The State of Israel was established in 1948. In its early years, Israel’s oil sector achieved only limited success. The first oil field, Heletz, was discovered in 1955 and ultimately produced approximately 17.2 million barrels of oil. Since then, only small quantities of oil have been discovered, although exploration activity has continued in the hope of identifying additional, commercially viable fields.

Israel’s upstream natural gas industry was established in 1999 with the discovery of the Noa reservoir off the coast of Ashkelon by the Yam Tethys partnership. A few months later, another reservoir, Mari B, was discovered. It was estimated that these reserves held about 45 billion cubic meters (“BCM”) of natural gas, which provided a limited amount of natural gas to the Israeli market, primarily to the Israeli Electric Corporation, its main customer. Today, these fields are nearly depleted.

More fields have been discovered since then, notably the Tamar field, located off the coast of Haifa and estimated to contain approximately 291 BCM, which commenced commercial production in April 2013. This was followed by the Leviathan field, estimated at approximately 608 BCM, which entered commercial production in December 2019, and the Karish field, estimated at approximately 102 BCM, which began production in October 2022. The Tanin field, although included in the Karish-Tanin development plan and initially anticipated to commence production in the second half of 2022, has not yet entered commercial production as of 2026.

Due to these discoveries, a significant portion of Israel’s natural gas demand is now met by domestic production rather than foreign imports, with approximately 83% of its electricity generated from local sources, primarily natural gas and renewables. The established upstream capacity, utilizing separate production systems from these fields, has enabled Israel to achieve energy independence for the first time in its history.

As of 2024, Israel’s Natural Gas Authority (NGA) estimates that offshore natural gas reserves in Israel amount to approximately 1,055.6 BCM. In 2024, Israel produced approximately 27.4 BCM of natural gas, up from 25.3 BCM in 2023, reflecting continued growth with an 8.3% increase following a 15.3% rise the previous year, driven by production increases of approximately 1.3% at Leviathan, 10% at Tamar, and 21.1% at Karish. During 2024, approximately 13.9 BCM of natural gas was supplied to the domestic market in Israel, while approximately 13.2 BCM was exported primarily to Egypt (9 BCM) and Jordan (3 BCM). Exports to Egypt and Jordan have significant geopolitical ramifications for the region, which has undergone major turmoil and conflict since October 2023. Furthermore, in December 2025, Israel and Egypt resumed their most significant energy agreement to date, concluding a $35 billion natural gas deal that triples previous export volumes. This agreement with the Leviathan partners provides for the export of up to 130 BCM of natural gas from Israel’s Leviathan offshore field to Egypt through 2040.

The oil and gas sector in Israel is regulated by two primary laws: the Petroleum Law, 1952 (the “Petroleum Law”), including the Petroleum Regulations, 1953 promulgated thereunder (the “Petroleum Regulations”), and the Natural Gas Sector Law, 2002 (the “NG Law”).

The Petroleum Law governs and regulates Israeli upstream activities (onshore and offshore) with respect to the exploration and production of petroleum, broadly defined in the Petroleum Law as petroleum fluid, whether liquid or gaseous, and oil, natural gas, natural gasoline, condensates, and related fluid hydrocarbons, as well as asphalt and other solid petroleum hydrocarbons when dissolved in and producible with petroleum fluid.

The NG Law governs midstream and downstream activities and sets out a licensing regime for Israeli natural gas infrastructure, including distribution, transmission, storage, and LNG facilities.

All petroleum resources in Israel and its continental shelf belong to the state. The Petroleum Law provides that no person may explore for petroleum without a preliminary permit, license, or lease, and no person may produce petroleum without a license or lease.

The Petroleum Law falls under the jurisdiction of the Minister of National Infrastructures, Energy and Water Resources (the “Energy Minister”), who in turn is tasked with appointing a Petroleum Commissioner (the “Petroleum Commissioner”) to be responsible for matters related to oil and gas exploration within the territory of Israel, in conjunction with the Petroleum Council that advises the Energy Minister and the Petroleum Commissioner (the “Petroleum Council”). The Petroleum Council is comprised of 15 members, with at least seven representing the public, and is required to meet at least four times a year.

The Petroleum Commissioner, in consultation with the Petroleum Council, is responsible for all matters relating to the licensing regime. There are three main rights that may be granted under the Petroleum Law: a preliminary permit, a license, and a lease. Such grants are all recorded in the Petroleum Register by the Petroleum Commissioner and are part of the public record.
A preliminary permit confers on its holder the right to carry out preliminary testing investigations, not including test drilling, in order to ascertain the prospects for discovering petroleum. The Energy Minister may grant a permit holder, priority rights for the receipt of a license in the permit area for a period of up to 18 months.

A license confers upon the licensee: the right to explore for petroleum in the license area (such area is defined in the license and is limited to a maximum area of 400 square kilometers) and outside such area in certain circumstances; the exclusive right to conduct test or development drilling in the license area and to produce petroleum; the right to obtain a lease after having made a discovery in the license area.

The license includes a work program to be carried out, which typically includes at least one exploration well. A license is granted for an initial term of three years and can be extended in accordance with the conditions set forth in the Petroleum Law for up to a total term of seven years from the date of grant of the license.

Once the Petroleum Commissioner recognizes that a discovery has been made in a given license area, the licensee may be granted a lease in respect of any area chosen by the licensee within the licensed area (not exceeding 250 square kilometers). Such lease confers upon the lessee the exclusive right to explore for and produce petroleum in the leased area for the term of the lease. The term of a lease is generally 30 years from the grant date and may be renewable for an additional term of 20 years, subject to various terms and conditions that may be set by the Energy Minister in consultation with the Petroleum Council.

A lessee may also construct pipelines for the transport of petroleum and petroleum products and install other facilities required therefor. The Petroleum Commissioner must approve the route of all pipelines, other than gathering pipelines leading to tankage, within or adjacent to the leased area. Additionally, the Petroleum Commissioner may, after consultation with the Petroleum Council, require the owner of an approved pipeline to allow other lessees to use its pipeline to transport petroleum (to the extent that the pipeline is not required by its owner), on such reasonable terms as the Petroleum Commissioner may prescribe.

The lease holder is required to provide, with respect to each lease, an autonomous, unconditional, irrevocable bank guarantee to the State of Israel, denoted in New Israeli Shekels, in an amount subject to the determination of the Petroleum Commissioner, with such amount being dependent on several factors, such as the stage of development and the size of the respective gas field, but in any case in an amount of not less than US$7.5 million per offshore lease (and US$1.5 million per onshore lease). For example, the guarantee amount determined by the Petroleum Commissioner with regard to each of the Leviathan leases was US$50 million, while the guarantee amount determined by the Petroleum Commissioner with regard to the Tamar lease was US$35 million. The guarantees shall ensure adherence to the leases and permits, and serve as a condition to the granting of the leases. The guarantees shall remain in force even after the expiration of the leases, until such time as the Petroleum Commissioner declares them no longer necessary.

The Petroleum Commissioner is entitled to collect all or part of the guarantee if: (i) the lease holder failed to implement the development plan, construct the facilities, or did not begin commercial production or pumping to the reception facilities on the specified dates in the lease; (ii) a safety or environmental accident occurred and the lease holder failed to rectify the fault; (iii) the lease holder failed to carry out abandonment in accordance with the provisions of the lease; (iv) a claim or demand was filed against the State of Israel for payment of compensation pursuant to damage caused due to violation of the terms of the lease; (v) the State of Israel suffered damages or expenses due to cancellation of the lease; (vi) the lease holder failed to carry out the required inspections or failed to submit required documents or reports; (vii) the lease holder failed to comply with the provisions regarding insurance as stated in the lease or by law; (viii) the lease holder did not comply with the provisions of the lease with regard to the guarantee; or (ix) the lease holder committed a material breach of other conditions of the specific leases. The Petroleum Law provides that the Petroleum Commissioner may cancel an owner’s petroleum right, subject to 60 days’ prior written notice, for noncompliance with any of the provisions of the Petroleum Law, Petroleum Regulations, any condition of the petroleum right, or the submitted work program. Additionally, if a lessee fails to produce petroleum in commercial quantities in the initial three years of the lease, or has thereafter ceased commercial production, the Energy Minister may condition the continuation of the lease on the production of commercial quantities of petroleum within a defined period (which will be at least 60 days), subject to various restrictions set forth in the Petroleum Law. If production is not resumed as required by the notice, the lease will expire at the end of the period determined by the Energy Minister.

Many oil shale fields have been discovered in Israel, and endeavors to develop this industry persist, using both in situ and ex situ processing. However, it should be mentioned that, as has occurred in other countries, various environmental concerns have been voiced in connection with this industry, including by the Ministry of Environmental Protection.

The Petroleum Commissioner, together with the Inspector of Mining, published guidelines and procedures in July 2016 for requesting a permit and/or license for prospecting and/or exploration activities. Requests relating to shale gas are to be submitted to the Petroleum Commissioner. The conditions for granting a permit and/or license for the prospecting and/or exploration and/or mining of minerals, including oil shale, are primarily regulated by the Mining Ordinance.

The Ministry of Energy has issued permits for oil shale rights and exploration in the Rotem Plain (one in 2001 and one in 2018) and in Oron (which expired on January 16, 2021). To date, no shale gas has been extracted in Israel, although interest remains. In February 2020, the Israeli government announced that it would no longer issue new permits for oil shale exploration, a move welcomed by environmental organizations and the Ministry of Environmental Protection.

