Over the past four years, in an important development for a country which has never had significant domestic energy resources, several energy companies (Israels Yam Thetis group, Isramco and British Gas) have discovered significant amounts of Natural Gas off the coast of Israel (and even more off the Gaza Strip). Israels new offshore gas reserves belong mainly to two groups: 1) the Yam Thetis group (comprising the Avner Oil, Delek Drilling, and Samedan); and 2) a British Gas partnership with Isramco and others. In August 2000, Isramco/BG announced that it had discovered a large natural gas field 12 miles offshore at its Nir-1 Well. The field reportedly contains natural gas reserves of 274 Bcf, and represents the third natural gas field discovered offshore Israel during 2000 (the largest two being Mari and Noa, with combined reserves of nearly 1.5 Tcf). However, in February 2004, Isramco announced that the Nir-1 well was not commercially viable. In July 2003, Yam Thetis had decided to abandon its Hana-1 well to the north of Mari. In early September 2001, Isramco had announced that BG was abandoning the Tommy, Orly, Shira and Aya concessions after analyzing geological and geophysical findings. In March 2005, Isramco announced plans to drill off the Ashdod coast at a cost of $13 million as part of the Med Ashdod oil and gas exploration partnership, which the company heads. It remains unclear as to which partners will participate in the project. Also, in March 2005, BG announced that it was quitting the Gal natural gas partnership,which it headed, almost completely abandoning its search for natural gas off the coast of Israel. BG concluded that the investment was not worthwhile without the certainty that it could sell natural gas to the IEC.
Natural gas has been discovered not only on Israels side of the border, but also in areas that lie in Palestinian territorial waters off the Gaza Strip. British Gas, which first struck gas in this area with its Gaza Marine-1 well in August 1999, signed a 25-year contract to explore for natural gas and set up a natural gas network in the Palestinian Authority (PA). In December 2000, BG successfully completed drilling a second natural gas well offshore Gaza. The drilling confirmed findings from the Marine-1 well, which had flowed at 37 Mmcf/d, indicating possible reserves of around 1.4 Tcf. In August 2003, Prime Minister Sharon reportedly vetoed a BG plan to import natural gas from the Marine field, citing concerns over where the money might flow. The Palestinian Authority wants to move forward with development of Marine-1, both for its own power generation needs as well as for export, but the project likely would not be economical based on demand in Gaza alone. BG does plan to proceed, however, with a third exploration well in August 2005.
In April 2002, Belgiums Tractebel indicated that it was withdrawing from a $400 million project to construct a natural gas distribution grid in Israel, ostensibly due to security concerns. Tractebel, which had held a 60 percent stake in the project consortium, had been the only bidder on the project, which was awarded in December 2001, and its expertise was considered crucial to the project. Following Tractebels withdrawal, Israels National Infrastructure requested that Israeli companies Paz Oil and Africa-Israel Investments, each of which held a 20 percent stake in the Tractebel consortium, come up with a replacement for Tractebel by mid-May 2002. In July 2002, BG decided not to join, dealing a major blow to the project, and triggering cancellation of the tender. Israels gas law requires that an experienced foreign company hold at least a 10 percent stake in the project. In August 2002, an Israeli consortium of Paz Oil, Africa-Israel Investments, and Batemen Engineering proposed adding a new foreign partner, Itera, which is affiliated with Russias Gazprom. In September 2002, IEC was authorized to build the entire grid, but in April 2003, Israels cabinet decided to reverse course and prevent IEC from building the grid. The cabinet reportedly was concerned that IEC should not be a monopoly in both electricity and in natural gas. In 2004, the Ministry of National Infrastructure granted Israel National Gas Lines (INGL), a state-owned company, a License for the construction and operations of the natural gas transmission system, which is expected to be completed by 2010.