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Israel and Egypt sign gas export deal as Europe seeks Russia alternative

European Commission President Ursula von der Leyen, Egyptian Petroleum Minister Tarek El-Molla and Israeli Energy Minister Karine Elharrar at the accord signing in Cairo on June 15. (Khaled Elfiqi/EPA-EFE/Shutterstock)
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TEL AVIV — Israel, Egypt and the European Union on Wednesday signed a trilateral natural gas agreement in Cairo, as Europe scrambles to cobble together an energy strategy to replace the Russian supplies it has relied on for decades.

The deal, which has been in the works since March, will enable Israel to streamline and increase the export of its natural gas through already existing pipelines to Egyptian ports, where it can be pressurized and liquefied, then transported to Europe.

“This will contribute to our energy security. And we are building infrastructure fit for renewables — the energy of the future,” Ursula von der Leyen, president of the European Commission, tweeted Wednesday from Cairo with a photo of the signing.

Israel in recent weeks had promised to accelerate its gas output as demand grew and prices soared. It is looking, in collaboration with other Middle Eastern countries, to sell to Europe, previously the largest client of Russian energy.

Israel, once energy-dependent, is new big gas producer

“With the beginning of this war and the attempt of Russia to blackmail us through energy, by deliberately cutting off the energy supplies, we decided to cut off and to get rid of the dependency on Russian fossil fuels, and to move away from Russia and diversify to trustworthy suppliers,” von der Leyen said at a joint news conference with Israeli Prime Minister Naftali Bennett in Jerusalem on Tuesday night, at the end of a two-day visit to Israel and the West Bank. “It is an outstanding step bringing our energy cooperation to the next level.”

Italian Prime Minister Mario Draghi also met with Bennett on Tuesday to discuss energy cooperation. Claudio Descalzi, the head of the Italian oil giant Eni, said last month that Italy aims to be fully independent from Russian gas by the winter of 2024-2025. On Wednesday, Eni said the state-owned Russian company Gazprom had cut its gas supply to Italy by 15 percent. Since Russia invaded Ukraine in February, Italy has signed deals with several energy-exporting African countries, including Egypt.

For Israel, the sudden energy shortfall in Europe is an opportunity to get involved in a global market that has become exponentially lucrative in recent months.

“This is a tremendous moment in which little Israel becomes a significant player,” Israeli Energy Minister Karin Elharrar said Wednesday in a statement.

Experts say Israel’s supply, extracted from three offshore Mediterranean gas fields, will be nowhere near Russian capacity. Israel produces roughly 12 billion cubic meters of natural gas a year, though industry analysts say at least double that amount exists in unexploited reserves. In 2021, the European Union imported 155 billion cubic meters of natural gas from Russia, accounting for about 45 percent of E.U. gas imports.

But Alex Coman, an energy expert at Tel Aviv University, said Israel’s contribution is becoming increasingly important as the Ukraine war thrusts Europe toward a more “fragmented strategy,” in which it will buy smaller amounts of energy from a number of different countries.

“Beyond just the war in Ukraine, Europe is so traumatized from Russian brutality” that it has moved toward a general restructuring of its energy system, “to avoid having dependence on one energy source,” he said.

In May, the London-based Energean exploration and production company announced that it had made a new commercial gas discovery of about 8 billion cubic meters off the coast of Israel. The company’s current project involves some 100 billion cubic meters in reserves and is slated to come online in September.

Energean’s CEO, Mathios Rigas, said that more pipelines were still needed to fully exploit the Eastern Mediterranean’s offshore supplies and that although “Europe needs gas today, there are no magic solutions.”

Beyond infrastructure, he said, the industry is challenged by both “below-surface — the rocks, the geology — and above-surface issues, disputes,” in a region that has for decades been marred by conflict.

Those issues surfaced this month when Lebanon protested the arrival of one of Energean’s floating rigs and claimed that the gas fields in question lie within its territorial waters. Israel has said the area is well within its exclusive economic zone. Lebanon is expected to drop the claim after a meeting in Beirut held this week with the U.S. senior adviser for energy security, Amos Hochstein, according to officials who spoke with the Reuters news agency.

Wednesday’s export deal comes a day after the Russian state-owned company Gazprom said it would cut capacity on the Nord Stream pipeline — the largest gas supply link to the E.U. — by 40 percent following repair delays, boosting already elevated natural gas prices by 15 percent.

The E.U. has worked with the United States and other allies to impose sanctions on Moscow, but several member countries remain heavily reliant on Russian oil and gas.

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