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    Tripartite agreement to drive Israel's gas export strategy


Egypt will act as the conduit for Israeli gas producers to European markets, after a tripartite agreement.

by: Callum Cyrus

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Natural Gas & LNG News, Asia/Oceania, Europe, News By Country, Egypt

Tripartite agreement to drive Israel's gas export strategy

Israeli gas producers are set to gain access to Egyptian gas transit routes and LNG ports for dispatch to European customers, the European Commission (EC) revealed June 15.

Israel, Egypt and the EU have signed a memorandum of understanding on supporting these exports, the EC said. Ursula von der Leyen, EC president, hailed the agreement as a "big step" for European energy security that would also allow Egypt to become a "regional energy hub." 

Officials told Reuters that it would lead to increased Egyptian LNG transit to Europe, though this could take a few years to take effect. The agreement additionally states that natural gas will play a central role in EU energy markets until 2030. The EU expects natural gas use to decline after 2030, matching its pledge to become a net-zero economy by 2050, Reuters said.

Israeli energy minister Karine Elharrar said: "Today Egypt and Israel make a commitment to share our natural gas with Europe and to help with the energy crisis."

Israel's annual gas output is expected to rise to 40bn m3 within the next few years, from 20bn m3 at present, thanks to the launch of several new upstream projects. Its renewables generation capacity has also increased, mainly through solar thermal and PV plants, which gives the government scope to increase gas exports. With the EU scrambling to limit Russian gas purchases, which amounted to 155bn m3 in 2021, that has opened a significant market opportunity for the Israeli government.

At the moment, most Israeli gas output is directed to domestic customers. But the Chevron-run Leviathan field already supplies some gas to Egypt. Some Israeli exports to Egypt are already re-exported as LNG, following liquefaction in Egyptian ports, Reuters said.

Israeli gas capacity will further escalate following the third quarter launch of Energean's Karish project, unlocking an estimated 8bn m3 in recoverable gas potential. The Israeli government also plans to hold another licensing round for offshore gas acreage.

From an Egyptian perspective, this solidifies Cairo's efforts to bolster LNG export ties to Europe and satisfy the continent's need for non-Russian gas flows. Egypt currently ships gas from two LNG export and liquefaction plants: Damietta (5.6mn metric tons/year) and Idku (7.2mn mt/yr). It shipped 8.9bn m3 of LNG in the first five months of 2022, according to Reuters' Refinitiv Eikon data, however most of this goes to Asia. Egypt only became a net gas exporter in 2019, and must also keep an eye on rising domestic demand. At a time when global prices have sharply risen, Cairo may face a trade-off between sending gas overseas and fostering domestic productivity.