On September 28, 2025, the oil shale project in the Rotem Plain received notice from the Ministry of Energy clarifying that the discovery certificate issued to it in accordance with the Mines Ordinance confers the status of a “permissible planning license,” enabling, together with the planning authorizations from the Israel Land Authority, the promotion of the planning of the project at the National Infrastructure Committee. On November 4, 2025, Rotem Energy resubmitted it’s request to transfer the permitting process to the National Infrastructure Committee in accordance with the committee’s updated procedure.

The Petroleum Commissioner, in conjunction with the Petroleum Council, has primary responsibility for regulating all upstream oil and gas activities. Other regulatory bodies, including the Ministry of Environmental Protection, the NGA, and the Electricity Authority, are responsible for the regulation of environmental matters and various aspects of midstream and downstream activities.

The government is not directly involved in the upstream oil and gas industry; however, pursuant to Regulation 2592 adopted by the Israeli government in 2017, the government-owned Israel Natural Gas Lines Co. (INGL) was tasked with the establishment and operation of a pipeline system to connect offshore gas wells to the shore for production stemming from small and medium-sized fields.

Israel’s upstream oil and gas sector has evolved into a mature, internationally integrated market defined by heightened foreign participation, substantial exploration activity, and robust regulatory oversight. Foreign companies generally are not subject to nationality-based restrictions on entering the sector, unless national security concerns apply. Participation is conditioned on satisfying the technical, financial, and administrative requirements set out in the Petroleum Law and Petroleum Regulations. These include demonstrating prior experience, providing evidence of financial capability, and completing formal registration procedures, either by establishing a local Israeli entity or appointing an authorized local representative. Companies seeking offshore licenses must submit bid bonds, bank guarantees, and, where applicable, corporate guarantees, ensuring their ability to perform committed work programs. The law further limits participants’ ability to obtain multiple licenses or serve as the operator across several leases.

The Fourth Offshore Bid Round, launched in December 2022, marked a significant milestone in the sector’s development and attracted unprecedented participation from major international energy companies. Israel awarded twelve offshore licenses to six companies, with Eni, Dana Petroleum, and Ratio Energies securing Zone G, and SOCAR, British Petroleum, and NewMed Energy obtaining Zone I, a 1,700 square kilometer neighboring frontier exploration area. This marked SOCAR’s first exploration activity outside Azerbaijan and BP’s first upstream venture in Israel. These awards signaled the entry of several new global players into the Israeli market and reflected substantial commitments to multi-year exploration spending. The Ministry described the round as demonstrating profound international confidence in Israel’s energy market and emphasized that increased competition, expanded exploration activity, and elevated investment levels would contribute materially to Israel’s energy security and strategic positioning.

Building on this momentum, the Ministry announced at the end of 2025 preparations for a Fifth Offshore Bid Round expected to be published in the near future. Although the government has not yet released final tender documents, it has indicated that the new round will similarly employ grouped exploration zones to maximize geological efficiency and encourage additional foreign interest. The initiative forms part of Israel’s broader strategy to expand its natural gas resource base and strengthen its role as a regional energy supplier.

In parallel with these regulatory developments, Israel approved a landmark US$35 billion natural gas export agreement with Egypt in December 2025, the largest such agreement in the country’s history. The arrangement provides for the export of approximately 130 BCM of natural gas from the Leviathan field between 2026 and 2040, with deliveries occurring in two phases. The deal is expected to generate significant fiscal benefits for Israel, including approximately 58 billion NIS in tax and royalty revenues and more than 16 billion NIS in associated infrastructure investment.

In 2024, an Inter-ministerial Committee for Examining Policy on the Natural Gas Industry and Strengthening Energy Security, chaired by Yossi Dayan, director general of the Ministry of Energy and Infrastructure (also referred to as the “Dayan Committee”), was formed with the primary goal of balancing Israel’s national interests related to energy security, market competition, and encouraging investment and production. While the committee’s final report has yet to be published, the committee’s draft report emphasizes promoting competition through effective secondary markets, encouraging further exploration, and maintaining a regulatory environment that attracts new entrants to the sector. In parallel, the Committee is specifically examining market concentration, competitive dynamics, and measures to ensure that Israel’s natural gas sector no longer relies on a limited set of production sites or dominant players, thereby enabling a more diverse and competitive upstream market structure.

Israel’s oil and gas sector is governed by a comprehensive environmental, health, and safety (EHS) framework, comprising a range of primary statutes and extensive secondary legislation, some of which implement international treaties to which Israel is a signatory. Key legislation includes, without limitation: the Prevention of Marine Pollution (Dumping of Waste) Law, 5733-1983; the Prevention of Marine Pollution from Terrestrial Sources Law, 1988; the Prevention of Pollution from Seawater Containing Oil Ordinance (New Version), 1980; the Hazardous Substances Law, 5753-1993; the Maintenance of Cleanliness Law, 1984; the Liability for Damages (Oil Pollution) Law, 2004; the Environmental Protection (Regulatory and Enforcement Powers) Law, 2011; the Prevention of Environmental Hazards (Civil Actions) Law, 1992; the Clean Air Law, 5768-2008; the Environmental Protection (Emissions and Transfers to the Environment – Reporting and Registration) Law, 2012; the Abatement of Nuisances Law, 1961; and the Coastal Environment Protection Law, 2004, together with associated regulations, orders, permits, and directives.

