In 2005, Israel produced only minimal quantities of oil and imported approximately 249,000 bbl/d of crude oil and products to meet domestic needs. Traditionally, major oil import sources have included Egypt, the North Sea, West Africa, and Mexico. In recent years, however, Israel has increased imports from Russia and the Caspian and now reportedly buys three-fourths of its oil from this region. Israel has begun to import larger quantities of Azeri oil, which is lighter and sweeter than the Russian Urals crude, and easily transported through the newly-inaugurated Baku-Tiblisi-Ceyhan (BTC) pipeline. For more on this pipeline please see the Azerbaijan Country Analysis Brief . Overall, oil imports in Israel are declining, as the country looks increasingly to alternative forms of energy.

Although oil exploration in Israel has not proven successful in the past (current output is about 100 bbl/d from six fields), more than twenty small independent firms are active in hydrocarbon exploration throughout the country. Israel's Petroleum Commission has estimated that the country could contain 5 billion barrels of oil reserves, most likely located underneath natural gas reserves.

Overall, more than 470 oil wells have been drilled in Israel since the 1940s, with little success despite the country’s location in the oil-rich Paleozoic petroleum system stretching from Saudi Arabia to the Mediterranean basin. Most recently, in May 2004, the Givat Olam Company reported a find of 980 million barrels of oil reserves at the offshore Meged-4 well near Kfar Sava, north of Tel Aviv. However, the company expects only 20 percent of the new reserves to be extractable. In April 2005, Zion Oil & Gas, Inc., based in Dallas and Tel Aviv, began drilling at the Ma'anit-1 well, located approximately 37.5 miles north-northeast of Tel Aviv. Operations were temporarily suspended in November 2005, although they are scheduled to restart in late-2006. Zion Oil holds exploration rights to more than 98,000 acres in central Israel until April 2007. U.S.-based Ness Energy International is also active in exploration in Israel.

Israel has sizeable deposits of oil shale, an estimated 14-15 billion metric tons and 600 million tons recoverable. Oil shale, considered a non-conventional source of petroleum, is sedimentary rock containing organic material from which liquid fuel may be extracted, at a rate of perhaps 15-17 gallons of oil per ton of shale. Most of Israel's shale resources are located in the Rotem basin region of the northern Negev desert, near the Dead Sea. A minimal quantity of shale is burned directly for industrial power production. Currently Israel is trying to increase interest in production of shale resources. In consideration is a proposal from Haifa-based AFSK Hov Tom, to build a $270-million oil shale plant in Mishor Rotem that could produce an estimated 60,000 bbl/d (30 percent of Israel’s imports) from six million tones of shale and two million tonnes of bitumen (from the Ashdod refinery). AFSK owns a patented process that employs catalytic conversion under low pressure, making production less energy intensive. However, oil shale processing is a water-intensive process and Israel’s water scarcity remains a challenge to large-scale shale development.

Since 1998, Israel's government has advanced reforms to deregulate the highly centralized oil sector, particularly the gasoline industry. Among other things, the process has ended the old cost-plus basis system, eliminated price controls for end users of petroleum products, and created more competitive conditions in general. Israel has two major refineries, historically owned and operated by Oil Refineries Limited (ORL). The refineries, which are located at Haifa (130,000 bbl/d) and Ashdod (90,000 bbl/d), meet all of Israel and the Palestinian Authority’s demand for refined oil products. In late July 2006, the Ashdod refinery was sold to Israel’s largest fuel retailer Paz Oil Company, Ltd for $800 million, nearly four times higher than original estimates by Israel’s Government Company Authority. The majority of shares in the Haifa refinery will be sold on the Tel Aviv Stock Exchange in a second phase, set for late-2006. In order to increase competition in the fuels sector, the largest domestic retailers (including Paz, Delek, Sonol and Dor Alon) are prohibited from participating in the Haifia refinery stock offering, but may be allowed to hold a minority share. Israel’s Antitrust Authority has delayed the decision on the matter in the near term. Following the war with Lebanon, Israel’s Natinal Infrastructure Ministry is reportedly considering moving the refinery and associated petrochemical facilities out of the port city due to environmental and security concerns should the facilities be targeted in the future.

