In March 2010, the United States Geological Survey estimated a mean of 1.7 billion barrels (bbl) of recoverable oil and a mean of 122 trillion cubic feet (tcf) of recoverable gas in the Levant Basin Province using a geology-based assessment methodology.¹ The amount of the estimated oil is, in relative terms, not huge, but the estimated volume of gas is substantial. By comparison, Canada holds 62.0 tcf, Australia 108.7 tcf, and Indonesia 112.5 tcf; all are well-established producers.² These considerable potential hydrocarbon reserves can drastically change the region's energy outlook. However, recoverable deposits do not equate to production. It will take several years to exploit these resources. Full utilization will also depend on national strategies and whether regional states will reach an agreement on maritime borders. In other words, geologically recoverable hydrocarbon deposits are available, but geopolicy to recovering them is still being played out.

Israel is the exception. Probably more than any other country in the Middle East, Israel's energy outlook is highly idiosyncratic; with one of the most developed economies in the region, and a high standard of living, Israel requires secure and sustainable energy supplies. The Jewish state is located close to the rich oil- and gas-producing countries in the Persian Gulf and North Africa, yet political animosity has prevented any cooperation for most of the last several decades. Furthermore, worrying about antagonizing Arab producers (and later Iran), many international oil and gas companies were reluctant to start operations in Israel. These complicated geopolitical dynamics have left Israel with limited energy resources and forced it to depend on remote suppliers in Russia, Central Asia and Latin America, among others.

Israel's energy outlook started to improve in the late 2000s through an agreement with Egypt, under which Cairo agreed to supply Israel with a large proportion of its gas needs. Equally important, Israel discovered a number of natural-gas fields. These fields, when they come on line, have the potential to transform Israel into a gas exporter. This rosy scenario, however, faces a number of hurdles both in the short and long terms. The toppling of President Hosni Mubarak in February 2011 raised questions about the sustainability of natural-gas supplies from Egypt at cheap prices. Meanwhile, several of Israel's Mediterranean neighbors have claimed that the newly discovered gas fields are located inside their own borders. Bluntly put, some claim that Jerusalem steals their gas. It seems these lucrative discoveries caught everybody by surprise, including the Israeli government. After long debate, the Knesset decided to raise taxes on hydrocarbon resources.

This essay seeks to examine these recent developments in the eastern Mediterranean. In the first section, I discuss the changes in Israel's energy sector and the controversy over state taxes. In the second, I analyze the regional context — Lebanese and Turkish claims in the Levant basin. These claims and counterclaims aside, Israel is likely to move fast in developing these natural gas fields. Lebanon, Turkey, Egypt and Syria are likely to invest more resources in searching for oil and gas off their own shores. This is followed by an examination of the Egyptian gas pipeline. The analysis suggests that, rhetoric aside, Egyptian supplies will continue, but Israel will have to pay a higher price.