Will gas from Egypt and Israel thaw Europe’s frosty crisis?

With the onset of very cold winter nights, European countries are seeking to fill the deficit with energy supplies from Moscow. This matter has confused the accounts of the European continent since the outbreak of the Russian war on Ukraine, which first sparked in February 2022.

Europe is intensifying its movements in the current period towards the south, towards the countries of the eastern Mediterranean, with the advent of winter. Its steps revolve around Cairo and Tel Aviv, as they are important players in the natural gas markets, especially in light of the integration between them.

Israel owns one of the largest gas fields in the Mediterranean, the Leviathan field, while Cairo owns the Zohr field (west of coastal Port Said Governorate). Egypt also has two natural gas liquefaction stations, the first in Damietta Governorate (north of the capital), and the second in Idku (Beheira Governorate, west of the Nile Delta). The latter has an annual liquefaction capacity of 7.2 million tons through two production lines, while the first has a capacity of 7.56 billion cubic meters annually, according to Enterprise.

German-Israeli agreement

Meanwhile, Germany, which has the largest economy in Europe and ranks fifth in the world, with a gross domestic product of $4.2 trillion, intends to import Israeli gas after liquefying it in Egypt. This is after the German company Uniper and Israeli NewMed Energy signed a non-binding agreement of understanding to explore ways of cooperation in the supply of liquefied natural gas in the short and long term, in addition to the production of blue and green hydrogen, according to Mees news website.

According to the deal, the two parties will study the export of natural gas from Israel to Germany in the near term using the existing production and transportation infrastructure and the transportation pipeline between Cairo and Tel Aviv after liquefying the gas in Egypt.

Gas liquefaction operations are carried out by removing some impurities from it, then cooling the remaining methane gas to less than minus 160 degrees Celsius, which reduces its volume by 600 times. After that, it is transported in its liquid state in special cooling tanks on huge tankers similar to oil tankers, and then it is unloaded and returned to its gaseous state by heating it in the ports of the consuming countries, according to Arab Oil Natural Gas.

Gas liquefaction in Egypt

According to the German-Israeli agreement, the latter will transfer the natural gas to the liquefaction facilities in Egypt, and then Cairo will export it directly to Berlin.

The deal extends to a feasibility study for delivering gas from Tel Aviv from the Leviathan field (about 130 kilometers from Haifa port) to Uniper. This will require expanding the existing infrastructure of the field, in addition to liquefying gas at one of the existing stations in Cairo, according to Reuters.

Since August 2022, Russia has completely suspended gas supplies to Germany through the main Nord Stream pipeline, after reducing it since mid-June.

The European Union countries relied on Moscow to meet nearly half of their gas needs before relations between the two sides soured with the attack on Ukraine and the subsequent Western sanctions on the Russian energy sector.

The value of the energy subsidy bill in the plans of European governments amounts to about €550 billion ($567 billion), according to Reuters and CNN.

Berlin allocates about €200 billion ($207 billion) to the German energy subsidy program alone.

Germany ranks second in the absolute spending ratio, after Malta, with a rate of 7.4%, while Sweden comes last on the list of spending countries by 0.35. Also, Britain allocated about £79 billion ($92.6 billion) to energy subsidies, according to a study by the Bruegel think tank, which specializes in European political economy and public policies.

According to Bloomberg, Israel's natural gas production increased 22% during the first half of 2022, reaching record levels of more than 10.85 billion cubic meters.

For his part, CEO of NewMed Yossi Abu said, “Natural gas will be the most important source of energy in the world during the coming period,” according to Offshore Energy.

“Leviathan is one of the most important gas fields in the Middle East, as it provides energy to Israel and other countries in the region, and it will be able to help Europe if it overcomes the current energy crisis,” he added.

At the same time, Cairo has worked during the recent period to increase its gas exports, as it represents about 10% of Egypt's total exports, and its value jumped to about $3.9 billion in 2021, compared to about $0.4 billion in 2020, an increase of 789.1%, according to Al Arabiya.

Diversification of gas supply sources

For his part, Niek den Hollander, General Manager of Uniper, said, “This cooperation is in line with our strategy to diversify gas supply sources and pave the way for a carbon-neutral world,” according to Energy Voice.

“Access to Israel's gas would increase the security of supplies in Germany,” he added.

Israel has two developed natural gas fields, Tamar and Leviathan. Tel Aviv began exporting gas to Egypt in 2020, bringing the total it sends to Cairo to about five billion cubic meters annually of gas through the Eastern Mediterranean gas pipeline (Ashkelon-Al-Arish), according to Reuters.

Six months ago, on June 15, Egypt, Israel and the European Union signed an agreement on the sidelines of the East Mediterranean Gas Forum, according to which “Israeli gas will be exported to Europe after it is liquefied in Egypt.”

Moscow supplies Europe with 40%

For his part, energy specialist Ahmed Ibrahim confirmed the possibility of European Union countries relying on Egyptian liquefied gas in order to bridge the gap after the cessation of Russian gas exports.

He told Jusoor Post, “Moscow was supplying European countries with about 40% of their gas needs, equivalent to 17 million cubic meters of liquefied gas, but at the same time, Mediterranean gas, whether in Egypt, Cyprus or Israel, cannot fully fill that gap.”

“Although Israel and Cyprus have a surplus, they do not have ways to export it. Neither the pipelines are feasible, nor the liquefaction of gas technically and financially,” he added.

Ibrahim predicted that “Europe will suffer a difficult winter this year because it is unable to fill the entire gap left by the Russian bear.”

“At the same time, Egypt has ties with 10 foreign countries that supply it with liquefied gas,” he added.

He explained that “Cairo has two gas liquefaction stations with a capacity of 12 million tons annually, while Russia used to supply Europe with 17 million cubic meters. The maximum capacity of the two stations does not exceed 12 million, so the difference of five million does not fill the entire gap created by the stopping of Russian gas. As for dry gas, there are no pipelines to export it.”

Israel needs years

The Israeli Energy Ministry said on November 11 that Tel Aviv “needs several years before it can significantly increase its supplies of natural gas to Europe,” according to Reuters.

The Director General of the Israeli Ministry of Energy, Lior Schillat, said that “providing gas to Europe will take some time.”

“In the short term, there will be some increase, but large shipments will come later,” he said on the sidelines of the United Nations Conference on Climate Change (COP27) in Egypt.

For his part, Karim Asaad, a specialist in energy affairs, believes that “Europe's filling the deficit resulting from the complete cessation of Russian gas cannot happen on the ground.”

“Any additional quantities obtained by the old continent, whether from Egypt, Israel or the countries of the eastern Mediterranean, will solve part of the crisis but cannot end it,” he said.

Asaad pointed out that “Europe's gas consumption is 240 billion cubic feet, and 40% of that amount comes from Moscow, while the rest of the world shares the remaining 60%. Russia produces 65 billion cubic feet of gas per day, and half of the amount is directed to the European continent.”