Israel's energy sector is largely nationalized and state-regulated, ostensibly for national security reasons. Since the return to Egypt in 1980 of the Sinai oil fields, Israel has had almost no fossil fuel reserves of its own, until the discovery of offshore natural gas reserves beginning in 2000. The reserves are estimated at 85 to 142 billion cu m. Natural gas reserves have also been discovered in Palestinian territorial waters off the Gaza Strip. Israel imports almost all its oil. In 2001, the country produced only 200 barrels per day of crude petroleum (compared with 1,000 barrels per day in 1986), while consumption of crude oil amounted to 278,000 barrels per day in the same year. Oil has been produced in the Negev desert since 1955, and exploration there continues.
A $1.3 billion, 100,000-barrel-per-day oil refinery in Alexandria, Egypt, developed as an Egyptian-Israeli joint venture, began operations in April 2001. In June of the same year, Israel sold its 20% stake in the project to Egypt in a move widely regarded as related to the renewed hostilities between Palestinians and Israelis that had begun the previous autumn.
Nearly all electricity is supplied by the government-owned Israel Electric Corp., which uses imported oil and coal. Electricity is generated principally by thermal power stations. Generating capacity has quadrupled since 1970, reaching 9,136 MW by 2001 (70% coal-fired, 25% oil-fired, 5% gas fired); total production in 2000 amounted to some 40.4 billion kWh, of which nearly 100% was from fossil fuels. Consumption of electricity in 2000 was 34.9 billion kWh.