Israel plans to increase the share of natural gas in its fuel mix (especially for electricity generation) for energy security, economic, and environmental reasons. Demand for natural gas is expected to reach 282.5 billion cubic feet (Bcf) by 2010 (ten times consumption in 2004) and increase significantly thereafter. Israel is developing various supply options including imports from Egypt's Nile Delta and domestic offshore reserves. Production in 2004 was estimated at 2.8 million cubic feet.

The East Mediterranean Gas (EMG) Company, a consortium of the Egyptian General Petroleum Corporation (EGPC), the Merhav group of Israel, and Egyptian businessman Hussein Salem, was established in 2001 to allow the import of Egyptian natural gas. A government-to-government agreement, which was signed in June 2005 calls for seven Bcf per year of Egyptian gas to be imported to Israel for fifteen years. Deliveries would be expected to begin in 2008 with a possibility of a five year extension (1.7-2 Bcf is contracted to the Israel Electric Corporation, and EMG is also negotiating with private power producers). A $300 million, 80.8-mile marine pipeline with a maximum capacity of 247.2 Bcf per year, is being planned from El Arish on Egypt's Sinai Peninsula to the Israeli coastal city of Ashkelon, with delivery and receiving facilities in both Egypt and Israel. Anticipating future needs and the potential for disruption of imports from within the region, Israel is also considering building a Liquefied Natural Gas (LNG) re-gasification facility or an underwater pipeline from Turkey.

Over the past several years, in an important development for a country with few energy resources, several energy companies have discovered small but commercially viable quantities of natural gas off the coast of Israel and the Gaza Strip. Israel's and the Palestinian Authority’s offshore gas reserves are under concession to two main groups: 1) the Yam Thetis group (comprising the US-based Nobel Energy, Israel’s Avner Drilling, and Delek Exploration ); and 2) a British Gas (BG) partnership with US-based Isramco and others.

Yam Thetis operates Israel’s two largest gas fields, Mari and Noa (Border), which have estimated combined reserves of 1.5-1.7 Tcf. Yam Thetis is currently the sole domestic supplier of natural gas to Israel’s two natural-gas run power plants, with deliveries from the Mari field beginning in February 2004. In July 2006, YamThetis signed an agreement that augments an 11-year deal to supply natural gas to Israel Electric Corporation (IEC) and the Ashdod refinery. The new agreement will increase quantities delivered significantly above the current 64 billion Bcf/year, and also support a second gas-fired power plant near Tel Aviv. Excess gas will eventually supply the Hagit and Gezer power plants, scheduled to convert to natural gas in 2007. According to press reports, the price for the initial quantities of gas is $2.75 per MMBtu, while the additional quantity is priced at $4 per MMBtu.

In 1999, BG first discovered gas in the Palestinian Authority’s territorial waters with its Gaza Marine-1 well. BG signed a 25-year contract to explore for natural gas and set up a distribution network in the territory. The drilling confirmed findings from the Marine-1 well, which had flowed at 37 Mmcf/d, indicating possible reserves of around 1.4 Tcf (estimated 10 years of domestic supply). Although Israel’s previous government rejected a BG plan to import natural gas from the Gaza fields, Prime Minister Ehud Olmert’s government has reconsidered importing the gas for economic and logistical reasons. Several parties have been involved in the on-again off-again negotiations. Participants include the Israeli ministries of finance, national infrastructure and the prime ministry; British government officials and BG (representing the Palestinian Authority); and minority shareholder Athens-based Consolidated Contractors International Co. (CCC), owned by the Khoury family of Lebanon. As of June 2006, negotiations were underway, with Israel reportedly guaranteeing the purchase of 53 Bcf per to be bought by private power producers at a price reported to be more than $4 per MMBtu. In May, talks were postponed when BG rejected an initial offer from the Israeli government that set a low price for gas and did not guarantee a long-term customer base. BG is also considering the option to export gas to LNG plants in Egypt for sale to Europe and North America. Security concerns and political issues threaten to delay field development in the near-term.

In March 2005, Isramco announced independent plans to drill in the Med Ashdod lease (Gad 1 well) with US based-Palace Petroleum Corp (30 percent shareholder) and several Israeli partners. Isramco also has a stake in the Med Yavne license, operated by BG. There are no development plans as yet for Med Yavnem, which contains the productive Or-1 well.

Israel’s Ministry of Infrastructure has recently revived plans to construct and license a national gas distribution system (excluding the Palestinian Authority), expected to be completed in 2010. In April 2002, Belgium's Tractebel indicated that it was withdrawing from the $400 million project, reportedly due to security concerns. In 2004, after a series of delay, 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 transmission system. In June and July 2006, the Infrastructure Ministry reported that contracts had been awarded for the first several stages of construction of the transmission system, which would begin in late-2006.

Jordan has 230 billion cubic feet (Bcf) of natural gas and has developed one gas field, at Risha in the eastern desert near the border with Iraq. The current output of around 25 million cubic feet per day (Mmcf/d) from the field is used to fuel one nearby power plant, which generates about eight percent of Jordan's electricity. Jordan’s National Petroleum Corporation (NPC), which operates the field, believes that the resource is underdeveloped and has the potential to produce 100-150 Mmcf/d. Jordan is currently looking for investors.