In addition, the Ministry of Energy, in coordination with the Ministry of Environmental Protection and other relevant governmental authorities, has issued specific directives regulating the environmental aspects of both offshore and onshore petroleum and natural gas exploration, development, and production. These directives are periodically updated to reflect evolving standards and best practices.

Pursuant to the Petroleum Law and Petroleum Regulations, drilling operations must be conducted with due care to prevent the uncontrolled release of gases and liquids, leakage into the ground, and migration between geological strata. Wells may not be abandoned until they have been properly sealed and marked in accordance with applicable requirements.

Entities engaged in oil and gas exploration or production under the Petroleum Law and Petroleum Regulations are required to submit an environmental report, which must include a baseline marine environmental monitoring program and an emergency response plan for oil pollution incidents. The Ministry of Environmental Protection oversees the implementation of these plans by reviewing environmental management reports and prescribing conditions in permits and licenses to safeguard public health and the environment.

Additionally, petroleum rights holders may be subject to further environment-related requirements imposed by other governmental bodies, including, inter alia, the Israel Land Authority, the Ministry of the Interior (regional planning and building committees), the Water Authority, and the Nature and Parks

Authority.
Failure to comply with applicable EHS requirements may result in enforcement actions, including suspension or revocation of operations, and may expose the company and its officers (including directors) to administrative sanctions, monetary penalties, and potential criminal and civil liability.

Royalties:

The Petroleum Commissioner is tasked with the collection of royalties and fees, in addition to other responsibilities regulating the oil and gas industry. Under the Petroleum Law, the holder of a petroleum right must pay the Israeli government a royalty equal to one-eighth (12.5%) of the wellhead value of the petroleum produced from the leased area, subject to certain exclusions set forth in the Petroleum Law. From time to time, the Petroleum Commissioner issues specific instructions to the holders for each leased area, specifying the deductible expenses for the calculation of the royalties, in light of the specific characteristics of each respective lease. As a result of such deductions, the effective rate of such statutory royalty is approximately 11.25%. In certain cases, such as with the Tamar Lease, the method for the calculation of the royalties has been disputed by certain leaseholders since commercial production began, leading to such holders currently paying a higher rate of royalties (based on the State’s method of calculation) under protest. This dispute is ongoing, with proceedings currently taking place in the Israeli Supreme Court. The Petroleum Commissioner may elect to collect the royalties in cash or in kind. Additionally, the holder is required to pay a small lease fee on the area covered by the lease. In the event that the holder fails to make timely payment of any fees or royalties, the Petroleum Commissioner is entitled to place a lien on all of the rights to such holder’s stored petroleum, facilities, and equipment and to seize anything so attached until payment is made.

Tax:

There are three key elements of taxation relevant to the oil and gas industry in Israel. The first element relates to the royalties that a holder must pay to the Israeli government, in the amount of one-eighth (12.5%) of the wellhead value of the petroleum produced from the leased area, as further described above. On December 31, 2024, the Royalties, Accounting, and Economics Division of the Natural Resources Administration at the Ministry of Energy and Infrastructure published its annual revenue report, according to which record revenues of approximately 2.37 billion NIS were recorded in 2024 from natural gas and mineral royalties. As of the end of 2024, since the commencement of natural gas production in Israel, the State’s cumulative revenues from natural gas have already approached 30 billion NIS. Of this amount, 14.9 billion NIS derives from royalties collected by the Ministry, with the remainder coming from the Natural Resources Profits Levy and corporate income tax collected by the Israel Tax Authority.

The second element is a levy imposed on profits derived from the sale of petroleum pursuant to the Petroleum Profits Tax Law (2011). The levy applies only to the profits from petroleum production (upstream operations) and is not intended to apply to the midstream and downstream segments of the petroleum chain. The levy is calculated and imposed separately for each project, and each holder of a petroleum right in a petroleum project is required to pay the levy according to its proportionate share in the petroleum right. In this regard, we note that the Natural Resources Profits Tax Law initially applied only to natural gas and oil. In 2015, the law was amended so that it would also apply to a closed list of additional natural resources. In this context, it should be noted that this law does not apply to renewable energy, which is regulated under separate legislation. Any levy actually paid is also recognized as a deductible expense for income tax purposes.

