Israel’s Gas Field Closure Could Affect Egypt’s LNG Exports

officials say Egypt is assessing the impact of a halt in production at Israel’s Tamar gas field on its plans to resume liquefied natural gas (LNG) exports to Europe.

by Motoni Olodun

Egypt is facing a potential setback in its ambitions to become a regional gas hub and a major exporter of LNG, as the supply of Israeli gas to the country has dropped by 20% due to security issues.

According to officials who spoke to Bloomberg on condition of anonymity, the shutdown of the Tamar field in the Mediterranean Sea has reduced Israeli gas imports to Egypt to around 650 million cubic feet per day. The officials said Egypt has not been informed of any halt to the much larger Leviathan gas field, which also supplies gas to the country.

The Tamar field, operated by Chevron Corp., was ordered to close by the Israeli government on Saturday amid escalating violence between Israel and Hamas militants in Gaza. The field accounts for about 70% of Israel’s domestic gas consumption and exports gas to Jordan and Egypt.

Egypt has two LNG plants in the Eastern Mediterranean, which process gas from its own fields and from Israel and Cyprus. The country had planned to resume LNG exports this month after a break over the summer due to increased domestic demand for electricity.

However, the closure of Tamar could affect Egypt’s ability to meet its contractual obligations to European buyers, who are facing a tight gas market and soaring prices ahead of the winter season. Europe relies on LNG imports as an alternative to Russian pipeline gas, which political tensions and technical issues have limited.

Egypt’s oil minister, Tarek El Molla, said last week that the country expected 50% less revenue from gas exports this year due to a global drop in gas prices. He also said that LNG shipments would resume in October when electricity demand drops with the start of autumn.

Egypt has been trying to position itself as a regional gas hub after discovering the giant Zohr gas field in 2015, which boosted its domestic production and enabled it to achieve self-sufficiency in gas. The country also signed agreements with Israel and Cyprus to import their gas, re-export it as LNG, and cooperate on developing regional gas infrastructure.

However, Egypt’s gas sector faces several challenges, such as declining domestic output, rising consumption, high debts to foreign companies, and geopolitical uncertainties. The latest disruption from Israel could further undermine Egypt’s gas aspirations and economic recovery from the pandemic.

Analysts say that the impact of the Tamar shutdown on Egypt’s LNG exports will depend on how long it lasts and whether Leviathan and other fields can compensate for the shortfall. They also say Egypt needs to diversify its gas sources and markets and invest more in its upstream and downstream sectors.

Egypt is hopeful that the situation in Israel will be resolved soon and that normal gas flows will resume. The country has recently strengthened its ties with Israel, especially in the energy sector. In August, Israel said it would increase its gas exports to Egypt from Tamar and Leviathan as part of a landmark deal worth $15 billion.

Source: Energy Voice

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