The Egypt-Israel gas deal of the late 1990s-early 2000s has been turned on its head.
Originally conceived as a means of providing Israel with natural gas when it had no domestic supplies of its own, the boot has been transferred to the other foot.
“This step will increase the state’s revenue and strengthen diplomatic ties between Israel and Egypt,”
Israel Katz, Energy Minister
On August 23, Israel announced that it has agreed to increase by some 70% its export of natural gas to Egypt, which is contending with rising demand and falling output from its own resources.
In the late 1990s, when Israel had to import all its fossil fuel needs, the government decided to encourage the use of natural gas. A number of reasons lay behind the decision, cost and environmental impact among them.
It turned to Egypt, and an agreement was hammered out. Israel would be supplied with natural gas, first in the form of Liquefied Natural Gas (LNG), but later through an undersea branch of the planned Arab Gas Pipeline. That branch eventually became the Arish-Ashkelon pipeline running direct from Egypt to Israel.
From 2008 until the political turmoil in Egypt following the Arab Spring of 2011, the pipeline supplied about half of Israel’s natural gas needs. The next two years were marked by political turmoil in Egypt, and the feeder pipeline in Sinai was sabotaged again and again.
No sooner was the damage repaired and supplies resumed to Israel – and, incidentally, to Jordan, which Egypt was also supplying with natural gas – than a further explosion put the pipeline out of commission. After no less than 14 such incidents, the pipeline was shut down.
A few years later, Egypt was in the throes of an energy crisis. Rising demand and falling gas and oil output had transformed the country from exporter to importer of both. Commercial interests spied a profitable opportunity. Deals in 2018 paved the way for the Arish-Ashkelon pipeline to be reopened, but with the flow reversed so that Israel could supply Egypt with the natural gas it desperately needed. As from 2020, gas from Israel’s Leviathan and Tamar fields, located off the northern Israeli coastline, were transferred via the pipeline from Ashkelon to Arish in Egypt.
Egypt’s power crisis may have been eased, but it was far from resolved. By June this year, the country was suffering severe power cuts. First affected were street lamps and some public services.
Then, as temperatures began to soar – up to 50° were recorded – power cuts were imposed, lasting about six hours in some areas. According to officials, the power outages resulted from exceptional pressure on the energy grid caused by the high demand for electricity to power fans and air conditioning. By mid-July Egypt’s electricity company was calling on people to avoid using elevators, in case they were trapped through a power cut.
Egypt’s prime minister, Mostafa Madbouly, claimed that the networks would soon return to normal, but that in any case, steps were in hand to ration electricity consumption.
Egypt, although it was facing growing demand for gas from its 105 million population, saw its own natural gas production decline by 9% year-on-year between January and May 2023, and by 12% compared to the same period in 2021.
Israel, an LNG exporter
It was against this background that Egypt sought, and Israel announced, the increase in its natural gas sales to Egypt. One factor easing the deal may well be Egypt’s presidential elections, due to be held in February 2024. Egypt’s president, Abdel Fattah al-Sisi, would certainly rather face the electorate with the power crisis well behind him.Sisi was first elected president under Egypt’s 2014 constitution, which provided for presidential terms to last four years, and for no president to serve more than two terms. He won his second term in 2018, but in April 2019 Egypt’s parliament extended presidential terms from four to six years, and in addition Sisi was allowed to run for a third term in the 2024 election.
Explaining the new Egypt-Israel agreement, Energy Minister Israel Katz, said gas exports to Egypt, currently about 5 billion cubic meters (bcm) per annum, will be increased by 3.5 bcm per annum over 11 years. Israel also intends to expand production from Tamar by 60% from 2026.
“This step will increase the state’s revenue and strengthen diplomatic ties between Israel and Egypt,” said Katz.The arrangement is far from the liking of some public figures in Israel. Some public advocacy groups have warned that Israel could suffer gas shortages as domestic demand rises, and have raised the prospect of environmental damage from heightened offshore activity.
In June, Yogev Gardos, Israel’s budget director, said there was an “immediate need for the examination” of export policy. Israel should urgently review how much natural gas the country should export, he said, to make sure it keeps enough for itself. In fact, back in 2013, Israel set limits on how much could be sold abroad, earmarking around 60% of reserves for domestic use.
Israel is expected to roughly double its gas output over the coming years, and in a letter to the director-general of the Energy Ministry, Gardos said exporting too much “could endanger Israel’s energy security” and lead to higher electricity prices.
Katz responded to the letter in a robust Twitter post: “Decisions on the gas sector take into account broad policy considerations, such as Israel’s standing, and the one who will make the decisions is me – the minister elected by the people. Not the professional echelon.”
He could afford to respond straight from the shoulder, for he already knew that Israel’s fourth offshore bidding round, launched in December 2022, had been an outstanding success. Four groups of companies, adding up to a total of nine companies – five of which were new to the Israeli market – had bid to explore for additional offshore natural gas fields in Israeli waters.
The three major Israel fields currently in production – Tamar, Leviathan, and Karish – have total estimated reserves of 1,000 bcm. Four more fields have already been discovered, and are awaiting exploitation – Zeus, Athena, Hermes, and Kallan – which, taken together, amount to an estimated further 108 bcm of natural gas. With the forthcoming exploration now in the pipeline, Israel’s future, both as regards to satisfying its own gas needs and as a remunerative gas exporting nation, seems assured.
The writer is the Middle East correspondent for Eurasia Review. His latest book is Trump and the Holy Land: 2016-2020. Follow him at: www.a-mid-east-journal.blogspot.com.