The third element is corporate income tax at a rate of 23% for 2025. Historically, holders of petroleum rights incorporated as a partnership so as to be transparent for tax purposes (although this is not the only possible form of incorporation). Accordingly, search expenses attributed to the holder’s lease are considered deductible expenses or a deductible asset. In addition to a partnership, holders of petroleum rights may incorporate as a company (through a holding company or a subsidiary), as well as through investment structures open to the general public, such as exchange-traded funds, shares in oil companies, or investment in futures contracts. Any levy actually paid according to the Petroleum Profits Tax Law 2011 is also recognized as a deductible expense for income tax purposes.

Foreign entities operating in the Israeli petroleum industry are obligated to establish a branch in Israel that is then defined as the entity’s Permanent Establishment in Israel.

In the context of indirect taxation, Israel has begun implementing a carbon tax, applied through an amendment to the fuel excise order starting in 2024, with the aim of encouraging a transition to renewable energy and reducing greenhouse gas emissions. The tax on coal and natural gas is expected to increase gradually until 2030, with an anticipated economic impact that includes electricity price increases of up to 5%. However, Israel currently does not have an emissions trading mechanism (such as an ETS) and relies solely on an indirect taxation mechanism.

In line with this, numerous government decisions have anchored Israel’s targets to transition to a low-carbon economy by 2050 and to achieve 30% electricity generation from renewable sources by 2030. These decisions include, among other measures: removing regulatory barriers, promoting solar storage, optimizing land use, and supporting the implementation of advanced technologies. In parallel, there are also government assistance programs (for example, carbon tax adaptation grants and investments in energy efficiency) designed to ease the transition for industry and the public.

Israel applies a domestic-priority principle to natural gas exports. Exports require ministerial approvals and, where relevant, amendments to leases or development plans. Approvals typically establish quantitative ceilings by field and export route, link volumes to verified reserves and deliverability, and require ongoing reporting and metering. The Energy Minister retains authority to review allowances periodically and to curtail or suspend exports in tight-market or emergency conditions. Route changes or capacity expansions (for example, higher nominations to Egypt) generally require separate approvals and may be conditioned on redundancy, reliability upgrades, and demonstrated progress on domestic capacity.

The Tamar and Leviathan leaseholders are obligated to invest in “local content”, by investing US$500 million over the course of eight years in: such content. “Local content” is defined to include, inter alia, purchase of goods and services from Israeli registered entities, investment in research and development, and professional training and donations in the area of social responsibility. Up to US$80 million may be spent on engagements with Israeli employees. Reports must be provided on a yearly basis to the Authority for Industrial Cooperation at the Ministry of Economy regarding previous and planned investments.

Existing policy also provides a domestic supply obligation, namely that gas exports are restricted to a predetermined quantity of natural gas calculated as a pro rata percentage of all natural gas resources available for the domestic market, in order to ensure an aggregate minimum quantity of at least 440 BCM for local consumption. Further restrictions provide that set percentages of natural gas derived from individual reservoirs are also reserved for the local market (50% for reservoirs of 200 BCM or greater, 40% for reservoirs of 100 BCM or above, and 25% for reservoirs in the range 25-100 BCM).

In April 2025, the inter-ministerial Dayan Committee published a draft recommending that Israel retain the existing sector-wide domestic supply obligation at 440 BCM, while sharpening export approval criteria and encouraging exploration and domestic resilience. Local-content requirements under the existing policy remain in place, with ongoing oversight by the Authority for Industrial Cooperation at the Ministry of Economy.

Earlier export permits to Egypt and Jordan (including the 2019–2020 Dolphinus/Blue Ocean route for approximately 85 BCM over 15 years) were augmented in December 2025 when the Israeli government approved a Leviathan–Egypt expansion of approximately 130 BCM through 2040, phased and conditioned on meeting domestic obligations and price-protection mechanisms for Israeli consumers.

Practically, permits embed curtailment protocols. During security events in both October 2023 and June 2025, Israel temporarily halted exports when the Tamar and Leviathan fields, respectively, were shut down and allowed only surplus volumes once domestic needs were fully covered.

The Petroleum Law and Petroleum Regulations do not contain detailed provisions relating to the decommissioning of offshore petroleum facilities. The Petroleum Law states that, upon expiry of a petroleum right, a rights holder must remove all its possessions and structures from the land within the period determined by the Petroleum Commissioner and leave the land, from a safety perspective, in the state instructed by the Petroleum Commissioner. The Petroleum Regulations state that offshore petroleum facilities may not be abandoned unless they are fenced in accordance with the instructions of the Petroleum Commissioner and properly marked. However, the leases themselves may include requirements regarding the submission of a decommissioning plan and other decommissioning obligations, and petroleum rights holders are usually required to submit a bond or guarantee to the Petroleum Commissioner to ensure they fulfill their obligations under the submitted and approved decommissioning plan. The Natural Resources Administration has also published guidelines for decommissioning drilling sites based on international standards, including those issued in January 2015 and May 2016.

