Palestine’s energy dream or nightmare

Speculation about the potential oil and gas reserves to which the Gaza Strip and West Bank of Palestine might lay claim have largely remained dormant since 7 October 2023 when Hamas militants massacred over 1200 mainly Israeli citizens and took 251 hostages. Until last month the world’s focus has been on the horror of the initial atrocity and the scale of Israel’s retaliatory action, the justification for which is beyond the scope of this column.

Now, two years on, a ceasefire (holding at the time of writing), release of hostages, and partial withdrawal from Gaza of occupying Israeli troops hopefully signals the first tentative steps towards a peaceful solution and with it the monumental challenge of restoring a community laid waste by war. In this context interest will at some point turn once again towards the possibility of revenue generation – meagre as it might be – from potential hydrocarbons exploitation in Palestinian territory.

This is an issue with a long and contentious history that reflects Middle East geo/oil politics dating back to the early 20^th century, well before the creation of the state of Israel in 1948 and the partition of Palestine. One accessible reference to the early days can be found in the aptly named The Land That Oil Forgot: Palestine, 1913–1948 by the prolific Middle East historian Michael Quentin Morgan in an article published in GeoExpro (5 December 2020). This makes mention of a meeting (chance or not is unclear) in 1914 near Kurnub in the Negev Desert, at that time still part of the Ottoman Empire. The encounter was between William Yale (1887-1975), an American oil representative from Socony (Standard Oil and eventually Mobil), later a regional diplomat and spy based in Cairo, and the legendary TE Lawrence (of Arabia fame). Yale apparently made pretence of being a tourist while in fact scouting for oil. Lawrence was unconvinced, reporting his suspicions of Yale’s true intent.

Socony was active in the Palestine area because pre-First World War, American companies were effectively excluded from the choice prospects of what were to be the oilfields of Iraq, and were only eventually admitted when the Iraq Petroleum Company (IPC), previously Turkish Oil Company, was formed in 1928. Morgan states the company went on to purchase interests in Palestine, invested in a Kurnub camp as a prelude to drilling for oil, to the apparent alarm of Britain. With the outbreak of war, Ottoman and British authorities effectively nixed the project until 1922. Then as the result of the US government calling foul play, Socony’s Palestinian status was reinstated and a preliminary survey conducted. However when Socony joined IPC in 1928, its interest lapsed.

Initial post Second World War operations were carried out by an IPC subsidiary until the end of the British mandate in 1948. They were resumed by Israeli companies (Lapidoth Israel Oil Co and Israel Oil Prospectors) eventually striking oil on 22 September 1955 at what would be known as the Heletz field, southern Israel, close to the Gaza Strip. The find at 4906 ft depth was made by deepening an IPC well which, according to a contemporaneous Oil and Gas Journal report, would only have had 1500 ft further to go for a strike. As Israel’s sole onshore oil producer (apart from some less significant oil activity around the Dead Sea and Golan Heights), Heletz and neighbouring sites have contributed a modest 17.2 million barrels.

Israel’s energy strategy up to the 20^th century was preoccupied with securing oil and gas imports and their safe pipeline passage dealing with neighbouring or nearby countries, typically Iran (until 1979), Egypt, Jordan, Lebanon and Syria in often fraught relations on occasion marred by actual warfare. Electricity demand was met by coal production, now being phased out, and imported mazut heavy fuel.

No one predicted that Israel was to become a natural gas power house, now aggressively exploring new markets for export. In summary, the breakthrough came in 1999 when the Tethys Oil Partnership discovered the Noa gas field, offshore Ashqelon. The Mari B field, operated by Noble Energy (acquired by Chevron in 2020) and the Delek Group, followed a year later and for a relatively brief period began delivering commerical gas from 2004, thereby initiating the country’s transition to gas-powered electricity.

In 2009, Nobel Energy and its partners discovered the Tamar-1 and the Dalit-1 gas fields. But it was the giant Leviathan field 30 km west of Tamar with estimated recoverable reserves of 650-619 bcm of gas which really transformed Israel’s energy outlook. Subsequently, additional amounts of gas have been discovered in the Karish, Tanin, Dolphin, Tamar SW and Aphrodita-Ishai fields. Tamar, Leviathan and Karish fields began production in 2013, 2020 and 2022 respectively.

