Israel has a wealth of underdeveloped natural resources that promise to revolutionise its economy.

The country, known for its academic prowess, technological expertise and entrepreneurs, is now making headlines with rumours of vast oil reserves beneath its natural gas fields.

In the wake of this, some experts are even describing Israel as the new “oil giant of the Middle East”; while others are adopting a more cautious outlook.

The fields, discovered over a decade ago, have been hailed as a significant finding by one of Israel’s leading economists and government advisors.

Eytan Sheshinski, a professor of public finances from the Hebrew University of Jerusalem, says: “We couldn’t believe it when we found natural resources in Israel.

“Over 500 onshore drilling projects took place all over the country and nothing was found except in Cheletz [south of Ashkelon] which has an insignificant amount of oil.

“It was a very disappointing story.”

Though onshore drilling projects proved to be less lucrative, offshore ventures have been far more profitable.

“The offshore gas fields, such as Leviathan and Tamar, have been big findings for Israel,” adds Prof Sheshinski. “Income from the fields is rising all the time. There is huge potential.” According to reports, the Leviathan natural gas field, located 130km offshore from Haifa, could also contain up to 1.5 billion barrels of oil 6,500 metres beneath the Mediterranean Sea.

If this is the case, the oil — a versatile commodity used in multiple industries from transport to agriculture and manufacturing — would satisfy Israel’s requirements for the next 15 years.

Further, experts say it would decrease its dependency on imports and provide trade opportunities to simultaneously boost its GDP and the bargaining power of business and political leaders.

The estimated 25 per cent chance of discovering the oil reserves this year has pushed Leviathan’s major stakeholder, Nobel Energy, to begin drilling at the end of 2013 on the arrival of new drilling vessel from South Korea.

If oil is extracted, companies and the Israeli government are likely to reap billion dollar rewards.

Dr Nicolas Waldmann, a geologist from Haifa University, explains that the extraction process is delicate and costly. He says: “Companies must consider how to control the liquid, the impact of pipelines and ask if a tsunami could arise?

“It is revolutionary that Israel has potential for natural resources, but it’s a new and developing process.

“Companies are still very much exploring the fields.”

With no return guarantees, is the process worth the investment?

“Of course,” insists Dr Waldmann.

“A survey could easily cost a company $20 million because you need a big ship, lots of equipment and very costly salaries.

“Only very large oil companies are able to carry it out on this scale.

“This is a very small investment for the companies compared to what they could get afterwards.”

He adds: “No one can say for sure if Israel has large reserves of oil. Anyway, if we had, we are probably not allowed to say it.”

“Nobel Energy has the technical know-how to look into and extract the oil,” explains Prof Sheshinski.

“There are big benefits. At $100 a barrel, they could make $100 billion in revenue. But this, of course, is revenue, not profit, as there are huge costs involved in drilling and so on.”

But Dr Amit Mor, the CEO of Eco Energy, an Israel-based government and private company consultancy firm, has approached the latest developments with more caution.

He believes claims of Israel becoming a major oil player “are highly speculative”, adding: “We need to wait for Noble Energy to begin drilling and see what they find.

“It very much depends on the quantity of the oil that could be produced.”

Nevertheless, energy specialist Dr Mor, a former consultant at the World Bank in Washington DC, acknowledges that uncovered oil reserves would reduce dependency on exports and possibly “bring a big economic benefit to Israel”. Israel currently imports 98 per cent of its oil — at an annual cost of $10
billion.

Dr Mor says: “At present, Israel uses 300,000 barrels of oil each year — and more than 70 per cent of our oil is imported from Azerbaijan and Russia.

“Reserves would decrease our dependency on foreign oil.”

Above all, Dr Mor believes that the reserves are “an important contribution to the Israeli economy”.

But he adds: “They will not replace high-tech as the major locomotive for Israel.”