Israel signs $35 billion natural gas supply deal with Egypt

LONDON: Israel’s Leviathan natural gas field has signed the largest export agreement in the country’s history, worth up to $35 billion to supply gas to Egypt, NewMed, one of the partners in the field has said.

The deal should ease an energy crisis in Egypt, which has spent billions of dollars on importing liquefied natural gas since its own supplies fell short of demand.

Egypt’s production began declining in 2022, it has increasingly turned to Israel to make up the shortfall.

Exports from the gas field were halted during a 12-day war between Israel and Iran in June but have since resumed.

Under the deal announced on Thursday, Leviathan, off Israel’s Mediterranean coast, with reserves of some 600 billion cubic metres, will sell about 130 bcm of gas to Egypt through 2040, or until all of the contract quantities are fulfilled.

The gas is pumped via pipelines, which makes it cheaper than LNG, the cost of which is inflated by the super-cooling required to make it a liquid that can be transported by ship and re-gasifying it when it reaches its destination.

Egypt’s Ministry of Petroleum, which is also responsible for energy imports, did not immediately respond to a request for comment.

Analysts estimate the average cost of LNG at $13.5 per million British thermal units (mmBtu), compared to $7.75 for Israeli gas. That excludes the cost of leasing floating storage (FSRUs).

Under the deal, Leviathan in a first stage will supply Egypt with 20 bcm of gas starting in early 2026 after the connection of additional pipelines.

It will export the remaining 110 bcm in a second phase that will begin after completion of the expansion project and the construction of a new transmission pipeline from Israel to Egypt via Nitzana in Israel, NewMed said.

Egypt has been struggling to get its gas production up. According to latest figures, production reached 3,545 million cubic meters in May, compared to 6,133 mcm in March 2021 – a decline of over 42% in less than five years.

The Leviathan reservoir began supplying Egypt shortly after production began in 2020. The field, operated by Chevron, which holds a 40% stake, also supplies Jordan.