The 35-billion-U.S.-dollar agreement to supply natural gas from Israel's Leviathan field to Egypt in the next 15 years marks a breakthrough for the North African country to reduce economic burden, which is suffering from deepening energy shortages, said local economists.
Israeli Prime Minister Benjamin Netanyahu said last week that he had approved a gas deal worth 112 billion shekels (about 34.7 billion U.S. dollars) under which Israel will supply natural gas to Egypt.
Under the deal, U.S. energy company Chevron, along with its Israeli partners, will supply Egypt with gas.
Calling it the "largest gas deal in Israel's history," Netanyahu said about 58 billion shekels from the deal will flow into the state treasury.
Israeli Energy Minister Eli Cohen described the approval of the agreement as "a historic moment" for Israel, both diplomatically and economically. Cohen said the approval followed several months of intensive negotiations, and that gas companies are expected to invest more than 16 billion shekels in gas infrastructure under the deal.
Egypt has been trying to boost its oil and gas production amid a decline in natural gas output in recent years. In August, Egyptian Prime Minister Mostafa Madbouly said Egypt's current natural gas production stands at 4.1 billion cubic feet per day and is expected to rise to 6.6 billion cubic feet per day by 2027.
"Currently, Egypt's consumption peak is about 7.5 billion cubic feet a day. The current resources are 4.1 billion cubic feet a day of local production. As of October, we import around 1.2 billion cubic feet a day. So the current deal is going to increase gradually the quantities from 1.2 to 2.8 by 2029, therefore reducing the economic burden of LNG (liquefied natural gas), which costs about 15 U.S. dollars per MMBtu (Metric Million British Thermal Unit) to around 7.6 U.S. dollars, which is the current price from the pipeline," said Egyptian economist Mohamed Fouad.
The imported gas will also be liquefied in Egyptian LNG plants and re-exported to Europe, creating an important revenue stream for the country.
However, the deal has raised eyebrows, especially as political ties have been strained over Israel's onslaught on Gaza, annexing the Rafah border crossing and blocking the inflow of aid from Egypt to the Palestinians.
"We are looking at a deal to guarantee gas supply, we're not looking at a political deal, because we have to understand that in Israel the exploration is based upon a concession, so this is not a government-to-government deal. This is a deal with NewMed and Chevron who basically have the right to the concession of the Leviathan field. Israel as a nation has no other alternative for export but Egypt. There could possibly be no pressures or strings attached to this particular deal. It is purely a commercial deal," Fouad said.
In spite of the importance of this energy agreement for both sides, some experts are skeptical that the volatile relationship between Egypt and Israel could result in the deal's suspension at any time down the line.
Israel became a natural gas producer after the discovery of major offshore fields in the eastern Mediterranean over the past decade, including the Tamar and Leviathan fields, which have transformed the country from an energy importer into a regional exporter.
Gas deal with Israel to significantly reduce Egypt's economic burden: economist
