By Tova Cohen
TEL AVIV, Jan 19 (Reuters) - The discovery of large amounts of natural gas in Israeli waters could boost the country's economy for years but analysts say its future remains in high tech rather than energy and it will have to keep importing fuel.
A U.S.-Israeli exploration group led by Noble Energy said on Sunday it had found more than 88 billion cubic metres (bcm) of natural gas 90 km from the port of Haifa in northern Israel.
That is three times more than a site off Israel's southern coast, already in production, that is expected to be depleted within five years.
The group plans to carry out production tests and additional verification drills in the next few months before making a final decision on whether to go ahead with an investment expected to reach $1.5 to $2 billion.
While National Infrastructure Minister Binyamin Ben-Eliezer called the discovery an "historic moment" for Israel, the country will still need foreign sources of fuel, albeit at a diminished rate.
"This is a very significant event, which will allow Israel to reduce its dependency on natural gas imports and achieve better energy security," Amit Mor, chief executive of energy and environmental consulting and investment firm Eco Energy, told Reuters.
"Nevertheless, it is important that Israel continue with its plans to secure diversified sources of gas. Israel is not turning into Saudi Arabia and people should not be euphoric."
Mor said Israel should advance a project to procure liquefied natural gas (LNG) and continue negotiations with BG Group to buy gas from a field off the shore of Gaza.
Analysts expect such a major discovery will encourage others to explore the offshore Eastern Mediterranean rim.
HIGH TECH STILL RULES
Yedioth Ahronoth commentator Sever Plocker said the impact of this discovery on Israel's trade balance is far less than the effect of a new Intel chip plant in southern Israel, which improved the balance of payments by $1.5 billion a year.
"High tech is Israel's oil and gas, it is our main source of energy. Because of high tech we thrived and we need to continue to invest in it," Plocker wrote in Monday's newspaper.
The natural gas is estimated to be worth a total of $15- billion to $16 billion over a 15-year period starting in 2013.
Still, $1 billion a year is about half a percent of Israel's gross domestic product.
"It's nothing comparable to the high-tech industry, no one is thinking in those terms or even in terms of the chemicals sector in Israel," said HSBC economist Jonathan Katz.
"But half a percent contribution per year over 15 years is significant. We are talking of GDP growth for 2009 of 1 percent, so another half percent is significant."
The gas will reduce Israel's import bills, thereby improving its balance of payments, and will be positive for the shekel.
"It's a nice little perk but nothing that will change the fundamentals of the macro picture in Israel," Katz said.
About 30 percent of Israel's electricity is now produced from natural gas, with an aim of reaching 40-45 percent by 2020, when about 5-10 percent will come from renewable energy, mainly solar, and the rest from coal.
Mor forecast that aggregate demand for gas in Israel from 2009-2030 will be 200-250 bcm, 80 percent for power generation and the rest for industrial and other users.
Besides the natural gas from the country's south, state-owned Israel Electric Corp is buying 1.7 bcm a year from Egypt under a 15-year contract with an option for five more years at $2.75 per million British Thermal Units, well below a price of $10 in Europe and $6-$8 in the United States, Mor said.
The gas is not flowing regularly, partly due to economic reasons. Analysts say Israel's discovery will strengthen its bargaining power if Egypt seeks to boost its gas prices. (Editing by Steven Scheer, editing by Anthony Barker)