Israel has one main operational oil pipeline, known as the “Trans-Israel Pipeline” or the “Tipline," built in 1968 to ship Iranian oil from the southern Red Sea port of Eilat to the northern Mediterranean port of Ashkelon, as a gateway to Europe. The pipeline went into disuse after relations with Iran soured in 1979. The 152-mile pipeline has a reported current capacity of 1-1.2 million bbl/d (having been expanded from 400,000 bbl/d) and 18 million barrels of storage capacity. Two smaller links feed Israel’s refineries.

During 2003, the Eilat-Ashkelon Pipeline Company (EAPC) modified the pipeline to reverse flows on the 42-inch line, to facilitate Russian Caspian petroleum exports to Far East. In October 2003, it was first reported that Swiss trader Glencore would ship 1.2 million barrels of Kazakh CPC Blend crude and 600,000 barrels of sour Russian Urals through the line as an alternative to the Suez Canal, which can accommodate only smaller, "Suezmax" tankers. In July 2006, Israel also signed and agreement with the State Oil Company of Azerbaijan (SOCAR) to import and transport Azeri Light Crude through the pipeline.

A comprehensive settlement to the Arab-Israeli conflict could once again open up Israel as an alternative energy transportation corridor for Persian Gulf producers to the West. Currently Persian Gulf producers export oil via tankers that pass through Suez Canal or around the cape of Africa, by pipeline from Iraq to Turkey (design capacity 1.5-1.6 MMBD), or via the Sumed (Suez-Mediterranean) Pipeline (capacity 2.5 MMBD).

Since 1994, Israel’s Dor Alon Energy, a subsidiary of the Israel Oil Company, Ltd., has been the exclusive supplier of refined petroleum products and Liquid Petroleum Gas (LPG) to the Palestinian Authority, at about a half-million gallons per day in 2005. The company has a contract with the PA to supply more than 200 gasoline (and natural gas) filling stations.

Jordan has yet to discover any significant petroleum resources of its own, and relies on imported crude oil and refined products to meet domestic demand (around 110,000 bbl/d in 2005). Like many oil-importing countries in the world, Jordan has felt increasing fiscal pressure from the sustained high price of crude oil. The macroeconomic impact of high oil prices has been compounded by the loss of highly subsided (in part, free) crude and refined oil following the March 2003 invasion of Iraq. The end of oil grants has meant that Jordan has had to both seek alternative sources of supply (with Kuwait and Saudi Arabia emerging as Jordan's main oil suppliers since 2003) and incur the cost of importing oil at market prices. Press reports indicated that at although some of this Gulf oil was sold at discounted prices through the end of 2004, Jordan has been paying the full market prices in 2005, while still subsidizing refined products for end-users at ever-increasing cost (estimated seven percent GDP in 2005). As a result, the Jordanian Parliament has adopted an IMF-supported reform strategy that includes the gradual adjustment and liberalization of tariffs on select petroleum products. Beginning in July 2005, prices have been adjusted bi-annually with the goal of fully eliminating subsidies by March 2007.

In August 2006, the Iraqi Oil Ministry announced plans to resume oil exports (approximately 30-35,000 bbl/d) to Jordan as part of a series of bilateral economic agreements. The details and terms of the agreement remain undisclosed.

