Israel to supply Egypt with gas worth $35 billion a year

On Wednesday, Israel approved an export deal signed in August this year with US company Chevron and its partners NewMed and Ratio. The deal covers gas supplies worth $35 billion a year.

The gas is to come from Israel’s Leviathan gas field. The field’s reserves are estimated at around 600 billion cubic meters. Under the current deal, around 130 billion cubic meters of those reserves are to be exported to Egypt by 2040, Reuters reports.

Israel signed the export deal with Chevron in August this year. According to Al Jazeera, citing Israeli media, however, Israel’s leadership, headed by the prime minister, wanted the final say. Israel accuses Egypt of violating agreements from the 1970s that limit the military capabilities Egypt can maintain on the Sinai Peninsula.

Difficult politics

Relations between Egypt and Israel have been particularly tense over the past two years because of Israel’s response to Hamas’s terrorist attack on October 7, which led to the displacement of a large part of the population of the Gaza Strip. Egypt has opposed Israel’s actions since the conflict began, and in August the Egyptian president described them as systematic genocide.

On Wednesday, the Israeli prime minister described the deal as the largest gas agreement in Israel’s history, saying it would help regional stability. According to Israeli media, the Israeli government believes the gas supplies will give it a stronger position and “leverage” in future negotiations with Egypt.

Egypt’s director of the State Information Service, by contrast, is seeking to keep his distance from the deal. He said, however, that the deal is in Egypt’s strategic interest and strengthens its position as a regional energy hub. He also added that it does not affect Egypt’s position in the Israeli-Palestinian conflict or its views on the rights of the Palestinian people or a two-state solution. He said the deal is purely commercial and has no political dimension.

According to CNN, the announcement of the deal comes as the current US administration is trying to bring both sides to the negotiating table. Egypt helped negotiate the current fragile ceasefire in the Gaza Strip, but no formal meeting between the leaders of the two countries has taken place for several years, and arranging one under the current circumstances is very difficult.

Egypt’s energy sector

In the energy sector, however, Egypt is turning to Israel increasingly often. Its domestic production has been falling since 2022, while demand continues to rise as the Arab country seeks to meet the energy needs of its massive population of 118 million, a significant proportion of whom live in large cities along the Nile.

In Egypt, demand for gas is still driven mainly by electricity generation. According to the IEA, around three quarters of Egypt’s electricity comes from gas-fired power plants. A significant share of the gas also goes to industry and households.

Egypt has its own gas reserves and was even an exporter in the past, but demand is now growing so significantly that the country is increasingly turning to imports from regional players. It is willing to take gas from Israel simply because it is much more economical for Egypt.