Israel, Egypt sign gas supply pact with EU

This morning, Israel signed a memorandum of understanding (MOU) with the EU on exports of gas. The signing ceremony took place at the meeting of the East Mediterranean Gas Forum (EMGF) in Cairo. It was attended by President of the European Commission Ursula von der Leyen, who has just completed a visit to Israel that largely focused on the gas issue. The agreement was signed by Minister of National Infrastructures, Energy and Water Resources Karine Elharrar and her Egyptian and EU counterparts. Israel already exports gas to Europe via the liquefaction plants in Egypt, but in small quantities.

Under the MOU signed today, the parties will work together to facilitate a regular supply of gas to the EU from Egypt, Israel, and other sources, through the existing liquefied natural gas (LNG) facilities in Egypt. This will be subject to energy security and supply capacity in the domestic markets of each of the signatories, and Israel and Egypt will not be prevented from exporting gas to other destinations.

A section of the MOU states that the EU will encourage European companies to participate in competitive processes and to invest in gas exploration and production projects in Israel and Egypt. In addition, the parties will formulate a program for optimum exploitation of infrastructure, examination of the need for new LNG plants, and setting out a road map for expediting the approvals required for implementing the provisions of the MOU.

The parties will also take action to reduce methane emissions, and will examine advanced technologies for capturing methane along the entire supply chain. The agreement even includes joint examination of possibilities for carbon capture as part of a general plan for reducing emissions and decarbonizing the natural gas industry, and of ways of investing in technologies in that area.

The agreement is valid for three years and will automatically renew for two further years.

Europe is crying out for gas following the Russian invasion of Ukraine, leading to the cutoff of gas supplies from Russia to some European countries. Last year, Russia supplied 155 BCM (billion cubic meters) of gas to Europe, of which 120 BCM went to countries now assisting Ukraine. The Europeans are seeking to procure gas from various sources, among them Algeria, the Gulf states, and the US.

Israel currently exports 8 BCM of natural gas annually, and it has a surplus of another 4 BCM that it can export after supplying its own needs. The intention is to expand exports after gas production begins from existing and proven resources, and to expand further when discoveries are confirmed in forthcoming drillings and in exploration of licenses in the new tender due to be held shortly.

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Critics of the agreement and of gas exports in general argue that the quantities of gas in Israel’s economic waters will not be sufficient for Israel’s needs in the long term.

Prime Minister Naftali Bennett, who met von der Leyen yesterday, said at the end of the meeting, at which the gas supply agreement was discussed, “Within the past few years, Israel has gone from being a country that imports gas to an exporter of gas. We are now working to produce more gas from Israel’s economic waters.”

In all her speeches in Israel, von der Leyen emphasized the gas question, and her visit was intended to settle the details of the agreement. The EU sought to ensure that it would be given priority in gas exports from Israel at least in the coming decade, and to formulate the best and fastest solution for transporting gas from Israeli reservoirs to Europe. The possible solutions are still being examined, and no decision has yet been made on which one to adopt.

Published by Globes, Israel business news – en.globes.co.il – on June 15, 2022.

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