East Mediterranean Gas: a triangle of interdependencies

How the geopolitics of the East Med will appear once current hostilities have ended, whenever and however that might be, is impossible to judge.  But outside the geopolitics there is a substantial functioning gas industry and important flows of gas within this region.  Israel and Egypt are both substantial gas producers and consumers, Cyprus is trying to plot a gas development path, which at present almost certainly means exports to Egypt.  So far gas production and gas flows in the region have not been greatly affected by the hostilities: it has been largely business as usual, with Israel’s production and exports reaching new highs and field expansion plans announced.

The purpose of this paper is to lay out the gas supply /demand fundamentals of the East Med, to establish a gas baseline and identify where the main flows, supply/demand bottlenecks and issues lie.

In the last 4 years, Israel has emerged as a regional gas player.  On the back of its own gas resources, it has become a gas economy to the extent that gas now provides almost 50 per cent of its domestic energy and an export revenue stream.

During 2023 Egypt’s gas balance became tight as its production dropped suddenly and significantly, and it achieved balance only though importing more gas from Israel and cutting back on its LNG production.  In 2024 it will once again import LNG to meet its summer demand.  Meanwhile, Cyprus is considering its gas development options, both for monetizing Aphrodite and Block 6 resources (Cronos et al), and also as a small LNG importer to bring gas to its oil-fired power plants.  2025 looks like being a key year for Cyprus to put its gas markers down.

A triangle of gas interdependencies has emerged.  Israel needs markets for its gas surplus and, apart from filling Jordan’s small 3 Bcm/a market, Egypt is its only option currently.  Equally, Egypt needs the Israeli gas to meet its own demand.  Cyprus development will, at least initially, be drawn to the Egyptian short and potentially the two Egyptian LNG plant, as it will take several years for its own LNG or FLNG or pipeline options to materialise.  For Europe looking to replace Russian gas, the prospect of supply from the East Med has receded in the short-term due to Egypt flipping from being an LNG supply side contributor to an LNG demand side consumer.  However, with more imports from Israel and potentially Cyprus, its LNG exports could resume in 2-3 years’ time.

By: Julian Bowden , Elad Golan