Historically, Israel has been a net energy importer, but its fortunes may be changing. Oil and gas companies have found significant natural gas reserves in deep waters off Israel’s coast that many experts believe could enable Israel to become a net exporter in the next decade. Some expect Israel’s newfound production potential to alter the geopolitical balance in the region as new Israeli export deals pave the road for improved diplomatic ties between Israel and its neighbors. However, there is little evidence to suggest that increased oil trade will become more important than the many other historical, political and security factors influencing Israel’s foreign policy decisions.
New technologies are opening up a number of new production opportunities in Israel. Among the most important are the Tamar and Leviathan deepwater fields, both located in the Mediterranean Sea west of Haifa. The fields bring estimates of Israel’s total proven natural gas reserves to 10.1 trillion cubic feet. However, production at the Leviathan field, which could hold as much as 19 trillion cubic feet of natural gas, will not be brought online until 2016 at the earliest.1
Israel also has a number of shale and tight oil formations that some analysts believe could hold an enormous amount of oil, if estimates prove accurate and the formations prove economically exploitable. Israel is thought to have the third-largest shale oil reserves, behind only the United States and China.2 The Shfela Basin is the country’s largest shale oil play and is expected to house some 40 billion barrels of oil.3
Israel’s burgeoning natural gas production has already led to export deals with some of its neighbors, including Jordan and Egypt. Some have speculated that Israel’s emerging energy role will reshape the country’s diplomatic ties throughout the Middle East and perhaps the world as other states become more reliant on Israeli energy exports.4 If true, Israel could hope to see more support for (or less resistance to) its foreign policy moves in the international community. However, there is much evidence to suggest that oil and gas trade ties are not always the determining factor in diplomatic or security cooperation between countries. Other priorities — in the case of Israel’s neighbors, various geopolitical and sectarian imperatives — will likely outweigh energy resources in terms of their importance in Israel’s bilateral relationships.
The country’s promising future in natural gas has also given rise to speculation that Israeli exports to the Palestinian Territories could shape the two entities’ relationship, though it is unclear whether those exports would be a source of peace or tension. On the one hand, some believe Israeli natural gas would spur development and growth in the Palestinian Territories, eventually creating trust and lessening tension elsewhere in the Israeli-Palestinian relationship.5 On the other hand, others worry that such trade would give Israel additional political leverage over the Palestinian Territories that, if used, could heighten instability and tensions in the region. The first, more optimistic view rests on the same misunderstanding that the hope of improved ties between Israel and its Middle Eastern neighbors does — that energy trade trumps all in bilateral relationships. However, the second prediction is more likely. Israel has threatened to shut off electricity to the Palestinian Territories in the past, and because natural gas is less fungible than oil, it is possible that Israel could use the threat of gas shut-offs for political reasons. But even this outcome is far from certain, given the spotty historical efficacy of using energy resources as a political weapon.