Analysis
The Abraham Accords and the EastMed Natural Gas Market: Supporting the Region’s Ambitions to Become a Global Gas Player
August 01, 2023
The changes in the global energy market, which are causing nothing less than an economic and political upheaval that will lead to enduring global shifts, all culminate in the need for Europe especially, to re-appraise its security of energy policies. This, combined with Israel’s growth as a natural gas player, and the signing of the Abraham Accords, is an opportunity for Israel and its new partners in the Arab world, together with Egypt and Jordan, to play a significant role in helping further stabilize the region, while contributing positively to the global economic scene.
This paper examines the disconnect between global and European energy demand and long-term supply, and will provide an overview of the Israeli gas sector, as well as relevant aspects of the greater Eastern Mediterranean region, including Egypt, Jordan, Cyprus, Turkey and Lebanon.
The analysis will conclude with executable recommendations on how to help contribute to marrying the surplus gas available in Israel (and other regional markets) with global energy needs, via new developments and gas export projects.
Gas Reserves Sector Overview: Greater Eastern Mediterranean Region
Egypt
- Egypt has large reserves of gas, producing 67 bcm in 2022, but as a country with a population of 110 million, it consumed nearly all gas produced locally (61 bcm in 2022).
- Egypt imported 6.3 bcm from Israel. The delta between Egyptian gas production combined with imports from Israel, and local gas consumption, was exported as LNG as well as small pipeline volumes to Jordan, leading to total exports of around 10 bcm in 2022.
Jordan
- Jordan has no gas reserves to speak of and is a net importer from Israel and Egypt. The country’s annual gas consumption stands at around 3.5 bcm per year.
Cyprus
- Cyprus has proven recoverable gas reserves of about 400 bcm, which can be developed separately or combined with Israeli gas export quotas to be channeled to international markets.
- None of the fields have been developed and Cyprus to date consumes no gas.
Turkey
- In 2022, the country consumed 53.2 bcm. Its first significant gas discovery (Sakarya) came on-stream in 2023, but the country is still highly dependent on imports from Russian, Iran and Azerbaijan, as well as LNG.
Lebanon
- Lebanon has not made any gas discoveries and is not consuming any gas.
Israel (as of mid-2023)
- Total: Over 1,000 billion cubic meters (bcm)
- Including Tamar and Tamar South West (285 bcm)
- Leviathan (619 bcm)
- Karish and Tanin (99 bcm)
- Small fields including Katlan (~50 bcm).
- Israel Gas Market Fundamentals in 2022: Total Gas Production: Over 21.9 bcm
(12.7 bcm was consumed in Israel; 9.2 bcm exported (6.3 bcm to Egypt, 2.9 bcm to Jordan).
In the past 5 years, gas production in Israel doubled, which allowed satisfying growing domestic consumption while significantly increasing exports to Egypt and Jordan.
Executable Recommendations for Key Stakeholders
Current and potential new member-states of the Abraham Accords should consider further investments in the natural gas infrastructure in the EastMed region, including the upstream, expansion of the pipeline grid within the region (e.g., new routes of gas supply from Israel to neighboring countries), and export projects, including (F)LNG plants. The proximity of the EastMed gas sources to one of the world’s key gas importing markets – Europe – could support high returns and profitability for such investments.
The Government of Israel must reach a clear decision that Israel is becoming a gas exporter and accordingly adopt suitable policies, while refraining from regulatory decisions that contradict the accepted conditions in international gas contracts.
It must play an active role in removing barriers and must not leave the full burden and risks on the gas companies. It must also move ahead with providing the permitting needed, and the siting and regulatory frameworks for an FLNG facility.
Egypt should create a more transparent energy market environment (including on pricing) and clearly define the regulatory framework for LNG exports. One of the solutions might be to finally review the prices for electricity in compliance with the country’s program to gradually phase out electricity subsidies. This would increase the electricity usage efficiency and limit the spikes of demand for power in summer, easing the pressure on the natural gas market.
Secondly, the Egyptian government should consider providing long-term guarantees to new potential suppliers (including Israeli companies and Cyprus fields’ developers), committing to not diverting gas volumes earmarked for export to the domestic Egyptian market, and securing agreed volumes for the LNG exports. This would solve the problem of the ullage in the Egyptian LNG plants, provide the country with stable export revenue from LNG exports, and create a transparent market environment for new suppliers.
Insofar as the UAE is concerned, all countries in the region could benefit from its gas experience and from it being a rare country that both imports and exports LNG. Although the UAE has never been short of gas potential, yet it remains a substantial net importer.
As the UAE is looking to change its status by the second half of this decade with its intention of establishing a second LNG export facility (ADNOC’s project), Israel, Cyprus and Egypt, can all gain greater understanding on how such developments are accomplished. In addition, the UAE is connected to Qatar via a gas pipeline and imports 20 bcm of gas from Qatar, thus bringing in another potential player into the greater region.
It is vital that the USA and EU work with the countries of the Eastern Mediterranean and Abraham Accords to advance strategic solutions, such as those proposed here. Together, Europe and the countries of the region can advance energy independence from Russia, while building a more stable and sustainable future for the Eastern Mediterranean and the Middle East.
Despite Europe’s long-term plan to wean itself off fossil fuels, it still requires gas, creating a window of opportunity for Israeli (and Cypriot and Egyptian) gas supplies over the next 20-25 years. Rebuilding Europe’s gas supply mix is expected to take several years and will require large investments in new pipelines and LNG receiving terminals, and long-term contracts to enable the development of new export assets. Volumes from the key EastMed natural gas players, and potentially in the future, from additional regional players such as northern Iraq, Lebanon and Morocco, could play a substantial role in filling the gap left by Russian gas.
The Abraham Accords have provided a unique political stability framework for a number of success stories in terms of those conditions. Since the signing of the Accords in 2020, Israel and Egypt have significantly expanded natural gas trade volumes, UAE’s companies have greatly increased their presence in the Israeli gas sector, and even Jordan is currently receiving larger volumes of gas from Israel than anticipated. Leading Israeli oil and gas players have stepped into exploration activities offshore Morocco.
The future of EastMed natural gas exports, and the region’s contribution to the mitigation of the European and global natural gas crisis, will greatly depend on the possibility of further development of similar “success stories”.