Israel's offshore Leviathan field started pumping gas on Tuesday in what the operating consortium called "a historic turning point in the history of the Israeli economy."
A joint statement from partners Noble Energy, Delek Drilling, and Ratio said that the start of production was expected to lead to an immediate reduction in domestic electricity prices and the start of exports.
"For the first time in its history, Israel to become a significant natural gas exporter," it said.
On December 17, Israeli Energy Minister Yuval Steinitz announced approval of sales to Egypt from Leviathan and the smaller Tamar field.
A spokesman for Israeli partner Delek said then that deliveries to Egypt were expected to begin on January 1.
Leviathan was discovered 130 kilometers (81 miles) west of the Mediterranean port city Haifa in 2010.
It is estimated to hold 535 billion cubic meters (18.9 trillion cubic feet) of natural gas, along with 34.1 million barrels of condensate.
Delek and US-based Noble struck a $15 billion 10-year deal with Egypt's Dolphinus last year to supply 64 billion cubic meters (2.26 trillion cubic feet).
It will be the first time Egypt, which in 1979 became the first Arab country to sign a peace accord with Israel, imports gas from its neighbor.
Israel had previously bought gas from Egypt, but land sections of the pipeline were targeted multiple times by Sinai jihadists in 2011 and 2012.
The Tamar and Leviathan gas will reach Egypt through the mainly undersea East Mediterranean Gas Company pipeline connecting the coastal city of Ashkelon with the northern Sinai peninsula.
Tamar, which began production in 2013, has estimated reserves of up to 238 billion cubic meters (8.4 trillion cubic feet).
Israel's neighbor to the east, Jordan, has been purchasing gas from Tamar on a small scale for nearly three years.
Besides bringing energy independence, Israel hopes its gas reserves will enable it to strengthen strategic ties in the region and help forge new ones, with an eye on the European market.
Lat week, the government of Greece said that it was about to sign an agreement for a huge pipeline project with Cyprus and Israel designed to pipe gas from the eastern Mediterranean to Europe.
Greek Prime Minister Kyriakos Mitsotakis's office said the agreement for the EastMed pipeline would be inked in Athens on January 2 with Israeli Prime Minister Benjamin Netanyahu and Cypriot President Nicos Anastasiades.
The 2,000-kilometre (1,200-mile) pipeline will be able to transfer between nine and 12 billion cubic meters a year from offshore gas reserves between Israel and Cyprus to Greece, and then on to Italy and southeastern Europe.
There are growing tensions with Turkey over its own activities in the area, particularly a contentious maritime deal with Libya expanding Ankara's claims over a large gas-rich area of the Mediterranean.
Scramble for energy
The discovery of hydrocarbon reserves in the eastern Mediterranean has sparked a scramble for the energy riches and a dispute between Cyprus and Turkey, which occupies the north of the Mediterranean island.
Natural gas is set to replace coal as the main fuel for power generation in Israel.
Critics note that while less polluting than coal, gas is still far from being a clean source of energy.
There have been fears among the Israeli public that the start of production from Leviathan, in which gas flows to a processing platform 10 kilometers offshore, could bring harmful emissions.
Israel's environmental protection ministry has sought to calm residents and has set up monitoring stations in communities along the northern coast to check for any spike in pollution.
Nevertheless, Israeli public radio reported that some residents had evacuated their homes until results of the air testing were verified.
