Israel, Egypt Agree Future Gas Export Deal With EU

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Israel and Egypt have agreed to a provisional deal with the EU to export natural gas to Europe. The deal was part of a wider agreement covering trade and transportation.

“This is a historical moment … the [memorandum of understanding (MOU)] will enable Israel, for the first time, to export Israeli natural gas to Europe,” said Israeli Energy Minister Karine Elharrar at a meeting of the East Mediterranean Gas Forum in Cairo this week. The MOU had been under negotiation and had not already been signed as previously reported.

Under the terms of the MOU, all sides have agreed to ensure a regular supply of natural gas to the EU from Egypt, Israel “and other sources using natural gas liquefaction infrastructure available in Egypt.”

Long considered the most viable commercial option, the existing Egyptian LNG export plants at Idku and Damietta on the Mediterranean coast are the preferred option of the international oil companies involved and European institutional investors such as the European Bank for Reconstruction and Development.

A study into a potential East Mediterranean Gas Pipeline is due to conclude this year but there are industry concerns over its commercial and technical viability and long-term suitability to Europe’s evolving gas market.

EU Seeks Alternative Gas Suppliers

Amid the ongoing war in Ukraine the EU has reached out to alternative suppliers in North Africa, the US, elsewhere in Africa and the East Mediterranean. The REPowerEU plan has set itself the target of slashing EU gas dependence on Russia by two-thirds (from 150 billion cubic meters per year to 50 Bcm/yr) this year.

Shell operates Idku with partners Petronas and TotalEnergies while Eni manages the Damietta facility. Egyptian LNG exports to Europe alone have ramped up since last December as prices have soared and in some months have outpaced exports to Asia.

Egypt’s twin terminals shipped about 600,000 tons of LNG to Europe in March, or about 80% of total output, data from Kpler show. In April, 370,000 tons went to Europe, or 48% of total output. In May, 570,000 tons went to Europe, or 74% of total output.

Israeli LNG Exports Not Imminent

But LNG from Israel will not be arriving on European shores anytime soon. Chevron, which operates Israel's 22 trillion cubic foot Leviathan field and the 4 Tcf Cypriot Aphrodite field, is due to select a development option for a second phase development of Leviathan, which might be combined with Aphrodite.

A dispute over boundary delineation for Aphrodite and Israel's smaller Ishai field still has to be resolved, with both Cyprus and Israel now discussing a solution to present to all companies involved.

The statement from the Israeli energy ministry also underlined that the deal is dependent on gas demand in the Israeli and Egyptian domestic markets. “This commitment is subject to the preservation of the energy security and capacity for supply to the domestic market of each one of the signatory parties, and will not prevent Israel and Egypt from exporting natural gas to other destinations,” read the Israeli statement.

The terms of the new agreement with the EU have a three-year duration, which can be automatically renewed for two years. The MOU did not provide volumes or prices.

Israeli Bid Round Boost?

The deal also includes a clause under which the EU will encourage European companies to bid in competitive tenders and invest in projects for the exploration and production of natural gas in Israel and in Egypt, the ministry said. A plan for the best use of existing infrastructure will be drafted including a review of the need to build and develop “new liquefaction plants.”

Israel is currently advancing plans for a new fourth offshore bid round — in a reversal of the country’s previous policy, which had favored investments in renewables to meet net-zero carbon emissions targets by 2050. Elharrar is now saying that given the global energy crisis there was “an opportunity to export larger quantities of natural gas.”

All sides have also agreed to reduce methane emissions and “explore advanced technologies for methane capture and reduction of venting, throughout all stages of the supply chain."

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