Aug 3, 2012 5:10 AM ET–Israel, reliant on imported energy since the state’s foundation in 1948, now has more natural gas than it can handle.

Noble Energy Inc. (NBL), Delek Group Ltd. (DLEKG) and other explorers have discovered enough gas under the Mediterranean Sea to supply Israel’s needs for 150 years. To profit from the finds sooner, the companies want to export the gas by pipeline or ship. As the Ministry of Energy prepares to publish a blueprint for developing the fields later this month, officials say the country’s economy and security must come first and shipments abroad should be limited.

Exporting natural gas presents challenges. A shortage of land and environmental opposition complicates building a plant to liquefy the fuel for export, while an offshore facility or pipelines to nearby countries will be hard to protect. Tapping all of Israel’s discoveries, which include Leviathan, a single field holding more gas than Middle East exporter Yemen has in reserves, may prove uneconomic without exports.

“I’d be surprised if some of the gas in Israel isn’t stranded,” said Nick Maden, a senior vice president for international exploration at Statoil ASA (STL), which has been examining the region’s potential. This is “the play that most companies will be trying to follow” and there has “been more gas discovered than you can commercialize.”
Prime Minister Benjamin Netanyahu met energy executives last month and said he would take steps to strengthen the potential of gas exports.

‘Many Reforms’

“We need to make many reforms and maintain a responsible framework for the state” in the energy market, Netanyahu said in a statement after the meeting.

The debate in Israel is similar to that in the U.S., where gas-hungry companies including Dow Chemical Co. and DuPont Co. have lobbied lawmakers to prevent exports on a scale that risks driving up natural-gas prices.

Noble discovered the Leviathan gas field in Israel’s deep waters in 2010 and at the time it was the world’s largest find of its kind in a decade. The Houston-based explorer is looking for a partner to develop an LNG project, which may cost as much as $5 billion. It also plans a deeper well next year to search for Israel’s first offshore crude finds, Chief Executive Officer Charles Davidson said on a July 26 conference call with investors.

“We’ve found far more natural gas that can ever be used in Israel,” Davidson said at a conference in May. “There are more natural gas resources to discover in Israel and they have to be able to demonstrate there is a market there in order to justify other producers to come in and explore.”

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