a project should be blocked because the technology is untested even though the only way the technology can be tested is by running the project. Yet Karassin is honest about the fact that, even if every environmental concern were answered, she would still be opposed: “Oil shale does not synchronize well with the current Israeli policy on alternative” energy sources such as wind, solar, and biofuels, she told the Post. (The Netanyahu government publicly pledged to convert 10 percent of Israel’s electricity production to so-called clean renewables.) “Israel’s wider interests must take precedence. And those require that the oil shale stays where it is.”

Vinegar is incensed at this myopia masquerading as farsightedness. Oil, even more than natural gas from the sea, “means energy security for Israel, almost forever.” It offers more options than just relying on gas exports as a national energy dividend, and in more concrete terms. Israel’s vehicle as well as civilian- and military-aircraft needs amount to 50,000 barrels of oil a day. A successful program in the Shfela basin could deliver as much as four times that, or 200,000 barrels a day—more than enough to sustain Israel’s fighting forces on the ground and in the air during a prolonged crisis.

Critics like Karassin refuse to listen, or don’t care. Yet the green lobby has twice failed to halt the Elah Valley pilot project in Israel’s Supreme Court. Vinegar’s Israel Energy Initiatives is now embarked on the final review process, which will take another nine months (it may be another year and a half before final approval of contracts to get started).

But the Greek chorus of critics doesn’t stop with the Vinegar project. Their attacks extend to the coming offshore gas bonanza as well.

A “clean” fossil fuel like natural gas makes a difficult target for attacks based on environmental grounds. But there are worries that the Israeli energy boom will have the dire economic impact known as the Dutch Disease. The term was coined by the Economist to describe what happened when discovery of natural gas in Holland in 1959 triggered a decisive decline of other sectors of the economy, especially manufacturing, as revenues from natural-gas exports pumped up the price of the guilder and made other Dutch exports less competitive. When the gas boom was over in the early 70s, the Dutch economy was in worse shape than when it started. In many ways, it still hasn’t recovered.

The Bank of Israel has dealt with a possible outbreak of the Dutch Disease in a report issued in April 2013. The bank recommended creating a sovereign wealth fund, or national pension fund, to ensure that export income from the sale of gas doesn’t convert into shekels or enter the Israeli economy or even the national budget. This should quell any distorting effects. Still, many remain skeptical and worry about what will happen to Israel if and when the gas runs out.

Still others worry about security concerns, and the possibility that Israel’s emerging oil and gas facilities, including its offshore gas platforms, make perfect targets for terrorist attacks. As Eco Energy’s Amit Mor notes, Israel’s current floating storage re-gasification unit six miles off Hadera already makes it a “sitting duck” for groups such as Hezbollah and Hamas. If jealous neighbors like Lebanon (which is already insisting that parts of the Leviathan field extend into its own EEZ) or oil-rich countries in the region, such as Iran feel the heat from Israel’s emergence as a major energy player, will they look for ways to shut it down—ones that include terrorist destruction? The specter of a Tamar platform hit by Hamas missiles and set ablaze, like BP’s Deep Horizon, dampens the mood in any discussion of Israel’s energy future.

Many inside and outside the Israeli Knesset also see in the rise of Israel’s gas industry a more sinister trap. Ariella Berger, at the Israel Institute for Economic Planning, thinks there may be far less gas in recoverable reserves than Noble and its partners claim. Even if all contingent proven gas reserves are included, she pushes a final figure closer to 650–680 billion cubic meters, far lower than the 950 billion figure the Netanyahu government accepts. That lower number, she points out, would put Israel at No. 29 on the list of nations with provable reserves, behind the Ukraine—which is hardly an energy superpower. From Berger’s perspective, an aggressive export-driven policy runs the risk of emptying the gas tank and leaving Israel high and dry just as it completes its shift from coal and oil to natural gas. She is urging instead that the vast bulk of the offshore finds should be kept at home for domestic use—and many in Israel agree with her.