Jordan's state Natural Resources Authority (NRA) continues to promote oil exploration within the country. Jordan is divided into nine exploration blocks, of which six are open for private concession. Currently, TransGlobal Corporation holds a concession for the Wadi Araba (Dead Sea) area in Western Jordan. In December 2004, U.S. based-Sonoran Energy was awarded exploration and production rights for the Azraq Block, just east of Amman. In March 2006, the Jordanian parliament rejected a Production Sharing Agreement (PSA) signed between the NRA and Sonoran Energy in November 2005. Under the terms of the PSA, Sonoran was to have rights to develop and explore the Azraq Block and take over operation of Hamzah, Jordan’s sole producing oil field, with production 30-40 bbl/d. The matter is currently in debate by the Parliamentary Energy Committee. In September 2005, London-based Petre reached and agreement with the Jordanian authorities to explore the East Safawi Block in eastern Jordan. East Safawi borders Saudia Arabia, Syria and the gas producing Jordanian Risha field, near Iraq.

Jordan has one refinery, at Zarqa, with a capacity of 90,400 bbl/d. The facility, owned by the Jordan Petroleum Refining Corporation (JPRC) is in need of major upgrades as it can no longer meet the fuel requirements of the domestic market. The refinery was designed to produce a product mix skewed toward heavy fuel oil (and particularly the processing of Iraqi crudes), which was originally needed to run electric power plants, but the local market is now in need of unleaded gasoline (leaded gasoline will be phased out by March 2008), kerosene and diesel, as electric power generation is switching over to natural gas. The MEMR is looking to attract $700 million for a modernization project that will also raise refining capacity to 130,000 bbl/d by 2010. As part of a national agenda to reform and deregulate the energy sector, JPRC’s monopoly on petroleum refining and distribution operations in Jordan will end in 2008. At that time, the government of Jordan will open the downstream market to competition.

In order to reduce petroleum imports, Jordan is promoting the exploration and development of oil shale resource. According to the NRA, Jordan has some 40 billion metric tons of proven oil shale reserves in 18 known deposits, which could yield as much as four billion tons of crude oil. In June 2006, the NRA signed an MOU with Royal Dutch Shell to test the extraction of deep oil shale resources using Shell’s in-situ conversion process in the Azraq and Al-Jafr blocks of central Jordan. In April 2006, Jordan’s Ministry of Planning and International Cooperation awarded a $310,000 - U.S. Trade and Development Agency (TDA) grant to US-based America Asia Petroleum for study of shale oil extraction and recovery. The MEMR is also planning on signing MOUs with companies to carry out feasibility studies on surface oil shale deposits in the Al-Lajoun block in the west. Based on the results of the studies the MEMR is expecting to open five blocks for bid: Wadi Magher, Sultani, Siwaqa, Jurf and Attarat Umm Ghudran. Currently, the Jordan Cement Company burns minimal quantities of oil shale directly for power generation.

Jordan is also a central transit point of the 500,000-bbl/d Trans Arabian Pipeline (“Tapline”), which was originally constructed in the 1940s as the main means of exporting Saudi oil to the West (via Jordan to the port of Haifa, then part of Palestine). The founding of Israel resulted in diversion of the Tapline's terminus from Haifa to Sidon, Lebanon (through Syria and Lebanon). Partly as a result of turmoil in Lebanon, and partly for economic reasons, oil exports via the Tapline were halted in 1975. In 1983, the Tapline's Lebanese section was closed altogether. Since then, the Tapline has been used exclusively to supply oil to Jordan, although Saudi Arabia terminated this arrangement temporarily to display displeasure with perceived Jordanian support for Iraq in the 1990/1 Gulf War.

Despite these problems, the Tapline remains a potential export route for Persian Gulf oil exports to Europe and the United States. Since early 2005, rehabilitation of part of the Tapline at an estimated cost of $100 to $300 million has been one of the strategic options being considered by the Jordanian government to meet oil needs.

Jordan has announced plans to tender construction on a 27-mile, 150,000- bbl/d capacity pipeline from the Saudi town of Rashediah to Jordan’s port of Aqaba. The pipeline project will include the construction of a 24-inch pipeline, a storage facility and truck unloading facility. The project will cost an estimated $65 million. The timeline of the project is unknown.