According to the Israeli Ministry of Energy and Mining, Israel had total proved gas reserves of about 709 bcm (2023). Israel produced 27.38 bcm from its Leviathan, Karish and Tamar fields in 2024, an 8.3% increase compared to 2023 (25.28 bcm). Of gas production from these fields in 2024, 52% (14.27 bcm) was destined for domestic use, while the remaining 13.11 bcm was exported to Egypt, Jordan and more controversially and tentatively to EU countries since an MoU in 2022.

Much more is to come. For example, in February 2025, the Israeli company NewMed Energy submitted a $2.4 billion plan to the Israeli Government for the expansion and boosting of production at the Leviathan gas field to 23 bcm/year (from around 12 bcm/year currently).

Adding to this abundance, Israel is believed to have the third largest deposits of shale oil in the world (estimated at 250 billion barrels) after the US and China, mainly in the Negev desert area and the Shfela Basin. Just how much would be recoverable is still to be determined, as is public acceptability of any development.

Amidst Israel’s stunning energy wealth generation, the Gaza Strip and West Bank have remained isolated: frustratingly so, because one of the early discoveries in the Levant Basin in 2000 was the Gaza Marine gas field (estimated reserves of 28.3 bcm ), 35 km off the Gaza coast made by British Gas in partnership with the Consolidated Contractors Company (CCC), under a licence granted by the Palestinian Authority (PA). According to multiple reports, Yasser Arafat, PA president, took a boat out to light the first flare stack at the well site. He referred to the find as ‘a strong foundation for a Palestinian state’.

The euphoria was short lived. As of today, 25 years later, the Gaza Marine prospect remains untouched, blocked primarily by Israel’s concerns for the security of its own neighbouring offshore fields and insistence that Hamas, which took control of the Gaza Strip in 2007, should not benefit from any development. No amount of persuasion, including past diplomatic efforts by the likes of John Kerry, US Secretary of State, and Tony Blair, ex British Prime Minister and Middle East negotiator, has got close to the finish line. At one time collaboration with the Russian company Gazprom was considered as an option. Unsurprisingly perhaps in 2018, Shell, which had taken over British Gas, decided to relinquish its 60% stake in Gaza Marine, transferring it to Palestinian state companies.

There has always been a plan on the table, focused on piping the Gaza Marine gas to Egypt, these days conflicted by its need to replenish its dwindling gas reserves but anxious not to put its more significant imports from Israel in jeopardy. Issues over the years have included the likely viability of this isolated development valued at $3 billion in revenue but with a capital cost possibly between $1-2 billion and vulnerable to fluctuating gas price. Although maritime borders were established in the 1995 Oslo Accords, interim agreements between Iarael and the then Palestinian Liberation Organisation, their legality remain contentious. Furthermore, international geopolitical tensions and disruptions in Gaza itself, control of which is disputed between the PA, based in Ramallah, West Bank and Hamas, are all factors constantly weighing on any approvals.

Meantime Gaza Marine’s potential to improve the fortunes of Gaza’s population has in some quarters reached almost mythical proportions. This applies also to Area C of the occupied West Bank where possible overlap from Israel’s minor Meged field is thought to harbour oil reserves denied to Palestinians.

A report in 2019 from the UN Conference on Trade and Development entitled The Economic Costs of the Israeli Occupation for the Palestinian People: The Unrealized Oil and Natural Gas Potential claimed Palestine was missing out on ‘hundreds of billions of dollars for development.’ Hence the improbable theory that Israel’s onslaught on the Gaza Strip was about access to oil and gas.

A polemical rejoinder by Elai Rettig (Begin-Sadat Centre for Strategic Studies) and Lee Wilcox, an American writer, in The Gaza oil myth, is right to say the UN report conflates Israel’s hydrocarbons bounty with Gaza’s suggesting some sharing of wealth: ‘The Gaza Marine and Meged fields, while valuable in an economic sense, are not significant enough to drive military action’. The authors sense sinister forces at work, adding ‘The spread of the Gaza oil myth reflects the dangers of relying on dubious sources and conspiracy theories to explain complex geopolitical conflicts’.

In fact, before the massacre, Israel was warming towards some concession, motivation unclear. In June 2023, it approved the development of the Gaza Marine field, with Egypt’s state-owned Egyptian Natural Gas Holding Company (EGAS) which would lead development in collaboration with the PA. Once integrated by a 40 km pipeline into Egypt’s energy grid, gas would be sold, as an export, to Palestinians and others. Preliminary Israeli approval was said to be ‘subject to coordination’ between its security services, Egypt and the PA, an ominous proviso to Palestinian hopes after all these years that will doubtless persist.

An issue with a long and contentious history

Always been a plan on the table