Israel's $35 Billion Natural Gas Deal with Egypt: Implications and Concerns

In December 2023, Israeli Prime Minister Benjamin Netanyahu and Energy Minister Eli Cohen announced a $35 billion natural gas agreement with Egypt, described as a “historic moment.” The deal involves supplying 130 billion cubic meters (bcm) of natural gas from Israel's Leviathan field to Egypt through 2040, with Israel expected to receive NIS 112 billion ($35 billion) in return. This agreement is projected to significantly bolster Israel's state revenues, with promises that it will not lead to increased energy prices for Israeli consumers.

Times of IsraelGas deal with Israel to significantly reduce Egypt's economic burden: economist

Despite the optimistic outlook presented by Israeli officials, critics warn that the deal may jeopardize Israel's energy independence. Ariel Paz-Sawicki, head of research at Lobby 99, cautioned that the agreement could lead to a depletion of Israel's natural gas reserves, potentially resulting in a 25% increase in electricity prices within a decade. Gabriel Mitchell from the Mitvim Institute echoed these concerns, suggesting that Israel's peak gas consumption could occur as early as 2035, rather than the previously projected 2045.

Times of Israel

Mitchell emphasized the need for Israel to develop a long-term strategy to manage its energy resources effectively. He noted that the deal with Egypt could exacerbate domestic energy shortages, as local demand is expected to outstrip supply sooner than anticipated. The Finance Ministry had previously raised concerns that increased exports could undermine domestic energy security.

Times of Israel

The consortium behind the Leviathan reservoir, which includes NewMed Energy and Chevron, is primarily focused on maximizing profits from exports, often at the expense of domestic needs. Critics argue that the government has prioritized export agreements over securing local energy supplies. Veteran geologist Yossi Langotsky warned that the likelihood of discovering new significant gas fields off Israel's coast is low, suggesting that the country may soon find itself reliant on expensive imports to meet its energy demands.

Times of Israel

For Egypt, the gas deal is seen as a crucial step in alleviating its economic burdens amid rising energy shortages. Egyptian Prime Minister Mostafa Madbouly indicated that the agreement would help increase Egypt's natural gas production from 4.1 billion cubic feet per day to 6.6 billion cubic feet per day by 2027. The deal is expected to reduce Egypt's reliance on liquefied natural gas (LNG) imports, which are significantly more expensive.

Gas deal with Israel to significantly reduce Egypt's economic burden: economistTimes of Israel

Critics of the deal argue that it favors a small group of investors while compromising Israel's long-term energy security. Paz-Sawicki pointed out that the government’s promises of future tax revenues from gas sales should be viewed skeptically, citing past discrepancies between projected and actual revenues. The deal has raised concerns about the potential for increased costs of living for Israeli citizens, as the country may soon face a scenario where it must import gas at higher prices.

Times of Israel

While the short-term benefits of the gas deal with Egypt are evident, experts stress the importance of developing a comprehensive long-term energy strategy. Without such a plan, Israel risks facing significant challenges in meeting its energy demands and maintaining economic stability. As the country navigates this complex landscape, balancing domestic needs with export ambitions will be crucial for its energy future.

Times of Israel

• “Israel currently enjoys energy independence for its electricity market, meaning we are not dependent on any other country for our electricity consumption and supply,” — Ariel Paz-Sawicki, Head of Research, Lobby 99

Times of Israel

• “The trajectory and the projection of when ‘peak gas’ consumption will happen, will happen sooner than what was originally projected for around 2045… We are now looking at probably 2035,” — Gabriel Mitchell, Policy Fellow, Mitvim Institute

Times of Israel

• “The past decade has taught us that promises of future taxation from gas sales cannot be trusted,” — Ariel Paz-Sawicki, Head of Research, Lobby 99

Times of Israel

• “This is a deal with NewMed and Chevron who basically have the right to the concession of the Leviathan field.” — Mohamed Fouad, Egyptian Economist

Gas deal with Israel to significantly reduce Egypt's economic burden: economist