In 2013, the export of natural gas became a fierce political issue. Matters came to head in June, when a select committee mandated by the government to study the issue and headed by Shaul Tzemach, director general of the Ministry of Energy and Water Resources, released its report. The committee recommended exporting up to 53 percent of Israel’s offshore gas while making sure Israel has a reserve to last for 25 years. Even after the Netanyahu cabinet voted to cut that number to 40 percent, it was still too high for the leaders of both the Likud and Labor parties, who denounced the decision as “reckless.” Release of the report triggered demonstrations that blocked roads in central Tel Aviv, while demonstrators also besieged the home of Minister of Energy and Water Silvan Shalom.

For once parties on the left and right in Israel could agree: Exporting Israel’s precious natural-gas resources would be a catastrophic mistake, no matter how much foreign currency it would draw in or how many minds in capitals in Europe or elsewhere it might change regarding Israel.

For those on the right, the debate largely hinges on a question of exports versus energy security. For those on the left, it’s also about profits versus people—more specifically, profits for Noble Energy and its Israeli partners. They see the current export model as a payoff by the Netanyahu government to its capitalist supporters; or as Dror Strum, former head of Israel Antitrust Authority, puts it, “There are actually [only] two sides to the story, the gas monopolies and the Israeli public.”

Indeed, it’s not hard to find those on the left who wonder, like their ideological allies in the Green Zionist Alliance, whether it would have been better if Israel hadn’t discovered its new energy resources at all—and whether Israel’s national identity can even survive the onslaught.

“Nonsense.” That is the reaction of Uri Aldubi, chairman of Israel’s Association of Oil and Gas Exploration Industries, to this rising tide of anti–fossil fuel propaganda and defeatist pessimism about Israel’s energy-rich future. On fears of the Dutch Disease, he points out that the Tamar field hasn’t added more than 1 percent of GDP to Israel’s already booming and diversified economy. Even Leviathan, for all its potential riches, won’t be able to overbalance an economy—which, unlike Holland’s in the 1960s and 70s, is one of the most dynamic and innovative in the world. “The Start-Up Nation will adjust,” Aldubi assures me, as will Israel’s thriving entrepreneurial culture. And far from misdirecting economic resources, Israel’s homegrown energy start-ups will only add more to the mix.

Aldubi has an even harsher reaction to worries that exporting too much gas will wreck Israel’s own domestic market. “Quite frankly, this is B.S.,” he says. “There is no way Israel can develop fields of this size without exporting.” No one, not even an Israeli energy company, would invest the time and resources in opening the Leviathan field just to meet the tiny Israeli market. It’s a point you hear from others who understand the energy business: Reserves in the ground count for nothing unless it’s economically feasible to open them up. Israel’s own neighbor Egypt is the classic example of a country that has very large natural-gas reserves and that suffers from an acute gas shortage. Israel could find itself in a similar squeeze once the Tamar field starts to play out, if there aren’t enough export-earned shekels to pay for new wells to serve that domestic demand.

As for Israel’s oil potential, he points out—like Harold Vinegar—that the aquifer in the Shfela basin is protected under the development scheme proposed by Israel Energy Initiatives. He, too, sees exploiting Israel’s oil-shale potential as a way to diversify risk as well as economic opportunity, and not just for Israel but for its neighbors.

Indeed, what many in the Israeli Knesset seem not to understand is that what looms on the horizon is more than just energy independence—or lots of new government revenue. Turning Israel into an energy-market player could be the beginning of a revolution in the country’s relations with its neighbors, who are already contracting to buy the gas. The list includes Jordan and Egypt—the latter, as Aldubi likes to point out, is the country that used to supply natural gas to both Israel and Jordan—-as well as the Palestinian territories.

And this is where the possibilities become intriguing.