Jordan is also looking to revive discussion with Iraq on a potential190-mile pipeline which would run from Haditha in Iraq to Zarqa, and potentially to the export terminal at Aqaba. The proposed $2 billion project would have a capacity of 1.2 million bbl/d, and would facilitate imports from Iraq once additional production capacity is developed. Due to security concerns, it is likely that near-term Iraqi fuel exports will continue to be transported in trucks.

Lebanon currently imports all of the oil it consumes, approximately 108,000 bbl/d (in 2005), in the form of refined products. The Kuwait Petroleum Corporation is a key supplier. As a result of its geographic location, Lebanon was once a refining center for crude oil that was exported from Iraq and Saudi Arabia by pipelines to two Lebanese coastal refineries, Zahrani in the south, and Tripoli in the north. Due to years of internal and regional political unrest, these refineries have not been operational for several decades. In April 2006, Lebanon and Qatar Petroleum International signed an MOU to study the feasibility of building refinery with a capacity of 150,000 – 200,000 bbl/ d. Due to renewed tensions with Israel, interest in reviving the sector is on hold indefinitely.

Syria's oil industry faces many challenges. Oil output continues to decline due to technological problems and depletion of reserves. Since peaking at 590,000 bbl/d in 1996, it is estimated that Syria's average crude oil output will fall below 400,000 bbl/d in 2006, as older fields, especially Jebisseh and Omar, reach maturity. Syrian oil production is expected to continue its decline over the next several years, while consumption rises, leading to a reduction in Syrian net oil exports. If this trend continues, it is possible that Syria could become a net oil importer within a decade.

Syria aims to reverse the trend toward declining oil exports through intensified oil exploration and production efforts, enhanced oil recovery (EOR) techniques, and a switch from oil-fired to natural-gas fired electric power plants. In 2001, Syria’s Petroleum and Mineral Resources Ministry offered the first in a series of block tenders to IOCs for oil and natural gas exploration using production sharing agreements.

The first of these awards was made in January 2003, with Shell receiving exploration rights in the Damascus-Palmyra area and India's ONGC Videsh receiving another onshore block. Independents Ocean Energy and Stratic Energy also received awards. In 2003, three new exploration deals were announced, with Canada's Tanganyika and PetroCanada, China's CNPC, and US-based Devon Energy and Gulfsands Petroleum receiving awards. Another round of awards took place in January 2004, with companies involved including U.S. independent IPR Transoil, India's ONGC, and Croatia's INA Naftaplin. In May 2005, Gulfsands Petroleum purchased Devon Energy's 80 percent stake in Block 26, then sold a 50 percent stake in the project to Soyuzneftegaz of Russia. Gulfsands remains as operator of the project with a 50 percent ownership stake. INA Naftaplin reported a discovery of oil at the Jihar field in September 2004, which it expects to produce 5,000 bbl/d once it is developed. In November 2005, blocks were awarded to Midway Oil, Tatneft, And Norway’s Inseis Terra, and Soyuzneftegaz, among others. Most recently, in a fifth licensing round held in April 2006, nine blocks were offered in the eastern Deir el Zour region, for which 23 bids from 13 companies were received. In late July 2006, Shell was awarded two blocks, while two other blocks went to small firms: the Ukrainian Ukna Nadan and France's Maurel and Prom. The unawarded blocks are expected to be offered in the sixth licensing round, along with offshore blocks in late 2006.

Syria's largest foreign oil producer is Al-Furat Petroleum Co. (AFPC) a joint venture established in 1985 by the Syrian Petroleum Company (SPC), an arm of the Ministry of Oil and Mineral Resources; Shell (majority stake holder), and PetroCanada. In 2005, PetroCanada’s stake was bought by the India-based Oil and Natural Gas Corporation (ONGC) and the China National Petroleum Company (CNPC). AFPC controls three dozen fields located primarily in northeastern Syria, where commercial quantities of oil were discovered in the late 1980s. It is estimated that the company is currently producing about 150,000 to 180,000 bbl/d of high quality light crude.

