Egypt could help Israel get rid of its excess gas
LONG a resource-poor country, Israel now has more natural gas than it knows how to use. Even by conservative estimates, the fields discovered off its Mediterranean coast since 2009 hold enough energy to meet domestic needs for 40 years. The government hopes to earn a windfall by selling the excess abroad; the owners of Leviathan, the largest field, have earmarked 9bn cubic meters (bcm) for export each year. Jordan has already signed a deal to buy some. Israel wants to send the rest farther afield—offering it to Europe as an alternative to Russian supplies. But geography and politics make that difficult.
An overland pipeline would have to cross either Lebanon or war-torn Syria, neither of which recognises Israel. The shortest underwater path, to Turkey, is also problematic, because it would pass through Cypriot waters. Turkey [cleansed of its majority Christian population and] occupied the northern third [37.2%] of the island in 1974; the Republic of Cyprus [UN, EU member], which [has no control of its northern third but] has gas to sell, rejects the project.
So in April Yuval Steinitz, Israel’s energy minister, signed a preliminary agreement to build an undersea pipeline directly to Europe. It would be the world’s longest, following a 2,200km path to Cyprus and onwards to Greece and Italy, at a depth of up to 3km. Mr Steinitz says it would take eight years to finish and cost up to $7bn. Sceptical energy executives think both estimates are low.
There may be a better solution next door. On August 8th Abdel-Fattah al-Sisi, Egypt’s president, signed a law that allows private companies to import natural gas. It takes effect later this year. One firm, Dolphinus Holdings, is already in talks to buy up to 3bcm from Leviathan.
Egypt is itself poised to become a major gas producer: the Zohr field, discovered off its northern coast in 2015, holds the largest reserves in the Mediterranean and is almost twice the size of Leviathan. But even that gigantic find may not be enough to meet booming demand in a country of around 95m people. Imports from Israel could help fill any gaps—and turn Egypt into a regional energy hub. Unlike Israel, it has two liquefaction terminals, which allow natural gas to be loaded onto tankers and shipped round the world. Both have sat idle for the past five years, since Egypt diverted its exports to the local market. They could soon ramp up again, giving Israel access to European ports.
All this would be a reversal of recent history. Egypt used to supply Israel with 40% of its natural gas, under a 20-year deal signed in 2005. It quickly became a source of public anger, because the gas was sold at below-market rates. After the revolution in 2011 a Cairo court convicted the architects of the deal, including Hussein Salem, a business tycoon who fled to Marbella, in Spain, to avoid trial. Prosecutors said the state lost more than $700m in revenues. Independent experts put the figure much higher. Egypt pulled out of the contract in 2012, and a Swiss court eventually ordered Egas, the state-owned monopoly, to pay $1.7bn to compensate its Israeli partners.
A new deal could be politically fraught, but it would come at an opportune time. Egyptians are worried chiefly about their struggling economy. By working through private companies, instead of Egas, Egypt could also sidestep any complications from the judgment, which is still unpaid. It would probably import the gas via Jordan, to avoid using a pipeline from Israel that is owned by a plaintiff in the case. Though the Israeli embassy in Cairo is empty, security ties between the two countries are better than ever. Their economic relationship may be in for a big boost, too.
This article appeared in the Middle East and Africa section of the print edition under the headline "Too much of a good thing"
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