THE BLOG
02/28/2014 12:56 pm ET Updated Apr 30, 2014

Israel: Now a Gas Exporter

Israel is now an energy exporter. Israel is now exporting natural gas and will soon become one of the largest natural gas suppliers in the world. This new reality is likely to change the entire economy of the Middle East. In fact, it just might reshape the entire world supply and demand graph of natural gas.

Last week Israel signed a deal with Jordan which will provide them with $500 million worth of natural gas over the next 15 years.

Jordan is in great need of gas. They took a terrible hit when their gas pipeline from Egypt was repeatedly sabotaged by Islamists. Now, because of their new deal with Israel, the Jordanians will have a dependable source of natural gas. The only component missing in the deal is the delivery mechanism. Infrastructure, pipelines and security must now be put in place to facilitate the delivery. It's a big task, but it is doable.

The gas Jordan will be receiving comes from Tamar, a gas field discovered in 2009 that lies deep below the Mediterranean Sea, about 50 miles off the coast of Haifa. It is the smaller of two gas discoveries that Israel has recently tapped. It is estimated that Tamar has 280 billion cubic meters (that is 8.5 trillion cubic feet) of natural gas.

The larger gas field is called Leviathan. It is estimated to have 540 billion cubic meters (that is 16 to18 trillion cubic feet) of gas and is located about 80 miles off the coast of Haifa. Leviathan is large enough to be able to supply all of Europe for an entire year. Interestingly, Israel signed a gas deal with the Palestinian Authority to provide them natural gas from Leviathan. That deal will cost the PA $1.2 billion for a 20 year supply of natural gas.

These finds represent the largest discoveries of natural gas in recent memory and they are enormous. According to estimates Leviathan will probably not start to export before 2016, but Tamar is already tapped and producing gas.

The gas fields are owned by a conglomerate. Thirty-two percent is owned by a Texas energy company called Noble. The rest is owned by several Israeli companies. Israel's Delek owns 31.25 percent. Isramco Negev owns 28.75 percent. And the last 4 percent is owned by Dor Energy. The gas is in demand. An Australian energy company named Woodside just signed a $2.5 billion deal giving them 25 percent of the product of Leviathan.

Not too long ago the idea that Jordan would rely on Israel for its supply of gas was, if not exactly ludicrous, certainly farfetched. But situations change and allegiances alter. Now it seems that for Jordan, Israel is a more reasonable and more dependable gas resource than neighboring Arab suppliers. Jordan has no real natural resources to speak of -- certainly no gas or oil. And soon they will be freed of the fear that changing winds and Muslim extremism can destroy their energy supply.

The best way to utilize the newfound Israel resource is to keep it local. That keeps prices down. So yes, the Jordanians and the Palestinians have signed on. And there is talk that the Turks might jump on the Israeli bandwagon, too. If that happens, it would be a significant icebreaker because right now, on other matters, the Israelis and the Turks are not really on talking terms. But when it comes to energy supply and dependability, let bygones be bygones.

What an industry shakeup. For so long we lived in a world where a very large percentage of the world's gas was supplied by countries not too friendly towards the West. It was a world where Israel was dependent on the spot market, where Israel needed to plan years in advance to make certain that they had gas to fuel their turbine to generate electricity. There is still a tanker filled with enough fuel to power the entire country for a few days permanently docked just off the coast of Israel with a direct pipeline to the electrical turbines in the event of an energy crisis.

This is a real game changer for the world economy and for the balance of power. Who but the most reckless gambler would ever have bet that in two or three years Israel will become one of the world's largest suppliers of natural gas.