AFPC's main oil field is al-Thayyem, where production has declined since 1991. Another important field -- Omar/Omar North began production in February 1989 at 55,000 bbl/d. Shortly thereafter, operator Shell was pressed by the cash-strapped Syrian government to step up production to 100,000 bbl/d. The result was serious reservoir damage, and in April 1989, output plummeted to 30,000 bbl/d. Currently, Omar produces about 15,000 bbl/d from natural pressure and 30,000 bbl/d from water injection. Other AFPC fields include Azraq, al-Izba (light oil), al-Ward, Maleh , Jido, Ishar East, Sijan, and Tanak.

SPC's fields include:

1) Karatchuk -- Syria's first discovery, located near the border with Iraq and Turkey;

2) Suwaidiyah -- a giant heavy oil field located south of Karatchuk in the Hassakeh region (and extending into northwestern Iraq) which currently produces around 85,000-90,000 bbl/d; and has been partially redeveloped;

3) Jibsah -- a major field producing both oil and gas;

4) Rumailan -- a small field near Suwaidiyah which produces heavy oil; and

5) Alian, Tishrine, and Gbebeh (Kebibe) -- three small, depleting fields producing heavy oil. China's CNPC signed a contract with SPC in March 2003 to undertake an enhanced oil recovery project (EOR) for Gbebeh, which is to increase production from the current 4,500 bbl/d to 10,000 bbl/d. Tanganyika will undertake EOR on Tishrine, Oudeh and Shiek Mansour, Sheikh Sulaiman and Jeribe, attempting to enhancing output from around 8,700 barrels per day to 17,000 barrels per day by the end of 2006, and eventually a reported 30,000 bbl/d.

Besides conventional oil reserves, Syria also has major shale oil deposits in several locations, mainly the Yarmouk Valley stretching into Jordan. In February 2006, the Ministry of Petroleum and Mineral Resources (MOPMR) announced call for bids to develop the Darra oil shale deposit and Al-Bushri tar sand (west of Der-Al Zour).

Syria's two refineries are located at Banias and Homs. Total current production from these refineries is a reported 239,865 bbl/d (132,725 bbl/d and 107,140 bbl/d, respectively). It is also reported that Syria is planning to construct a third and possibly a fourth refinery at Deir ez-Zour to supply products to the eastern part of the country. Development plans remain unclear. A feasibility study on for the larger facility (and a petrochemical plant) project was awarded in 2005 to Russia’s Stroytransgas, but the MOU was cancelled in May 2006. In November 2005, the MOPMR reportedly signed $1.4 billion deal with CNPC for the construction of a 70,000-bbl/d refinery Deir al-Zor. However, in May 2006, the ministry said that it was in talks with France’s Total for a refinery with capacity of 70,000 bbl/f to be located either at Deir al-Zor or east of Homs. The ministry also stated that plans were underway for a separate 140,000 bbl/d refinery.

It is also reported that Syria plans to upgrade its two existing refineries, both of which are in urgent need of overhauling, to process heavier crudes and replace output of fuel oil with lighter products. It is rumored that a $130-million overhaul of the Homs facility was being considered, although the Ministry of Petroleum and Mineral Resources denied such a program was underway in May 2006.

Currently most Syrian oil is exported by trucks. The 1.4 million bbl/d pipeline between the Syrian port of Banias and the "Strategic Pipeline" in Iraq, which connects its northern and southern oil infrastructure, has been inoperative since the war began in March 2003.

Oil	Proven Reserves (1/1/06E)	Production (2005E)	Consumption (2005E)	Imports (2005E)
	Million barrels	Thousand barrels per day*
Israel	2	0	249	249
Jordan	1	0	110	110
Lebanon	0	0	108	108
Syria	2500	420	265	(155)
Total	2503	420	732	312

* Under 100 barrels/day listed as zero, does not include refinery gains