Natural gas consumption has tripled since 2003, due to conversion of electric power plants from diesel-powered to natural gas (consuming some 56 Bcf in 2005, according to the Ministry of Energy and Mineral Resources). In August 2003, Jordan received imports of natural gas from Egypt through a newly built pipeline (Jordan Gas Transportation Pipeline), from El-Arish in Sinai to Aqaba .The second phase of the project, connecting the Rihab power plant in northern Jordan, began operations in February 2006. A May 2001 agreement guarantees 100 Mmcf/d of gas supplied by Egypt for 30 years. Regional governments continue to discuss extending the project, dubbed the “Arab Gas Pipeline” (AGP), to Syria and Lebanon, with a possible extension to Turkey, Cyprus and southern Europe.

Jordan is also working on building a gas distribution network to supply select industrial consumers, first in Aqaba, and later in Amman and Zarqa, by 2008. In August 2006, the Jordanian-Egyptian company Al-Fajr, which transports and supplies natural gas, broke ground on a 15-mile pipeline to supply the Al-Rashadiyya Cement Factory with gas. The plant is expected to start using the natural gas by early 2007.

Although Lebanon has no known gas reserves of its own, the country is in the process of converting its power generating plants from oil to natural gas. To help meet this demand, the 26-mile natural GASYLE gas pipeline linking the Baniyas plant in Syria to the Deir al-Ammar-Beddawi power plant in northern Lebanon, was completed in March 2005.

In February 2006, Syria agreed to supply 1.5 million cubic feet per day, beginning in late-2007, for ten years. However, imports are limited by growing domestic needs and limited production in Syria itself. Lebanon expects that in the future, Syrian imports will be supplemented by additional imports from Egypt and delivered through the so-called “Arab Gas Pipeline.” In April 2006, Lebanon announced plans to construct a second pipeline from Syria to the Zahrani power station in the south of Lebanon. Plans are on hold due to the recent conflict with Israel.

Syria's proven natural gas reserves are estimated at 8.5 trillion cubic feet (Tcf). An estimated three quarters of these reserves are owned by SPC, including about 3.6 Tcf in several fields in the Palmyra area, 1.6 Tcf at the al-Furat fields, 1.2 Tcf at Suwaidiyah, 0.8 Tcf at Jbessa, 0.7 Tcf at Deir ez-Zour, and the remainder at al-Hol, al-Ghona, and Marqada. About half of Syria's natural gas is non-associated, and the rest is associated (i.e. with oil). Syria’s newest gas discoveries include the modest strike at Hayyan (in the Palmyra area) by the Croatian company INA Naftaplin. The field has estimated reserves of 530 Bcf. In 1999, SPEC discovered Borth al-Faydh, which reportedly has production potential of 35 million cubic feet per day (Mmcf/d).

In 2004, Syria produced about 251 Bcf of natural gas, up from 205 Bcf in 2002. Syria has stated plans to increase this production over the next several years to 350 Bcf as part of a strategy to substitute natural gas for oil in power generation and free up as much oil as possible for export (also, around 25% of domestic production is used for re-injection in oil production). As with oil exploration, Syria has been working to adopt more investor–friendly policy to attract needed investment for gas development.

In May 2006, Syria and US-based Marathon oil signed a $127-million gas and oil exploration agreement. Under the 25-year deal, Marathon Oil and its partners will develop Al Shae'r and Al Sharyfa fields in the Homs region. After initial tests, the field is expected to produce 71 MMcf s of gas and 5,000 barrels of oil per day. In June 2006, Petro-Canada signed an agreement with Marathon for a 90% stake in the fields. Development of this region has been at the center of almost two decades of negotiation between Marathon and the government of Syria. PetroCanda originally divested Syrian holdings (including the Al-Furat Company) when it lost out the US$850-million Palmyra fields development contract in early 2005 to Russia’s Soyuzneftegaz.

Syria is planning to supplement domestic production with imports from Egypt. In 2001, Syria first signed agreements with Egypt, Jordan, and Lebanon in early 2001 to construct a portion of the "Arab Gas Pipeline." The section of the pipeline running from Egypt to northern Jordan currently is in the final stages of construction. An agreement was signed in January 2004 between Egypt, Jordan, Syria, and Lebanon for the extension of the pipeline into Syria and Lebanon. Syria issued an invitation for bids for the extension project in June 2005. Meanwhile, Syria has begun exporting a small quantity of natural gas to Lebanon.

A number of new gas-fired power projects are currently under construction or being planned. In September 2001, a new, integrated natural gas project (called "Desgas") was completed in the Deir ez-Zour region, three years since a $430 million service agreement was signed between SPC and ConocoPhillips and TotalFinaElf. The complex utilizes approximately 175 Mmcf/d of previously-flared, associated natural gas, in the more than 20 Deir ez-Zour oil fields. However, Conoco divested in September 2005, and their stake taken up by SPC. The Deir ez-Zour complex now includes a natural gas gathering system and processing plant, plus a 155-mile pipeline to carry 150 Mmcf/d of natural gas to the power plants serving western Syria. Liquid Petroleum Gas (LPG) and condensate is collected from that Total’s Tabiyeh fields and sent to market via rail and the Banias pipeline respectively. Other state-owned gas plants that will supply power plants throughout the country include Jbessa, Suweidiya, Palmayra and Omar. Planned facilities include plants at Homs and As-Sawra.

Natural Gas	Proven Reserves (1/1/06E)	Production (2004E)	Consumption (2004E)	Imports (2004E)
	Trillion cubic feet ( Tcf )	Billion cubic feet ( Bcf )
Israel	1.4	28	28	0
Jordan	0.2	11	50	39
Lebanon	0.0	0	0	0
Syria	8.5	251	251	0
Total	10.1	290	329	39