Shlomi Fogel may be described in the financial press as “one of Israel’s wealthiest and most secretive billionaires,” but in the flesh he is affable, eloquent, and passionate about the most prolonged of all Israel’s agonies, the conflict with the Palestinians and the status of the West Bank. Fogel is no milk-and-water Israeli liberal; he is close to Netanyahu and his master architect of the government’s export-driven energy policy, Egon Kandel. But Fogel is also friends with key officials in the Palestinian Authority, as well as leading Palestinian businessmen, and he sees in Israel’s energy discoveries an unprecedented opening to a new Israeli–Arab future.

The founder in 1993 of Ampa Industries, one of Israel’s largest diversified companies, Fogel says he sees “four vectors signaling Israel’s future rise as a world-class economic power.” The first is its impressive command of leading high-tech industries. The second, its up-to-date infrastructure, including high-speed Internet, far ahead of any other Middle Eastern country and even in some respects the United States. The third, its gift for entrepreneurial flair. The fourth is now oil and gas.

When asked whether the growth of Israel’s oil and gas business can promote Palestinian–Israeli amity, Fogel is emphatic. “Absolutely,” he replies. People have had enough of politicians manipulating the issue for their own gain, he says. On both sides of the security fence, it’s time for a bottom-up solution, taking root in one business deal at a time and creating a powerful middle-class constituency that has a stake in creating wealth instead of fomenting war. The export of natural gas to revivify the economy of the West Bank, with Palestinians finding well-paying jobs on building and servicing pipelines or in oil-shale production, could be a compelling way to jump-start the process.

“Jordan is moving toward development and purchasing of gas from us,” he tells me. “I believe we will see better times with them.” He sees the same possibility with the Palestinians, even in Gaza. “The rockets are not giving them a better future,” he says. “Their young people will not accept misery and unemployment” for very long if they see a better more prosperous future unfolding in Jordan and the West Bank.

Of course, there are many reasons for believing ancient enmities won’t die away anytime soon, especially when there are outside powers ready to exploit them. In mid-January, Russia’s Gazprom announced it was talking to Palestinian officials about developing Gaza’s offshore gas fields. Gazprom had tried to take a stake in the development of the Leviathan field, even though it might pose a challenge to Russia’s natural-gas market in Europe. (The Israelis opted for the Australian company Woodside instead.) Making gestures toward Gaza might be Putin’s way of getting revenge, as well as reasserting Russia’s geopolitical stake in the eastern Mediterranean, as it did by taking a leading role in staving off an American attack on Syria last year. Certainly none of it bodes well for the future—especially with Russia’s partner in the Middle East, Iran, likely to follow close behind.

All the same, Fogel’s enthusiasm is infectious, especially when he looks at the impact Israel itself could have on the global energy picture. Once Israel commits itself to expanding its own energy sector, the results, he is convinced, will reverberate back to America and beyond. As the energy industry becomes increasingly high-tech, once the Israeli penchant for improving and innovating those technologies kicks in, what seems impossible today could become common practice. (Four years ago, a Noble Energy official told me that the idea of developing the Leviathan field entirely offshore would have seemed impossible.)

The ultimate question is, Can the Israelis live with this new bounty? Have they become so accustomed to living in survival mode and being under constant threat that they simply cannot believe their good fortune—and cannot act on the opportunity?

In the end, what Israelis do may depend on how the outside world does, especially the Jewish community and supporters of Israel in this country. In order for its oil and gas bonanza to succeed, Israel needs two things, says Uri Aldubi: “operators and investors.” Almost all of them, for now, will have to come from outside—not only from the United States but from Europe as well. Universal Oil and Gas is a London-based company that recently partnered with the Association of Oil and Gas Exploration Industries to host a series of conferences to champion those links and also possibly to prepare the way for a future European market for Israeli gas. The talks are to take place in Europe and in the Mecca of America’s energy industry, Houston. The Israeli ambassador in Norway organized a similar conference in Stavanger last November, where Norwegian service and exploration companies with long experience in offshore gas development along their own continental shelf came not only to offer their knowledge and skill to Israel but also to learn how Israeli expertise in high-tech pursuits might transform their own businesses. The first outlines of Shlomi Fogel’s prediction may be coming true.

But in the meantime, the world waits as Israel makes up its mind.

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