As economy stumbles over judicial push, Israel banks on an energy boom


KARISH GAS FIELD, between Israel and Lebanon — Fifty miles off the coast of Israel, a hulking rig floats on the sparkling blue waters of the Mediterranean, processing natural gas drilled from thousands of feet below.

The 400-foot, 70,000-ton tanker, tied to the seabed by 14 cables, is like a floating town — stacked with employee dorms, gyms, control areas and fortified panic rooms. The $2 billion project is manned by a crew of 145 Israelis and foreign workers. They are trained to oversee on-site gas refinement and respond to the unique security risks of an Israeli installation just 15 miles from Lebanese waters, which Israel views as enemy territory.

“We’re doing this very quietly, but it has a substantial influence on Israel’s economy,” said Shaul Zemach, chief executive of the Israeli subsidiary of Energean. The London-based natural gas firm brought the rig online last fall after a landmark maritime deal between Israel and Lebanon — a diplomatic breakthrough that included Hezbollah, the Iranian-backed militant group.

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Speaking over the whirring din of machines, Zemach pointed at two steel pipes transporting fuel onto the rig for processing and export to the Israeli national grid — where gas accounts for more than 70 percent of its electricity.

Natural gas has transformed Israel, once a resource-poor nation, into a regional energy powerhouse. The discovery of significant offshore fields a decade ago has allowed the country to become largely self-sufficient, and has opened up lucrative export opportunities. Demand is especially high now, as European markets scramble to replace the Russian oil and gas imports disrupted by the war in Ukraine.

But Israel’s gas rush also coincides with a surge in regional tensions — from the West Bank to Lebanon — and an unprecedented domestic crisis, as the country is roiled by mass protests against the government’s contentious plan to weaken the Supreme Court.

After lawmakers pushed through the first phase of the judicial overhaul last month, the value of the shekel plummeted and Tel Aviv’s stock market tumbled. Bankers and business leaders warned of capital flight and Moody’s downgraded Israel’s sovereign credit rating, citing “a deterioration” of governance.

Prime Minister Benjamin Netanyahu has repeatedly dismissed warnings of a looming catastrophe, asserting that Israel has alternatives — including natural gas — to help it ride out the turmoil.

“We are increasing gas exports to Europe. We’ve opened bidding for tenders worth hundreds of billions for gas exploration in Israel,” he said Wednesday in a video posted on Twitter, recently renamed X. “Israel is becoming an energy superpower. … Who would have believed it?”

There are an estimated 1.75 trillion cubic feet of reserves in the Karish field alone; already, it produces 35 percent of the gas consumed by Israel. Zemach thinks there could be even more abundant wells further down, two to three kilometers (more than a mile) below the current extraction level.

But despite European demand, experts say Israel’s relatively nascent gas sector — expected to be worth $55 billion by 2064 — will comprise only a minor chunk of its economy for the foreseeable future.

“Netanyahu is trying to shift the attention to the gas sector and to the other resources that he says will help Israel’s economy,” said Eldad Ben Aharon, an expert on Israel’s foreign policy and a researcher at the Peace Research Institute Frankfurt. “But if we zoom out and we look at gas’s potential versus the deteriorating economy, it’s not convincing.”

There are no guarantees, he said, that the infrastructure and the multilevel regional cooperation required for drilling will keep pace with the forecasts. Even in a best-case scenario, he said, gas profits cannot begin to compensate for the economic damage caused by Netanyahu’s judicial overhaul — especially in Israel’s tech sector, which accounted for 54 percent of the country’s export market last year and more than one-tenth of its workforce.

Tech leaders have been at the forefront of street protests over the past seven months, chanting for Netanyahu to back down or risk lasting economic harm. Investments in tech firms have dropped 68 percent since the beginning of 2023, the lowest pace of investment since 2018, according to a report last month by the Start-Up Nation Policy Institute. Many Israeli-founded tech companies are moving their money and their employees abroad.

Natural gas exports are part of “Netanyahu’s multidimensional approach to ‘diversify’ the economy,” said Eran Etzion, the former head of planning in Israel’s Foreign Ministry. But the “numbers don’t add up.”

Netanyahu is also trying to develop global partnerships as an alternative to those with the United States and Europe, Etzion said, and sees gas development as a way to forge new bonds with once-hostile neighbors. These include Egypt, home to the region’s sole liquefaction facilities, which are needed to export the fuel to Europe and the Persian Gulf — where Israel has expanded ties in recent years under the U.S.-brokered Abraham Accords.

Earlier this year, the United Arab Emirates’ state-owned oil and gas company and British Petroleum (BP) announced an offer to acquire a stake in NewMed, one of Israel’s largest gas companies. In 2021, the UAE’s sovereign wealth fund purchased a $1 billion share in Tamar, Israel’s second-largest field.

“The atmosphere has completely changed,” said Hezi Kluger, a former Israeli energy minister who oversaw the sector’s development in the early 2000s.

He said new deals with international companies such as Chevron — the California-based energy titan that acquired the largest natural gas company working in Israel for about $4 billion in 2020 — have received the tacit approval of Saudi Arabia. In previous decades, Kluger noted, multinational companies actively avoided dealing with Israel so as not to endanger their ties with the Saudis.

While natural gas companies can bank on short-term windfalls during the war in Ukraine, experts predict that the market will peak within a decade as Europe transitions to renewable energy. The Israeli firms brand themselves as transitional suppliers, stepping in until new energy sources can be established at scale. Demand is expected to spike as European nations work to cut ties with Gazprom, the Russian energy giant.

Qatar has become a major supplier of liquefied natural gas (LNG) to Europe and plans to increase its export capacity by more than a third by 2026. The United States has ramped up LNG exports to Europe by 141 percent in the past year and is planning for an additional 40 percent increase in the coming years.

The Palestinians have ambitions of their own, including a $1.5 billion project to extract natural gas off the coast of the Gaza Strip. The project was blocked by Israel for more than two decades, but a deal with Greek and Egyptian partners is expected to be finalized in the coming months.

The Palestinian Authority, teetering on collapse, is tested in Jenin

Gas exports could ultimately deliver millions of dollars to the cash-strapped Palestinian Authority, which is struggling to contain mounting violence between Israeli forces and a new generation of militants across the West Bank.

Israel, meanwhile, is on the verge of being “sucked into a conflict” with Hezbollah on its northern border with Lebanon, Tzachi Hanegbi, head of Israel’s national security council, told reporters this week.

From the middle of the Mediterranean, Israel’s domestic tumult and its regional conflicts seem far away. Zemach sees his rig as a rare symbol of cooperation, and a reason to be hopeful.

“Natural gas allows us to talk about the Mediterranean Sea as a common gas market, where wide regional collaborations to advance stability can be made,” he said.





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