Israel and Egypt will boost gas deliveries to the EU after the three parties signed a new energy agreement in Cairo on Wednesday as Brussels seeks to cut energy dependence on Russia.
Recent discoveries in the Mediterranean have made the region a potential source of new imports. Under Wednesday’s memorandum of understanding, which follows similar deals between the EU and the US, and the EU and Qatar, Israeli gas will be liquefied at plants in Egypt, before being sent by tanker to the bloc.
While Israeli gas is already shipped to Egypt, Israel’s energy minister Karine Elharrar hailed the deal as the moment in which Israel — which is expected to double its gas production following the discovery of new offshore gasfields in the past decade — becomes “a significant player in the global energy market”.
Egypt’s petroleum minister Tarek el-Molla said that the deal, which will run for three years and can be extended for two more, was a “milestone” and could lead to further co-operation between other Mediterranean countries. The European Commission said it now expects to import 7bcm of LNG from Egypt in 2022, up from an originally expected 5bcm. This could double again next year, a spokesman said.
The signing in Cairo comes amid mounting concerns within the EU about the reliability of Russian gas supplies, which accounted for about 40 per cent of the bloc’s gas imports last year.
Italy’s gas group Eni said on Wednesday that Russia had cut gas deliveries to the country by 15 per cent, a day after Russia’s Gazprom said that it would cut supplies to Germany via the Nordstream 1 pipeline by 40 per cent.
During a trip to Israel on Tuesday, Ursula von der Leyen, president of the European Commission, accused Moscow of “deliberately” cutting off supplies to various European countries and companies since the Russian invasion of Ukraine in “retaliation for our support” for Kyiv.
But she insisted that this had “only strengthened our resolve to break free of our dependency on Russian fossil fuels”.
However, analysts cautioned that the ability of either Egypt or Israel to send large additional volumes to the EU in the short term was limited, and that the deal in Cairo would not on its own be enough to fill the gap left by Russian deliveries.
“The agreement does not lay out any specific timeline for the ramp-up in LNG flows from Egypt or for the construction of a new pipeline to ship extra volumes of Israeli gas to Egypt, ” said Leo Kabouche, LNG market analyst at Energy Aspects in London
Tom Marzec-Manser, head of gas analytics at ICIS, said that Israeli deliveries to Egypt and Egyptian deliveries to the EU had both risen this year due to high prices in the bloc, and that as a result, the deal was more likely to affect longer-term deliveries.
“The market is often a better driver of these sorts of developments than political agreements,” he added.
Martijn Murphy, principal analyst for north Africa at Wood Mackenzie, the oil and gas consultancy, said that the deal could help foster further development of Israeli gasfields.
“It will help Israel in terms of attracting IOCs [international oil companies] into the country who can be confident that there’s going to be a market to sell the gas on.”
Additional reporting by Alice Hancock in Brussels
Source: Financial Times
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