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    Egypt Still Considering Israeli Gas

Summary

Egypt is still looking for natural gas suppliers to ease its energy crisis. Importing gas from Israel is still a possibility, says Egypt's oil minister.

by: Karen Ayat

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Featured Articles, News By Country, , Egypt, Israel, East Med Focus

Egypt Still Considering Israeli Gas

Egypt is looking to import natural gas from Israel. Once a net natural gas exporter, Egypt is now facing a severe energy crisis that is threatening more power outages and an increase in the price of electricity for the private and commercial consumer. A mismanagement of the country’s resources led to a domestic shortfall. Egypt previously exported gas to Israel and Jordan via the Arab Gas Pipeline. Several attacks to the pipeline in the aftermath of the 2011 revolution that toppled Husni Moubarak have led to the disruption in the flow of gas from Egypt to its neighbours.

The disruption of gas has left the Kingdom of Jordan energy thirsty and with a spiking energy bill that is putting a strain on the economy and the government’s budget. Israel’s discovery of natural gas could not be more timely. Not only is Israel studying various options for the export of its gas found mainly in the giant Tamar (10 Tcf) and Leviathan (21 Tcf) fields, but the country’s natural gas independence is now secured for decades to come.

Importing natural gas from Israel would make both technical and economic sense for Egypt. The gas would flow via pipeline in the opposite direction than it did historically. For Israel, exporting the gas to far-reaching market has proven tricky. The complicated geopolitical landscape in the region have made all scenarios, including pipeline, LNG and FLNG, complex. Israel has expressed its regional strategy, starting by exports to its surrounding: Jordan, Egypt and the Palestinians. Exporting gas to Egypt would also allow Israel to use Egypt’s unused export terminals to reach lucrative markets in Europe and Asia.

Egypt’s Energy Minister Sharif Ismail confirmed to local media that importing gas from Israel was a possibility. He added that decisions on import are made with Egypt’s best interests at sight. The partners in the Leviathan and Tamar fields have signed MOUs to export natural gas respectively to BG’s LNG plant in Idku and to the LNG plant in Damietta, operated by Union Fenosa Gas.

Recent regulatory hurdles in Israel have however made Israel’s regional ambitions questionable. A climate of uncertainty and hostility is surrounding the development of Israel’s offshore resources. In December 2014, Israel’s Antitrust Commissioner announced he was reconsidering an agreement that would have allowed Delek and Noble to pursue their partnership in the Leviathan and Tamar if they sold two smaller fields, Tanin and Karish. A final decision is expected by February 2015, but there is no doubt that the risk of the partners being qualified a cartel might deter international investors from participating in Israel’s gas developments, push Noble out and defer the development of the Leviathan further beyond 2018, and with it all the deals attached. 

Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat