The discovery of the largest gasfield in the eastern Mediterranean set off a frenzy yesterday in Israel, which has long depended on imported energy.
The Leviathan field, estimated to hold 16 trillion cubic feet (tcf) of gas worth more than US$95 billion (Dh348.93bn), was discovered by Noble Energy and its partners 130km offshore from Haifa, the northern Israeli port.
The discovery will "impact many fields in Israel," Uzi Landau, Israel's infrastructure minister, said after the announcement.The discovery is almost three times as large as the nearby Tamar gasfield that a group led by Noble struck two years ago.
It is four times as big as Egypt's largest gasfield and eight times larger than the Gaza Marine gasfield, named after the Palestinian Territories' enclave. That area's one power plant could be fuelled for a decade if Israel allowed the field to be developed.
The twin Tamar and Leviathan discoveries mean Israel has more than enough gas to fuel its power stations for decades. It currently depends on Egypt for much of its gas supply.
Israel's gas find has sparked a trading frenzy in Tel Aviv and New York. The shekel gained as much as 0.8 percent to 3.5432 per dollar, the highest level since October 2008.
Shares of local oil and gas companies have shot up this year, but many pulled back yesterday as investors realised that the path to bringing Leviathan's gas on stream might not be smooth.
One factor is that Noble, based in the US, and its Israeli partners, Delek Energy, Avner Oil Exploration and Ratio Oil Exploration, are nervous about the deteriorating environment for oil and gas investment in Israel.
"Realising the potential of Leviathan requires from the developers enormous investment in infrastructure to export gas," said Gideon Tadmor, the chief executive of Delek Energy, a unit of Delek Group.
Yoram Turbowitz, the group's chief executive, told Israel's Haaretz newspaper he was experiencing "a sense of success mixed with worry and concern that we will not be able to utilise the huge discovery … to its limits".
"[It] will demand enormous investment in infrastructure. The state will need to assist with regulations, planning and accompanying what will become the largest infrastructure project in the country," he added.
But the extent of the government's recent intervention in the energy sector has been to propose higher taxes on gas production, including retroactive levies.
Under its 1952 petroleum law, still on the books because there were few large finds until recently, Israel offered some of the world's lowest royalties along with generous tax breaks for exploration. But this year, Yuval Steinitz, the Israeli finance minister, proposed changes to boost Israel's take from any gas discovery. He also proposed changing the terms of existing oil and gas licences in the government's favour.
Chuck Davidson, the chief executive of Noble, wrote a letter in April to Mr Steinitz objecting to the scheme. A retroactive change would be "egregious" and "would quickly move Israel to the lowest tier of countries for investment by the energy industry", he said.
The US embassy in Tel Aviv also warned Israel not to renegotiate concession terms.
But Mr Steinitz has stuck with his recommendations to abolish tax breaks for energy companies and impose a windfall profits tax. The proposal still requires cabinet approval.
Guil Bashan, an analyst at IBI Investment House, said such approval was more likely following the Leviathan announcement, which could hold back development of the field.
"The chances that gas will be produced from Leviathan before 2017 are slim, in our opinion," he said.
At least part of the 325 square kilometres covered by the Leviathan field lies within waters contested between Israel and Lebanon. The two neighbours do not have diplomatic relations and their maritime border has not been formally demarcated. Beirut stated this year that part of the Leviathan prospect lay within Lebanese territory.
In August, Lebanon's government passed the country's first oil exploration law. Gibran Bassil, the oil minister, said the first auction of offshore exploration licences could be held just over a year from now.
The border disputes may not stop there. This month, Israel and Cyprus reached an accord on their border that was promptly rejected by Turkey.
"Agreements signed by the Greek Cypriots with countries of the region are null and void for Turkey," said the Turkish foreign ministry, while claiming the agreement disregarded the rights of Turkish Cypriots.
Among other things, a border deal would clear the way for Noble to proceed with gas exploration in Cypriot waters, where it already holds a licence. Turkey has previously blocked such exploration by dispatching gunboats. Moreover, its relations with Israel were recently strained by the Israeli raid on a Gaza-bound aid flotilla in which nine Turkish citizens were killed.