Published in the Jerusalem Post, 21 September 2023
The Egypt-Israel gas deal of the late
1990s-early 2000s has been turned on its head.
Originally conceived as a means of providing Israel with natural gas
when it had no domestic supplies of its own, the boot has been transferred to
the other foot. On August 23 Israel announced that it has agreed to increase
by some 70% its export of natural gas to Egypt, which is contending with rising
demand and falling output from its own resources.
In the late 1990s, when
Israel had to import all its fossil fuel needs, the Israeli government decided
to encourage the use of natural gas. A
number of reasons lay behind the decision, cost and environmental impact among
them. It turned to Egypt, and an
agreement was hammered out. Israel would be supplied with natural gas, first in
the form of Liquefied Natural Gas (LNG), but later through an undersea branch
of the planned Arab Gas Pipeline. That
branch eventually became the Arish-Ashkelon pipeline line running direct
from Egypt to Israel.
From 2008 until the
political turmoil in Egypt following the Arab Spring of 2011 the pipeline
supplied about half of Israel’s natural gas needs. The next two years were
marked by political turmoil in Egypt, and the feeder pipeline in Sinai was
sabotaged again and again. No sooner was
the damage repaired and supplies resumed to Israel – and, incidentally, to
Jordan, which Egypt was also supplying with natural gas – than a further
explosion put the pipeline out of commission.
After no less than fourteen such incidents, the pipeline was shut down.
A few years later Egypt
was in the throes of an energy crisis. Rising demand and falling gas and oil
output had transformed the country from exporter to importer of both. Commercial interests spied a profitable
opportunity. Deals in 2018 paved the way
for the Arish-Ashkelon pipeline to be reopened, but with the flow reversed so
that Israel could supply Egypt with the natural gas it desperately needed. As from 2020 gas from Israel’s Leviathan and
Tamar fields, located off the northern Israeli coastline, were transferred via
the pipeline from Ashkelon to Arish in Egypt.
Egypt’s power crisis may
have been eased, but it was far from resolved. By June this year the country was suffering severe power cuts. First affected were street lamps and some
public services. Then, as temperatures began to soar – up to 50 degrees Celsius
(122 Fahrenheit) were recorded – power
cuts were imposed, lasting about six hours in some areas. According to officials, the power outages
resulted from exceptional pressure on the energy grid caused by the high demand
for electricity to power fans and air conditioning. By mid-July Egypt’s electricity company was
calling on people to avoid using
elevators, in case they were trapped through a power cut.
Egypt’s prime minister, Mostafa Madbouly, claimed that the networks would soon return to normal, but that in any case steps were in hand to ration electricity consumption.
Egypt, although it
was facing growing demand for gas from its 105 million population, saw its own
natural gas production decline by 9% year-on-year between January and May 2023,
and by 12% compared to the same period in 2021.
It was against this
background that Egypt sought, and Israel announced, the increase in its natural
gas sales to Egypt. One factor easing
the deal may well be Egypt’s presidential elections, due to be held in February
2024. Egypt’s president, Abdel Fattah
el-Sisi, would certainly rather face the electorate with the power crisis well
behind him.
Sisi was first elected
president under Egypt’s 2014 constitution, which provided for presidential
terms to last four years, and for no president to serve more than two
terms. He won his second term in 2018,
but in April 2019 Egypt's parliament extended presidential terms from four to
six years, and in addition Sisi was allowed to run for a third term in the 2024
election.
Explaining the new Egypt-Israel agreement, Israel’s Energy Minister, Israel Katz, said that gas exports to Egypt, currently about 5 billion cubic meters (bcm) per annum, will be increased by 3.5 bcm per annum over 11 years. Israel also intends to expand production from Tamar by 60% from 2026.
"This step will
increase the state's revenue and strengthen diplomatic ties between Israel and
Egypt," said Katz.
The arrangement is far
from the liking of some public figures in Israel. Some public advocacy groups have warned that
Israel could suffer gas shortages as domestic demand rises, and have raised the
prospect of environmental damage from heightened offshore activity. In June, Yogev Gardos, Israel's budget
director, said there was an "immediate need for the examination" of
export policy. Israel should urgently review
how much natural gas the country should export, he said, to make sure it keeps
enough for itself. In fact back in 2013 Israel
set limits on how much could be sold abroad, earmarking around 60% of reserves
for domestic use.
Israel is expected to
roughly double its gas output over the coming years, and in a letter to the
director-general of the Energy Ministry, Gardos said that exporting too much
"could endanger Israel's energy security" and lead to higher
electricity prices.
He could afford to
respond straight from the shoulder, for he already knew that Israel’s fourth
offshore bidding round, launched in December 2022, had been an outstanding
success. Four groups of companies,
adding up to a total of nine companies – five of which were new to the Israeli
market – had bid to explore for
additional offshore natural gas fields in Israeli waters.
https://www.jpost.com/israel-news/article-759895Eurasia Review, 22 September 2023
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