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Israel flag, archives.

With its oil treasure, Israel gets a shield from tyranny Add to ...

The London-based World Energy Council says Israel's Shfela Basin, a half-hour drive south of Jerusalem, holds 250 billion barrels of recoverable shale oil, possibly making the energy-vulnerable country (as expressed by The Wall Street Journal) "the world's newest energy giant." With reserves of 260 billion barrels, Saudi Arabia would remain the world's No. 1 oil country - though not, perhaps, for long. Howard Jonas, CEO of U.S.-based IDT Corp., the company that owns the Shfela Basin concession, says there is much more oil under Israel than under Saudi Arabia: Perhaps, he says, twice as much.

Even with a mere 250 billion barrels, the Shfela Basin (or 238 square kilometres of it) would make Israel the third-largest holder of shale reserves in the world - right behind the U.S. with 1.5 trillion barrels and China with 355 billion barrels. Assuming for the moment that Mr. Jonas is correct in his calculations, the U.S. and Israel would together hold shale reserves in excess of two trillion barrels: Enough oil to fuel these two countries (at combined consumption of eight billion barrels a year) for more than 200 years.

And the discovery of further vast energy reserves in the United States and Israel progresses at an accelerated (and now often frenzied) pace. With shale, everything depends on technology - and the prospects are encouraging. In the Texas shale play known as Eagle Ford, for example, 12 companies will drill 3,000 wells in the next year, all of them within spitting distance (as The New York times put it) "of a forsaken South Texas village" notable only for its derelict gas stations and rusting warehouses. Elsewhere in the country, thousands more wells will be drilled with new technology that cuts drilling time, per well, to 25 days from 65.

According to the Times, 20 of these shale oil plays could increase U.S. oil production by 25 per cent in the next 10 years. "This is very big and it's coming fast," says U.S. energy expert Daniel Yergin, chairman of the energy research company IHS CERA. "This is like adding another Venezuela or another Kuwait - except that these fields are in the U.S."

The U.S. now produces nine million barrels of oil a day. It consumes 18 million barrels. The American oil gap, thus, is nine million barrels. Assuming that shale oil production increased overall crude production by 25 per cent (2.2 million barrels), this gap would fall to 6.8 million barrels.

But North America is a single market for oil and gas - and Canadian petroleum producers expect to increase production in the next five years by 1.3 million barrels a day (to 4.7 million barrels). Add this increased supply to the North American market and the U.S. oil gap falls to 5.5 million barrels.

But further still: High oil prices and low natural gas prices imply substantial substitution of gas for oil - most easily in oil-fired production of electricity. U.S. energy analyst Irfan Chaudhry calculates that this kind of substitution could reduce U.S. oil consumption by two million barrels a day. (Mr. Chaudhry says $26 worth of coal now produces as much electricity as $100 worth of oil - as does $24 worth of natural gas.) Subtract this gas-for-oil substitution from the U.S. oil gap and it falls to 3.5 million barrels a day.

It will take years - probably decades - for Israel to reach maximum production from its vast reserves of shale oil. But odds are that the Shfela Basin will change the global balance of power long before then. Indeed, it will effectively change the balance of power the day it exports its first barrel of oil. This shouldn't take long. With such investors as Lord Rothschild (the banker and philanthropist), Rupert Murdoch (the media magnate) and Dick Cheney (the politician), Israel should be pumping oil within three or four years. Also on board is Shell Oil's remarkable top scientist, Harold Vinegar, who says the Shfela oil is not only abundant but premium quality as well: "The equivalent of Saudi extra-light."

Israel knows the perils of relying on tyrants for oil: Russia suspended its delivery of oil to Israel during the country's 2006 war with Hezbollah. Israel needs first to secure its own energy independence. But one day - count on it - Israel will match Canada in oil exports to the U.S. and thus free its long-time friend from needing to deal with tyrants.

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