Summary

Having finally cleared the major regulatory hurdles, once-energy-poor Israel is closer than ever to developing and exploiting its vast natural gas reserves. With natural gas projected to provide 68 percent of Israel’s electricity generation by 2040, Israel could fortify its domestic economy, enhance its national security, and transform the energy order and economic ties of the Eastern Mediterranean and beyond. Israel is also poised to become a key energy exporter to its neighbors. However, if Israel seeks the large windfall gains that gas exports would bring, it must overcome geopolitics and maximize the potential for mutual gain in an increasingly convoluted web of regional relationships.

Key Points

  • From 2004 to 2010, natural gas use as a fuel source in the country grew from almost non-existent to 40 percent of electricity generation
  • Israel is projected to earn $20 billion from gas royalties and taxes by 2026, according to Noble Energy
  • Israeli civil society lobbying for tighter gas sector regulations has resulted in significant changes to ensure that more revenue goes to the state, and that the nation’s natural gas sector enjoys more competition
  • Jordan, Egypt, and Turkey are the most probable candidates to receive Israel’s first gas exports, but anti-Israel public sentiment will be a major obstacle for future energy deals
  • The speed of verdict in resolving the stability clause issue, one of Israel’s most consequential regulatory challenges of the last decade, represents a major win for Israel in terms of boosting investor confidence and paving the way for future gas exploration off Israel’s shores

Read the full Policy Focus here.

This analysis does not represent the opinions of PA Consulting Group.

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