Energy a Key Focus for Israel's New Government

Energy looks set to play an important role in Israeli foreign policy under the new government led by Prime Minister Benjamin Netanyahu.

Foreign Ministry officials are already looking at way to promote exports of Israeli gas to Europe and other new markets, an Israeli industry source confirms.

"There seems to be a solid link forming between the energy and foreign ministries," the source says.

Some Israeli media reports have suggested that new Energy Minister Israel Katz will hold that position for one year, with Foreign Minister Eli Cohen taking it over from him for two years and then handing it back to Katz.

The industry source believes signs of closer ties between the two ministries are auspicious, adding that he expects the energy ministry to revive a proposal from the previous administration to increase gas exports.

The National Economic Council, which advises the prime minister, is already seeking input on energy issues ahead of possible policy changes.

East Med Potential

Russia's war against Ukraine has forced Europe to find alternative sources of supply to reduce its past dependence on Russian pipeline gas, and Israel and the broader East Mediterranean region could make an important contribution to that effort.

Chevron is eyeing a second phase of development at its 22 trillion cubic foot Leviathan gas field offshore Israel, which could be combined with development of its 4 Tcf Aphrodite field offshore Cyprus.

Gas discoveries by TotalEnergies, Eni and Exxon Mobil offshore Cyprus have further boosted the region's prospects for becoming a major source of supply.

London-listed Energean started gas production at its Karish field offshore Israel last year and also announced the Hermes and Zeus discoveries.

Exploration could expand Israel's gas resources going forward. The outgoing government launched the country's fourth offshore licensing round in December, with 20 blocks up for grabs.

The bid round follows a maritime border agreement between Lebanon and Israel in October, which could help attract more investment to the Eastern Mediterranean.

Building Ties With Europe

Netanyahu's government looks set to continue the work of its predecessor to build strategic gas ties with the European Union.

As Europe sought new sources of gas to replace imports from Russia, former Energy Minister Karine Elharrar made a U-turn on energy policy last year, having previously prioritized investment in renewables over gas development.

The European Commission signed a provisional LNG supply deal with Egypt and Israel in June of last year.

And in November Israel's NewMed Energy and German utility Uniper signed a provisional agreement to explore LNG supply from Israel to Europe and the development of blue and green hydrogen.

In 2021, the energy ministry had already proposed relaxing a policy requiring 60% of Israel's gas production to be allocated to the domestic market, recommending that the portion available for export should be raised from 40% to 60%.

The ministry said at the time that plans to increase renewables' share of Israel's power generation from 17% to 30% by 2030 could free up more gas for export.

It also warned that Israel could be left with gas that is no longer needed if it moves too slowly to develop its resources, citing a forecast from the International Energy Agency that Israel has 20-25 years before gas demand starts to decline.