A decision on Israel's natural gas export permits from Israel is set to be taken, and "Globes" has learned that last Sunday the recommendation by Minister of Energy and Infrastructure Israel Katz was discussed by his top officials. This discussion preceded Minister of Finance Bezalel Smotrich's response to Moody's warning on political developments in Israel in which he said, "The gas industry is increasing exports to Europe."
Israel's must balance between energy security and strengthening Israel's regional status through gas exports, in particular vis-a-vis Egypt. "Globes" has learned that in a recent meeting between the head of Egyptian intelligence, Abbas Kamal, who is considered the second most powerful person in Cairo after President Abdel Fattah al-Sisi, and Israel's National Security Council head, Tzachi Hanegbi, the Egyptian official pressed Israel to approve an increase in exports. The Egyptians, who are in an economically problematic situation, are interested in Israeli gas both for conveyance through Egyptian liquefaction facilities to Europe (Cairo buys natural gas from Israel for $7.5 per thermal unit, and makes profits in the LNG market) and for its domestic economy.
Egypt's annual gas consumption totals 70-75 BCM (billion cubic meters), with Egypt itself producing about 60-63 BCM. In Israel gas consumption in 2022 was 12.7 BCM, and export volume was 9.2 BCM, including 4.62 BCM to Egypt through the EMG pipeline. These exports are from the Leviathan field, which has maximum annual export production capacity of 12 BCM per year, 11 BCM per year from Tamar and 7 BCM per year from Karish. For the reservoir partners to expand production capabilities, an estimated investment of $3 billion is required for Leviathan and $1 billion for Tamar, and they need to know that they will be able to export more.
The big numbers come from Leviathan
In 2022, Tamar accounted for only 17% of Israeli gas exports, and it would like to see Israel's overall exports increased to 16 BCM annually. Such an increase would be based on at least 4 BCM, subject to the approval of the Ministry of Energy and Infrastructure, being procured by Egypt in a deal for 12 years. The goal in such a deal would be not only to supply gas to Egypt for its domestic market, which is important to Cairo, but also to Egypt's liquefaction facilities, which would allow gas to be shipped in liquid form to Europe.
Egypt receives gas from Israel through various pipelines: about 5 BCM is transported annually on the EMG pipeline and this could grow to 8 BCM by the end of 2023; there is also a connection via Jordan to the Arab pipeline that also reaches Egypt; and in 2027 it is planned to build the Nitsana pipeline with 6 BCM annual capacity. The increase in exports will include Tamar and Leviathan investing as partners in the development of the Nitsana pipeline, but only if gas exports to Egypt are increased.
In Israel's gas exports the big numbers come from Leviathan. 66% of its gas production is exported, accounting for 83% of all Israeli gas exports. Leviathan currently has an export capacity of 12 BCM annually, and this is expected to increase to 14 BCM and in the long term potentially 21 BCM per year based on FLNG (floating facility for liquefaction of natural gas). In the plan submitted to the Ministry of Energy and Infrastructure in 2016, and approved, there were two phases: initially, 12 BCM, and in the second phase 21 BCM annually.
About 3.5 years after the start of production from Leviathan, the partners started exploring FLNG facility options, because the liquefaction process, makes it possible to transport gas by ship to Europe and Asia and thus increase revenue, in contrast to the current situation where Israel only transports gas to Jordan and Egypt through pipelines or bases itself on Egyptian liquefaction facilities. The FLNG facility would allow Leviathan to produce 7 BCM per year for 20 years - equivalent, for example, to the volume of gas supplied to Egypt today.
The likelihood of discovering more gas in Israel is high
Natural gas enhances Israel's regional status, but not only. The increase in exports could also directly enhance the status of Prime Minister Benjamin Netanyahu and Minister of Energy and Infrastructure Israel Katz in particular. With the problematic relationship between Netanyahu and US President Joe Biden, Netanyahu is looking for creative ways to get closer to Saudi Arabia that would expand the Abraham Accords. One of the people closest to Egypt's President al-Sisi is UAE leader Mohamed bin Zayed, who until recently was a close friend of Saudi Crown Prince Mohammed bin Salman. Netanyahu would have been happy for Emirati assistance in moving closer to Riyadh, but recently there has been tension between bin Zayed and bin Salman on issues, including OPEC oil production policy and the civil war in Yemen.
At the same time, Israel Katz and Minister of Foreign Affairs will swap jobs in December for two years, and it is likely that in the run-up to this change, Katz will want to build trust with Abbas Kamal, who is interested in increasing exports Therefore Katz is expected to change Israel's gas export policy which has been in place since 2018 by increasing exports.
This decision is not only of great importance to the Leviathan and Tamar partners, but also other companies. Last week, the submission phase of the fourth competitive procedure for natural gas exploration in Israel's economic waters ended. Of the nine companies that approached, five were new, among them BP and the Azerbaijani SOCAR. Without certain knowledge that finding gas would allow exports, companies will not want to search for gas in Israel - even though the probability of finding it is relatively high compared with other places.
The Ministry of Energy and Infrastructure said, "The Ministry of Energy and Infrastructure is in the process of examining requests for additional exports of natural gas, as stated in the government's decisions and the minister's policy. These decisions will take into account first and foremost the needs of the local economy, alongside economic and geopolitical considerations."
Published by Globes, Israel business news - en.globes.co.il - on July 27, 2023.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.