The NG Law and the Natural Gas Sector Regulations 5768-2008 (the “NG Regulations”) regulate the construction and operation of offshore oil and gas pipelines. The NG Law authorizes the NGA, a segment of the Ministry of Energy, to promote the law’s goals, such as regulating natural gas facilities and maintaining their safety, including the pipelines connected to these facilities. Pursuant to Regulation 2592, adopted by the Israeli government in 2017, the government-owned INGL was tasked with the establishment and operation of a pipeline system to connect offshore gas wells to the shore for production stemming from small and medium-sized fields. In addition, the Offshore Pipeline Director Israel (“OPDI”), a supplement to the Partial National Outline Plan for Natural Gas NOP 37/A/2 (TAMA) December 2002, the NG Law, and Safety Decree, provides instructions and guidelines set forth by the NGA to assist the INGL in obtaining the necessary permits for the planning, design, manufacture, construction, operation, and maintenance of offshore high-pressure natural gas pipelines. NOP 37/H allocates offshore areas within Israel’s territorial waters for the construction of, inter alia, gas pipelines.

The NGA regulates this industry, as it regulates the transportation and distribution of oil and gas to the Israeli market. The Hadera Deepwater LNG Terminal was launched in 2013 by INGL and transmits gas from the Tamar reservoir and tankers to Israel. Israel currently does not have a terminal for the liquefaction of LNG.

The NG Law and the NG Regulations grant the Ministry of Energy the authority to regulate natural gas storage. Accordingly, the NG Law and NG Regulations provide the legal framework for the NGA to regulate gas storage facilities in Israel. The NG Law governs midstream and downstream activities and sets out a licensing regime for Israeli natural gas infrastructure, including distribution, transmission, storage, and LNG facilities. The NGA promotes long-term strategic planning for the construction and function of facilities. It ensures that gas facilities are designed to promote safety and comply with Israeli and international safety standards. One of the primary roles of the NGA is determining safety orders, regulations, and procedures for planning, construction, operation, and maintenance of natural gas facilities, including conformity with specifications, operating procedures, and emergency plans.

Both Tamar and Leviathan, the two natural gas fields that have begun gas production, maintain facilities with the capacity for offshore gas storage on the applicable gas rigs. Israel currently relies on the inherent storage capacity within the transmission network and does not maintain any long-term, large-scale onshore gas storage facilities.

In order to safeguard the energy security of the State of Israel and to ensure the uninterrupted, proper, and continuous operation of the energy sector when the natural gas fields are not operational, the Ministry of Energy (the NGA and the Natural Resources Administration) is currently examining several alternatives for promoting natural gas storage solutions, as well as conducting a comprehensive review of potential sites for underground storage.

Once natural gas reaches the shoreline, INGL has the exclusive license to transmit the gas to its facilities and distribute to consumers. For larger consumers, INGL brings the gas directly to a facility adjacent to such consumer’s factory. For small and medium consumers, certain third parties have regional licenses to transmit the gas from INGL’s regional storage facilities to smaller local factories.

The regional distribution networks are planned, constructed, and operated by distribution companies that are required to provide equal, non-discriminatory service to any consumer. Israel is divided into six license regions: Southern region, Negev region, Arad Area, Central region, Jerusalem region, and Northern region. Each region is constructed and operated by a single distribution company. These companies have exclusivity for the construction, operation, and maintenance of the distribution network within the region for a period of 20 to 25 years.

There are marketing companies that purchase natural gas from offshore production companies and sell it to small and medium-sized facilities through the distribution network.

Natural gas is transported from offshore production platforms to an onshore receiving terminal and from there through a state-owned transmission system operated by INGL. This system is designed to feed a distribution network to deliver natural gas at low pressure (up to 16 bar) to local consumers, industrial zones, and small to medium-sized facilities. Customers are limited to the distribution company that operates in their region, as described above in question 15.

The NGA sets certain infrastructure rates relating to the purchase of gas. When a customer wants to purchase natural gas, they have two options on where to turn. They could purchase directly from the Tamar or Leviathan partnerships, however, these actors tend to sell mainly to large customers and not to smaller consumers. The second option is to turn to regional distribution companies that act as middlemen between the producers and consumers. These regional distribution companies buy vast amounts of gas directly from the gas fields and then sell at negotiable prices to consumers. There is no regulation mandating specific pricing or rates for these consumers, barring the exception of electricity companies whose purchase of natural gas is regulated by the Electricity Authority and guarantees that pricing to electricity companies will not exceed the maximum price as determined by the Electricity Authority.

One component of natural gas pricing is an infrastructure tariff in respect of the transmission and distribution of gas. Such tariff is fixed and non-negotiable and applicable to all consumers, although it varies based on locality. The tariff rate is generally determined by the NGA.

