Once energy-dependent, Israel sees a future in gas

NETANYA, Israel - The huge reservoirs of natural gas discovered off the coast of Israel now flowing toward shore have the potential to transform the once energy-strapped country into a lean, green manufacturing machine - capable of supplying cheap, clean energy to its citizens, factories, and vehicles for a generation.

Until now bereft of the petroleum bonanza that created the modern Middle East, Israel suddenly finds itself a major player in the Mediterranean, and perhaps even the European, natural gas market.

The deepwater fields, discovered in 2009 and 2010, will soon turn Israel into an energy exporter, putting the country in the enviable - but very tricky - position of trying to sell billions of dollars in surplus gas to neighbors who range from cool to downright hostile.

The questions are: To whom? And how?

Some Israeli leaders suggest a "gas for peace" strategy whereby Israel, through the energy companies, provides gas at competitive rates to neighbors. But they also acknowledge that some Arab countries might refuse gas at any price from Israel.

The Israeli leadership will soon announce how much future production it will allow the homegrown and U.S. companies to export. Politicians also have begun to think about what to do with billions of dollars the state will take in royalties and taxes.

The discoveries represent a twist of fate for a country that until recently relied on imported coal, diesel, and heavy fuel oil to generate its electricity. Israel has not only been vulnerable to the vagaries of the global energy market but also to attack on the infrastructure that keeps it running.

Two years ago, Israel was getting 40 percent of its natural gas from Egypt. But in the aftermath of the uprising that toppled Hosni Mubarak, Egypt's pipeline across the Sinai to Israel was sabotaged by extremists more than a dozen times. Egypt canceled its contract to sell gas to Israel last year.

Today the section of pipeline that once served Israel and Jordan is empty.

But maybe not for long.

Charles Davidson, chairman of Texas-based Noble Energy, which has taken the lead in developing Israel's natural gas fields, told reporters last month that Noble and its partners were evaluating a number of export options for Israeli natural gas, including offshore floating plants to convert the product to liquefied natural gas, or LNG, which can be loaded on tankers and shipped anywhere in the world.

There are as many options as challenges. Offshore platforms or floating LNG plants may be especially vulnerable to attack.

According to the intelligence consultant group Stratfor, "the easiest way for Israel to sell the resource abroad would be to build a pipeline running along the coasts of Lebanon and Syria and eventually reaching Turkey. But Lebanon and Syria are openly hostile to the idea. Even if they agreed, neither country has a government stable enough to secure such a project in perpetuity."