Will Israel's gas export to Europe prevent a deepening energy crisis?
Cheaper gas salvation

ANALYTICS  12 December 2022 - 16:00

On December 9, 2022, the US energy giant Chevron announced that it started the expansion of the Tamar gas field off the coast of Israel in the Mediterranean Sea. At present, Tamar's production capacity is 27 billion cubic meters (bcm) per year. Chevron and its partners will invest a further $673 million in the field to expand it to include a third 150-kilometre-long (93 miles) pipeline. The goal is to get daily production to 1.6 billion cubic feet (4.5 million cubic meters - mcm) per day.

The move comes as a result of a Final Investment Decision (FID) between Chevron Mediterranean Limited and the working interest owners of the Tamar reservoir, which include Chevron Mediterranean Limited, Isramco, Mubadala Energy, Tamar Petroleum, Dor Gas, and Everest. Hence, the project's first phase will include another 150-km long pipeline from the Tamar field to the offshore platform. The new pipeline will be adapted to support deliverability of up to 1.2 bcf/d of natural gas, and the process is expected to take until 2025.

Gas fields in Eastern Mediterranean

The boost in natural gas production will enable Israel to become the leading regional energy exporter amid the growing global energy crisis. In fact, Israel gradually increased natural gas exports to neighbouring countries. As such, Egypt recorded in March a new record in gas imports from Israel, which in turn boosted their first-quarter flows to an all-time high. The imports go in line with Cairo’s efforts to become a regional hub for gas trade as well as Tel Aviv’s plans to take advantage of its thirst for gas to increase exports. According to the available data, only in March, Egypt imported around 20 mcm per day from Israel in 2022, while the country accounted for an all-time high of 26.5% of Israel's gas output during the same period.

The significant increase in Egypt’s gas imports from Israel became possible with the Arab Gas Pipeline (AGP) that connects Egypt with Jordan at the Red Sea and then extends to Syria and Lebanon. In this regard, the Egyptian authorities earlier stated that they would boost LNG exports by 14% to 8 million tonnes/year in 2022, as the North African producer seeks to plug a hole left by lower Russian imports into the European Union. Due to the raging war in Ukraine, about 90% of this year's LNG exports are heading to European Union countries, compared with 80% in 2021.

Moreover, Israel is keen to diversify energy exploration works to increase export volumes. In October 2022, the UK-based oil and gas company Energean plc said it had started gas production at its Karish gas field in the Mediterranean Sea, offshore Israel. Reportedly, the initial capacity of the field is up to 6.5 bcm/year, and commercial gas sales are expected to reach this level four to six months after the first gas. Hence, the production will contribute significantly to supplying the needs of the local sector and upholding Israel's international commitments.

With further exploration of the field, Israel will have a gas surplus enabling it to export around ten bcm of fossil fuel annually to Europe. Therefore, more technical cooperation with Egypt is much needed to be able to deliver enormous volumes of gas to Europe. Israel intends to use the infrastructure connecting its gas fields with LNG terminals in Egypt, in line with the provisions of a Memorandum of Understanding that Egypt, Israel, and the EU signed in June 2022. Indeed, the EU’s interest in Israeli gas results from the need to quickly diversify its sources, as Russian energy flow stopped causing a sharp energy deficit. At the same time, the profitability of gas imports from Israel has increased due to the very high prices of gas recorded on European gas hubs since the autumn of 2021.

Lebanon, Syria, and Egypt sign gas import agreement, June 2022

Also, Israel may ensure additional surplus once gas extraction from the Leviathan gas field increases from the current 12 bcm to 21 bcm annually, though it depends on the building of a new infrastructure for transporting gas. The boost of energy export intensified when the Israeli authorities held several talks with the EU Energy commissioner Kadri Simson in 2022. As a result, an agreement was reached to liquefy the Israeli gas in the Egyptian LNG terminals at Damietta and Idku. Although the initial agreement has been reached for the Israeli gas, specific arrangements will need to be made beforehand, as the document does not put any binding legal and financial obligations on the parties and does not specify any timeframe, volume, recipients, or prices of the gas supplies.

Caliber.Az