The NG Law and NG Regulations, as well as the Gas (Safety and Licensing) Law, 5749-1989, the Gas Order (Safety and Licensing) (Natural Gas Distribution Facility), 5759-1999, and the Planning and Building Regulations (Licensing of Natural Gas Installations), 5764-2003, govern midstream and downstream activities and set out a licensing regime for Israeli natural gas infrastructure, including distribution, transmission, storage, and LNG facilities.

The NGA in the Ministry of Energy acts by virtue of the NG Law and promotes the law’s goals such as developing the natural gas sector, ensuring a regular and reliable supply, encouraging competition, ensuring the maintenance of safety, and setting suitable tariffs. The Director of the NGA is appointed by the government, pursuant to a recommendation from the Energy Minister and in consultation with the Minister of Finance, for a five-year term. The Director works in conjunction with the Natural Gas Council, which is comprised of a Chairman, a representative of the Minister of Finance, a representative of the Energy Minister, and two public representatives. The Council’s role is to advise on the tariffs system. The NGA also includes a Supervisor of Safety who works in coordination with the Council and handles the safety of the natural gas economy in accordance with the NG Law and NG Regulations.

The aforementioned bodies work in consultation with the Energy Minister to advertise tenders, prepare licenses, supervise licenses and tariffs, engage with other authorities when there is an intersection with real estate, determine and respond to safety orders, regulations, and procedures, oversee gas storage facilities, determine the standards for services, fees, and arrangements with consumers, regulate companies distributing and selling natural gas, and recommend rates and tariffs to the Council.

After a multi-year pause, Israel reopened offshore exploration and awarded new licenses under the Fourth Offshore Bid Round (4th OBR), signaling a policy shift back toward measured frontier and near-infrastructure exploration. The Ministry of Energy and Infrastructure emphasized multi-block clusters, data reprocessing, and staged work commitments intended to accelerate prospect maturation while preserving flexibility for macro and security uncertainties. The 4th OBR saw awards to multiple consortia that combine international operatorship with regional and Israeli partners, although licenses for some of the blocks have yet to be awarded. Recently, the Ministry of Energy announced its intent to publish a 5th bidding round for additional exploration blocks in a manner similar to that of the 4th round.

Implementation of the 2022 Israel–Lebanon maritime arrangement has reduced exploration uncertainty along Israel’s northern frontier, though operational risk remains sensitive to regional security conditions. During the recent regional conflict spanning 2023-2025, production from each of the Tamar and Leviathan fields was temporarily halted for security reasons. During the shutdown of Tamar, production from the Leviathan field was diverted to meet local needs.

Export policy continues to be anchored in a domestic-first principle, but with calibrated flexibility to enable regional export monetization where domestic sufficiency can be reliably demonstrated. Recent government decisions allow incremental increases in exports from producing fields—principally via existing pipeline routes—contingent on verified reserve adequacy, execution of capacity expansions, and adherence to redundancy and curtailment protocols. This framework has underpinned a series of approvals and commercial arrangements that facilitate additional flows to Egypt, subject to periodic review and potential curtailment if domestic needs tighten. Most recently, Israeli and Egyptian counterparties advanced a multi-year arrangement to increase pipeline gas deliveries to Egypt. The deal structure preserves Israel’s right to reduce or suspend export volumes where domestic supply risks arise, and it conditions sustained higher exports on meeting development and reliability milestones.

Separately, the Dayan Committee, an inter-ministerial panel convened by the government to review the natural gas sector’s long-term framework—including domestic sufficiency standards, export allowances, infrastructure investment obligations, and market conduct—is expected to publish recommendations in the near term. Based on the committee’s remit and public consultation themes, market participants anticipate proposals that could sharpen domestic-priority tests and reserve thresholds for exports, mandate clearer, shorter, and more flexible contracting practices, and tie expanded export capacity to verified investments in deliverability and system redundancy. Notably, the committee refrained from imposing forced divestment on Chevron, the operator of both the Tamar and Leviathan fields, despite earlier proposals from competition authorities aimed at increasing market competition. This decision reflects a careful balancing act between fostering competition and maintaining stability in the sector.

The Israeli oil and gas sector, with a predominant focus on natural gas, faces a complex array of challenges that are both structural and dynamic in nature. These challenges are deeply interwoven with the country’s unique geopolitical context, market structure, and evolving energy landscape. The main challenges affecting the industry are as follows:

Geopolitical and security escalation risk: Offshore production platforms, subsea pipelines, and onshore reception points are strategic assets exposed to elevated threat levels during periods of regional tension. This exposure affects not only physical risk but also insurance pricing, financing terms, and operational flexibility.

