By Velda Addison, Hart Energy

HOUSTON—For decades, Israel depended on other countries to meet its energy needs despite its proximity to some of the world’s top oil producers in the Middle East.

Now, the 67-year-old country with an even younger energy sector has gained prominence in recent years thanks to a winning streak of natural gas discoveries. By U.S. Energy Information Administration estimates, the small country—home to about 8 million people and a burgeoning technology industry—holds at least 6.7 trillion cubic feet and 14 million barrels of proved gas and oil reserves, respectively.

Houston-based Noble Energy’s success in the Mediterranean Sea offshore Israel put the country on the energy scene in the late 1990s with the Mars-B discovery. More and bigger gas finds followed, strengthening the country’s energy security and setting the foundation for its transformation into a gas exporter, with Noble’s 10 Tcf Tamar gas find in 2009 and the gigantic Leviathan Field, with gross resources of about 22 Tcf, in 2010.

While development of the Tamar Field has moved forward, regulatory issues, including antitrust concerns, have stalled development of Leviathan, which is being developed by Noble and Israel’s Delek Group. In September, Israel’s parliament approved a deal regulating the fields, but it still needs the signature of Israel’s economy minister.

Israeli Energy Minister Yuval Steinitz sat down with Hart Energy to discuss the issue as well as what Israel has to offer as the country works to attract energy companies during a time of low commodity prices, budgetary constraints and continued turmoil in the Middle East.

Editor’s note: This interview has been edited for length and clarity.

Q: Given today’s commodity prices and budget cuts by oil and gas companies, why is now a good time for Israel to seek investment from U.S. oil and gas companies?

A: We do believe that despite the declining prices in the world we have a very strong Israeli domestic market and very good opportunities to export Israeli gas at very reasonable prices either to Egypt—they need a lot of natural gas beyond what they have just discovered in the Zohr Field—and maybe to Turkey. Also, Jordan is eager to buy Israeli gas. There is also opportunity to build a pipeline going from Israel to Cyprus and either Greece or Turkey to the European market. Prices can go up and down, but if you discover significant gas fields in the Eastern Mediterranean Basin, it would be worth it to develop them.

Q: What sets Israel apart from other countries with plentiful hydrocarbon resources?

A: In the past, we have found nothing significant. Only lately, in the last decade and a half, we’ve opened our economic water to international companies, and about 20% of our economic water we’ve already seriously explored. There are some significant findings. … I think that today it is quite clear that it is not just high-tech companies that have invested in Israel. It’s not just Apple, Google, IBM, Intel and Cisco. What we see now is that other companies like Lockheed Martin, Boeing and General Electric and even banks are interested in Israel and opening R&D centers in Israel for cybersecurity and other technological needs. It’s now clearer than ever that in any field, even in energy, you need new solutions. You need R&D. You need advanced technologies. You need high-tech. You need cybersecurity. Companies that invest in Israel to find, produce and export gas and oil will benefit from these technological aspects.

Q: How crucial is the development of Leviathan and Tamar to Israel’s economy?

A: Very crucial. Tamar was already developed. It was discovered at the end of 2009, and in 3 ½ years’ time it was developed. At the beginning of 2013 it had supplied gas to Israel. Today more than 50 percent of our electricity is produced by natural gas, mainly from Tamar. This makes Tamar extremely important for our domestic demand. This also makes the development of Leviathan extremely important. We need diversity. Let’s assume we have some problems that have to be fixed in Tamar because it’s a very deep-water gas field and pipes take time to fix. So we have to have another field and another pipe system in order to have energy security. In addition to this, of course, we need the revenues which are going to be significant for such a little country like Israel. It’s a golden opportunity to cooperate in the Middle East and to strengthen the axis of peace between Israel, Egypt and Jordan and to cooperate with them together with Cyprus and maybe in the future also with Turkey. It’s also a growth engine that we need to boost the Israeli economy.

Q: Any more about the regulatory delays with Leviathan?

A: I think we did create some obstacles and delays in the last three or 3 ½ years. It is now largely over. We already fixed most of it. ... Now we are waiting for the signature of the minister of economy because some elements in this new framework are actually changing, or bypassing, some decisions of the antitrust regulator, which is part of the ministry of economy. I don’t want to get into details, but the prime minister is doing his best to overcome the difficulties and I am confident that by the end of the year, hopefully, in the next few weeks even, this will be over, and the new framework which was already adopted by the government and by the parliament will be in place. We will be able to move to speedy development of Leviathan and the development of Karish-Tanin and open the sea for other exploration.

Q: These fields have captured many headlines, but that is not all Israel has to offer. What more can you tell us about the Golan Heights oil discovery?

A: I am unable to give you all the details now because we are still studying and evaluating the findings on the Golan Heights. It sounds very serious, but we still have to learn and evaluate it. Generally speaking, according to our geological surveys, research and analysis, a significant amount of oil, not just gas, is waiting to be discovered. There is no certainty, but it seems highly probable. Companies probably have a lot of interest in this.

Q: What is Israel’s overall energy strategy, and has anything changed in recent years that has caused you to rethink this strategy?

A: We just established our strategy because until recently it was almost irrelevant. For many years, we thought we were deprived of Gazan oil resources until we made a very careful, solo analysis of our economic waters. It looks very promising, so therefore we have to come out with a strategy. When I was still finance minister, I established a committee to fix our tax regime. I discovered that the government take on oil findings was the lowest in the world. It was only 21%. … We managed to fix it and raise it to 55% government take, which is the average in North America, Europe and the OECD countries. After we fixed this we encountered some additional problems with regard to antitrust regulations, export restrictions and many other issues.

But I believe in the last few months we’ve made enormous progress. We established a regulatory framework that stabilizes and clarifies all of the conditions. … Now, finally, we have crystal clear energy policy, including tax regime, export licenses, almost everything that is needed—and stability is very important in this field.

Velda Addison can be reached at