East Med: Gaza crisis tightens regional gas balances

On 7 October 2023, Hamas attacked Israeli communities near the Gaza strip, sparking a huge Israeli military response.  This Comment considers potential direct and indirect impacts and wider implications of disruptions to Israeli gas production and export flows.

Over the last 3-4 years Israel has become a major regional gas player. Production expansion plans would take it to the next level, moving it from leading a regional value chain to something more integrated with the global gas market.  The current conflict will probably put a brake on most of these plans. The Tamar field was shut down almost immediately, and exports to Egypt have been cut.

The Tamar shut-in should not jeopardize supply into the domestic Israeli market, mainly because of the Karish field ramp-up, but export volumes will be affected. It is expected that supply to Jordan will not be threatened, but exports to Egypt have been reduced at a time when Egypt is already struggling to allocate gas to its LNG plants because of its own supply/demand problems. Further afield, the near-term and even medium-term prospects of more LNG volumes to an EU looking to replace Russian gas look remote. Apart from the Tamar and EMG pipeline shut-in, so far there have been no announcements of investment cancellations. But expansion plans will be re-examined, and delays look probable. Cyprus is not discussed here, and these events could work either way: if the Egyptian balance remains critically tight into 2024, then market conditions around Egypt could lead to acceleration of plans around Aphrodite and other fields being developed to supply into Egypt.  On the other hand, any Cyprus plans involving Israel could be parked for the moment.

By: Julian Bowden