Israel’s energy minister laid on the charm as he spoke to a few dozen oil executives, contractors and analysts in a crowded hotel conference room about the country’s natural gas prospects.
He crowed that the country could one day be a top supplier to Europe, while explaining how multinationals in other industries were already enamored of Israel.
“It is not enough to have a lot of potential,” said the minister, Yuval Steinitz, who was kicking off a road show for energy investors on Thursday at the Copthorne Tara Hotel in London. “From now on it is my job to make Israel very attractive for new exploration, for new investments, for newcomers.”
Israel is courting international money as it tries to nurture a fledgling gas industry and evolve into an energy exporter. For the first time, the country is offering drilling leases in the Mediterranean waters off its coast, testing investors’ appetite and its own energy ambitions.
It is a major shift for a country that closed its territorial waters for the last four years while the government wrestled with how to regulate the new industry. Although the regulatory issues are largely resolved, Israel may get a chilly investment reception, given the weakness in the energy markets, the country’s political risk and the general uncertainty in the region.
Israel “is not a straightforward place to be going in and doing stuff,” said Trevor Sikorski, an analyst at Energy Aspects, a market research firm based in London.
An up-and-comer in the energy landscape, Israel is trying to get to the next level.
Mr. Steinitz, the energy minister, estimates that Israeli waters could hold 75 trillion cubic feet of gas. If that much extractable gas were found, Israel’s reserves would be in the same ballpark as those of energy powerhouses like Norway and Canada.
Two major finds by Noble Energy and its Israeli partners have proved the existence of substantial resources. One field, Tamar, now supplies the fuel for a sizable portion of Israeli electricity production.
“We are not selling garbage here,” said Nati Birenboim of the Tamuz Group, based in Tel Aviv, which advises investors on Israeli energy projects. “We totally believe, following the last Israeli big discoveries, that the potential is huge.”
Now, Israel is hoping to replicate the recent successes of its neighbor Egypt.
A longstanding oil and gas producer, Egypt is attracting major new investment at a time when many oil and gas companies are throttling back globally because of weak energy prices. Both BP and the Italian company ENI have multibillion-dollar gas projects underway in Egypt.
A huge new gas find by ENI off the coast of Egypt has spurred interest in the whole region. Exxon Mobil, ENI and France’s Total all recently submitted applications for exploration acreage in Cypriot waters.
“All around the region you are seeing activity,” said Brenda Shaffer, a visiting researcher at Georgetown University’s Center for Eurasian, Russian and East European Studies, who has advised the Israeli government on energy. “Israel doesn’t want to miss the boat.”
Israel’s energy ambitions, in part, are commercial. The natural gas industry has already helped reduce the country’s dependence on imported fuels that cause more pollution, like coal and oil. The government also wants to expand the field of players in the industry, which is now dominated by Noble Energy, a midsize American company.
There is also a geopolitical dimension. The country has the potential to become an exporter to Europe, as well as Turkey and Arab countries like Egypt and Jordan, providing at least a modest alternative to Russia. The United States government has helped facilitate this regional commerce as a way to encourage coordination and cooperation between former enemies.
“The United States believes that the discoveries of offshore gas in the Eastern Mediterranean present an opportunity for economic prosperity and regional security,” said Amos J. Hochstein, the State Department’s special envoy and coordinator for international energy affairs. “That is why we have been actively engaged to help overcome obstacles to achieve this goal.”
But Israel may find it challenging to attract investors.
The environment has broadly cooled, as gas prices in Europe have dropped more than 50 percent in the last four years. Major oil companies, with revenue slashed, are being pickier about the projects they finance. And players with projects in the Arab countries may be politically wary of investing in Israel.
“I think there will be interest, but it won’t likely come from the majors due to political considerations,” said Martijn Murphy, an analyst at the Edinburgh energy consulting firm Wood Mackenzie, referring to the largest oil companies.
Although midsize companies may be a more likely bet, the costs — $100 million or more for drilling wells in deep areas — may prove daunting. Adding to the hurdles, operators may need to find new destinations for the gas, assuming they find some. Demand in Israel, while growing, is still relatively modest.
Despite the support of Prime Minister Benjamin Netanyahu’s government, Israel has been a difficult place for oil and gas companies to work. Noble found a giant field called Leviathan in 2010. Since then, it has encountered long delays, mostly arising from concerns that Noble had a chokehold on Israel’s gas output and could charge high prices.
The company and the government reached a settlement last year that involved reducing some of Noble’s stakes in Israeli gas fields. Noble is back at work on Leviathan. But the company has yet to lock up the export deals that would allow it to proceed with the project, which is estimated to be worth $4 billion.
The going “hasn’t been that smooth in Israel,” said Mr. Sikorski, the gas analyst. That may weigh against the country for investors that “have lots of stuff to do and limited capital.”