The find has the potential not just to make the tiny nation energy independent but turn it into one of Europe's biggest gas suppliers and, in the process, reshape the political landscape of the Middle East.
"Having made the largest gas discovery globally in 2010, and given the additional potential, it is only a matter of time before Israel becomes a big gas exporter," said Philip Wolfe, an energy banker at UBS, the investment bank. As the Arab protests that began in Tunisia spread throughout the region - the heart of global oil production - the implications could be profound.
The Leviathan field sits under 5,000ft of water and 20,000ft of rock, halfway between the Israeli coast and Cyprus. It was found by Noble Energy, a Texas oil explorer, and companies owned by Delek, the mini-conglomerate controlled by Yitzhak Tshuva, an Israeli billionaire.
The reservoir holds up to 16 trillion cubic feet of gas, far more than Israel needs. A discovery in 2009, by the same group of companies, already has the potential to secure Israel's energy needs for the next two decades. The Tamar field holds 8.4 trillion cubic feet of gas, and it is set to start flowing by 2013.
Israel's newfound treasure has the energy world agog. Gideon Tadmor, chief executive of Delek, said: "Basins of this magnitude are not often discovered. We have stirred the pot and, with so much going on in the region, we are now at the centre of focus. We have opened the eyes of the industry to the potential."
The fields will cost billions to develop. Bankers say their owners will need to team up with a large oil company such as Royal Dutch Shell or BG that has the deep pockets and technical expertise needed to realise their potential.
David Fuller's view This is the second story on Israel's potential to become not only self-sufficient in energy but also an exporter in the next decade, which Fullermoney has covered in recent months. On 22nd March I posted this article on Israel's shale oil reserves. They had previously been regarded as a resource of dubious potential, as there was no known way to extract the oil trapped in rock. This has changed with US-led technology now being used for the extraction of shale oil in America.
However scepticism remains among some commentators regarding the commercial viability of Israel's shale oil, as it sits above the countries aquifers. Nevertheless, Harold Vinegar, former chief scientist at Royal Dutch Shell and now head of Israel Energy Initiatives, believes that he and his colleagues are solving the problems and that commercial production will commence in little over a decade. Having seen a number of previously "irresolvable" energy production problems resolved in my lifetime, I would not underrate their chances of success. Necessity remains the mother of invention.
Offshore oil and gas drilling techniques continue to improve and companies will be even more diligent following BP's by all accounts careless and hugely costly accident in the Gulf of Mexico last year. I assume that Royal Dutch Shell will be very much in the running to help develop Israel's offshore gas fields, given the companies expertise in this field and previous close connection with Harold Vinegar.
Today, the global supply / demand balance for energy remains delicately poised. Moreover, worldwide demand for energy is set to grow dramatically over the next several decades. Only a few years ago it was widely feared that this would place impossible demands on the supply side of energy, possibly leading to major conflicts.
Energy supplies are likely to remain tight, but only for a few more years. By the next decade we have every reason to be considerably more optimistic regarding future energy supplies, thanks to the march of technology. New sources of mainly offshore conventional gas and oil continue to be discovered. Fields previously described as largely 'depleted' in terms of extractive capability have become productive once again with the advent of new techniques, not least horizontal drilling.
However the most dramatic breakthroughs are occurring in the fields of previously untapped shale gas and even more recently shale oil. According to an increasing number of recent estimates, potentially extractable sources of both shale gas and oil could more than double the world's remaining, known conventional reserves. Consequently, Fullermoney believes that the real (inflation adjusted) price of crude oil will be lower in 12-15 years than it is today, despite increasing demand for energy.
Yes, these are fossil fuels and even though the use of crude oil produces considerably less carbon dioxide than coal, and natural gas produces considerably less CO2 than crude oil, all three pollute the atmosphere. If most people want a significant and affordable reduction in carbon dioxide emissions, and I certainly do, then we need to ensure that the nuclear renaissance continues. (See Eoin's item below on fuel usage.)