System concentration and limited redundancy: Israel relies heavily on a small number of large offshore fields and a limited set of critical transmission assets forming the backbone of both domestic supply and export capacity. Any outage – whether security-related, technical, or due to maintenance can have a disproportionate domestic impact (particularly on power generation) and significant export consequences (notably with respect to Egypt and Jordan).

Market structure and competition issues: The upstream segment of Israel’s natural gas sector is marked by high concentration, with a small number of operators controlling the majority of reserves and production capacity. This market structure has repeatedly attracted regulatory scrutiny and public debate regarding the potential for anti-competitive behavior, including price manipulation, restricted access to infrastructure, and the use of long-term contracts that may stifle market entry and innovation.

Export and regional market dynamics: Israel’s export strategy is substantially linked to pipeline exports to Egypt and Jordan. Changes in regional politics, the Egyptian domestic supply-demand balance, or security conditions can directly impact export value. Israel continues to balance domestic reserve and security considerations with export monetization, which affects approvals for additional export volumes and the sequencing of field development.

Electricity market and renewables trajectory: The ongoing transition in Israel’s power sector—from coal to natural gas, and increasingly toward renewables and energy storage—has significant implications for natural gas demand. The evolving demand profile introduces new uncertainties for gas producers and suppliers, affecting revenue stability, the structure of long-term contracts, and investment planning.

In response to the geopolitical and security risks, the Israeli government has adopted a proactive approach, leveraging statutory emergency powers and continuity planning tools alongside robust physical security measures. The Energy Minister has, during periods of heightened tension, issued emergency declarations and directives to ensure the uninterrupted supply of energy, prioritize essential services, and enable rapid operational coordination across the electricity and natural gas sectors. Enhanced protection for offshore assets, including naval patrols and advanced surveillance systems, reflects the strategic importance of these facilities. Contingency planning, including the development of redundancy measures where feasible, remains a central pillar of national energy security policy.

Industry participants, for their part, have responded to the multifaceted challenges through sophisticated legal and commercial strategies. Gas sale and purchase agreements now routinely incorporate enhanced force majeure provisions, detailed curtailment and allocation mechanisms, domestic supply priority clauses, price review and reopener terms, and change-in-law protections. These contractual innovations are designed to rebalance risk between sellers and buyers, providing greater flexibility and resilience in the face of fluctuating demand, supply disruptions, and regulatory changes. Additionally, both sellers and buyers are increasingly seeking to diversify offtake channels and incorporate operational flexibility, recognizing the need to adapt to a rapidly changing market and risk environment.

Given Israel’s relatively small emissions footprint, its greenhouse gas emissions are a minor share of global totals and have limited direct impact on the global climate. Nevertheless, Israel is committed to reducing emissions as part of international efforts to address climate change and in line with applicable international standards and obligations.

Israel faces unique challenges in meeting its climate targets due to energy security considerations; relatively high population growth compared to other developed countries; its status as an “electricity island” with no interconnections to neighboring countries’ power grids; and constraints such as limited land availability and security considerations, which restrict the deployment of certain zero-emission energy technologies.

On July 25, 2021, the Israeli government adopted Resolution No. 171, “Transition to a Low Carbon Economy” (“Resolution 171”), amending the 2030 greenhouse gas reduction target set in Resolution No. 542 to at least 27% below 2015 levels. Resolution 171 also set a 2050 target of at least 85% below 2015 levels and established sectoral targets for emissions reductions and energy-efficiency improvements.

To advance its greenhouse gas emissions reduction objectives, Israel is implementing measures including carbon pricing on fossil fuels via the fuel excise tax (with incremental increases from 2025 and full implementation targeted for 2030), replacing coal-fired generation with natural gas and renewables, and promoting zero-emission vehicles in the transportation sector.

The Energy Ministry has identified geological formations capable of storing 10 million tons of CO2 annually (about 17% of national emissions), plus 7-15 gigatons in Negev saline aquifers and additional offshore capacity in depleted gas reservoirs. High energy costs, limited technological maturity, bureaucratic hurdles, and regulatory uncertainty have delayed broad implementation of carbon capture across Israel’s value chain.

Regulatory uncertainty presents a significant challenge to green hydrogen projects in Israel. The sector is dynamic, with many active companies and relatively high investment activity for Israel’s size. Israeli entities participate across the full hydrogen value chain, utilizing a broad spectrum of innovative technologies. In May of 2023, the Ministry of Energy released a strategic document for this industry.

In 2024, the Ministry of Energy released a roadmap for net-zero emissions in the energy sector by 2050, highlighting hydrogen’s role and its integration across energy processes.

In December 2025, the Israeli government approved the establishment of the International Hydrogen and Innovation Valley in the Eastern Negev, aiming to strengthen hydrogen deployment technologies across the value chain, encompassing both infrastructure and commercial applications. The Valley is expected to support the development of tailored regulatory frameworks, promote research and development, provide a dedicated testing environment, and facilitate industrial adoption of hydrogen solutions.