Egypt weighs impact of Israel gas-field halt on LNG exports
Egypt is currently assessing the impact of a production halt at Israel’s Tamar gas field on its plans to resume liquefied natural gas (LNG) exports to Europe. According to officials familiar with the matter, this stoppage has resulted in a reduction of Egypt’s imports of Israeli gas by approximately 20%, bringing it down to around 650 million cubic feet per day. These officials have requested anonymity because they are not authorized to discuss this issue publicly.
The production shutdown at the Tamar gas field was ordered by Israel and is operated by Chevron Corp. The reason cited for this shutdown is safety concerns, coinciding with heightened conflict between Israeli military forces and Hamas in the eastern Mediterranean region. Notably, the Israeli government has not communicated any cessation of operations at the much larger Leviathan gas field to Egypt, as per one of the officials.
The situation underscores the complexities and geopolitical factors that can impact energy trade and supply arrangements in the region. Egypt’s plans to resume LNG exports to Europe, which may have been affected by this reduction in Israeli gas imports, could potentially be subject to further adjustments depending on the evolving situation in the Eastern Mediterranean.
Egypt’s oil minister recently announced plans to resume liquefied natural gas (LNG) exports this month after a summer hiatus. These exports come from gas produced domestically in Egypt and also from fields in Israel. However, the halt in production at the Tamar gas field in Israel has raised concerns about the potential impact on LNG shipments to Europe.
European buyers, looking for alternatives to Russian pipeline gas, have increasingly relied on LNG, especially during the winter heating season. The interruption in Israeli gas supply from Tamar could lead to reduced shipments to European buyers, contributing to concerns about energy security and supply reliability.
Benchmark European gas futures reacted to these developments, rising as much as 7.3% to the highest level since mid-June, following a 15% increase on the previous day.
To address the situation, it’s essential for Israel to maintain regular operations at the Leviathan gas field, which is significantly larger than Tamar. Additionally, if output from the Karish field in Israel is increased, it could help ensure a continued flow of Israeli gas to Egypt. Leo Kabouche, an analyst at Energy Aspects Ltd., suggests that if these conditions are met, Israeli gas exports to Egypt can be maintained, mitigating potential disruptions in supply to European markets.
The duration of the outage at the Tamar gas field remains a critical and uncertain factor, as pointed out by Leo Kabouche, an analyst at Energy Aspects Ltd. He noted, “Key unknown is the duration of the outage.” This uncertainty is particularly significant because Israeli gas plays a critical role in providing feedgas to Egypt, given the decline in domestic gas production in Egypt.
Egypt has ambitious plans to establish itself as a regional gas hub, but the operation of its two liquefaction plants saw a decline over the summer, with no LNG exports in June, August, and September. The temporary suspension of production at the Tamar gas field in Israel poses challenges to Egypt’s aspirations and its ability to maintain a consistent supply of natural gas for both domestic use and export.
The gas discoveries in Israel over the past couple of decades have had a transformative impact on the nation’s economy. The shutdown of the Tamar field, located about 50 miles west of Haifa, threatens Israel’s plans to become a significant regional gas supplier. In August, Israel had announced intentions to increase gas exports to Egypt, reflecting the strengthening ties between the two neighboring countries. The duration and resolution of the Tamar field outage will be closely monitored, as it has broader implications for energy dynamics in the region.
