The political turmoil in Egypt is posing a potential threat to a major energy source for Israel. An explosion in the gas pipeline that exports gas from Egypt to Israel last Friday sparked fears that the political unrest could turn into an economic one for Israel.
Even though the explosion was not connected to the riots in the capital and other parts of Egypt, and was most likely an accident, Israeli officials have been careful to reassure the public that Israel’s energy market is secure. At the same time, they are calling for Israel to diversify energy sources.
According to an agreement between the two countries from 2005, Egypt agreed to supply Israel with 25 billion cubic millimeters of gas a year, for 15 years. The estimated value the entire deal is $2.5 billion.
In reaction to the explosion, Israel’s minister of infrastructure, Uzi Landau, said that Israel is prepared to deal with such events and that no disruption to Israel’s energy market is expected.
In spite of reassurances, Israeli Prime Minister Benjamin Netanyahu also publicly addressed the need for Israel to develop other sources for gas. “Most of our supply today is coming from Egypt. It’s important for us to develop additional resources,” said Netanyahu during his meeting with Quartet and Middle East Special Envoy Tony Blair, on Friday.
“There’s a Palestinian Authority gas field adjacent to an Israeli gas field,” added Netanyahu. “We need to develop both simultaneously. This is something that the Palestinian Authority expressed interest in. I think we’re going to begin discussions and negotiations to facilitate both, where the revenues from the Palestinian field go to the Palestinian Authority, and the revenues from the Israeli field go to the Israeli government, and I think this is good for stability, good for prosperity, and good for peace.”
Besides exporting natural gas to Israel, there is not much economic activity between the two neighbors, and the peace agreement between the two is often referred to as “cold peace.”
According to the Israeli Central Bureau of Statistics, Israel’s exports to Egypt in 2010 were $11 million and imports from Egypt were $38.9 million. By way of comparison, Israel’s exports and imports with the United States are almost $180 billion and $70 billion respectively.
The gas supply agreement between the two countries has endured regional political crises, according to an S&P market analysis report on Israel’s gas market a few years ago. None-the-less, the company assessed that political changes in Egypt will have a negative effect on gas supplies to Israel, and might also affect U.S. interest in Egypt.
Some recent developments in the Israeli gas industry might help secure the country’s energy supplies. During 2009, a big deposit of natural gas was discovered off the northern shores of Israel and is expected to be in production by 2013. Last August, the United States Geological Survey (USGS) estimated that there are 122 trillion cubic feet of undiscovered, technically recoverable, natural gas off the eastern shores of the Mediterranean. This potential has an estimated worth of $450 billion, according to the USGS. Shifting energy use in Israel to domestic gas has already saved the state $5 billion, according to research by the Knesset Research Center.
