Under Israel’s natural gas framework regulation Noble and its partners in 2016 sold two smaller fields, Karish and Tanin, to Energean for a reported $148 million plus royalties in a move meant to bring increased competition to the domestic Israeli gas market.

Zass calls Energean’s deal to supply gas to private Israel power plants a major moment, introducing a third supplier to the market, but cautions to “hold the Champagne.” The Greek company still needs to make its final investment decision by the end of the year. The deal it signed offers better terms than the ones Noble and Delek give its customers but the gas fields’ smaller size and the long-term contracts already in place in the Israeli energy market will still limit competition.

Without significant export opportunities, major international players are unlikely to become involved in the Israeli energy exploration and production sector, is the consensus among analysts. Arie Reich, an expert in trade law and competition at Israel’s Bar-Ilan University says that the drawn-out regulatory wrangle combined with other risk factors has hurt chances of that happening.

“After what happened with the gas saga I think foreign investors will be wary of coming,” he says, extrapolating it to other sectors of the economy. Reich argues for more bilateral investment treaties to reassure investors. “Especially now when we have these huge investments that are required in the energy sector, which are the biggest investments ever in Israeli history,” he added.

In a sign that domestic opinion on how to deal with the gas bonanza is not quite settled yet, the Energy ministry in May launched a $2 million, one year, PR campaign to persuade the public of the “supreme importance to link the Israeli economy to natural gas.”

The ministry also signed an agreement earlier this year with Cyprus, Greece and Italy to explore a gas pipeline for exports to Europe. But the ambitious 2,200 kilometer project, crossing depths of up to 3 kilometers in the Mediterranean, is in a very initial stage. Amid current low European gas prices and political risk in both Israel and Cyprus, many question whether it is viable.

International ratings agencies are upbeat about the effect of gas on Israel’s economy, but Kristin Lindow, senior vice president at Moody’s Investor Services, says the contribution of gas to GDP (gross domestic product) growth, “is not substantial anymore.”

“At first when Tamar came on there was an extra boost to GDP and there has not been an additional boost relative to the rate of growth of other sectors of the economy since then. But the construction of Leviathan will certainly contribute to growth and so will the export,” she said.

The country’s “A+” or “A1” credit rating is only expected to be revised upward if plans to set up a sovereign wealth fund with the gas proceeds are realized and it starts building up. “What we look at when we make positive adjustments for sovereign wealth funds is the extent to which a sovereign wealth fund can cover the country’s external debt,” says Lindow.

While Israel’s external debt is relatively small, the build-up can take time, depending on exports and what portion of revenues end up being invested in the fund. It is now expected to begin operating around 2020.

But, says Zass, even if exports don’t materialize to the hoped-for degree, “if you count domestic sales and exports to the Jordanian market, Israeli government revenues can become very high in the following years. I think the opportunity to start a governmental fund for the next decades or the next generations is still viable.”

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