EU inks energy deal with Egypt, Israel to give up Russian gas

20 June, 2022 | Vaishali Sharma

As Europe tries to wean itself off Russian oil and gas and confront Russia for using energy to blackmail European countries, the EU signed a Memorandum of Understanding (MoU) with Egypt and Israel ...

As Europe tries to wean itself off Russian oil and gas and confront Russia for using energy to blackmail European countries, the EU signed a Memorandum of Understanding (MoU) with Egypt and Israel last Wednesday in Cairo, aimed at using the energy potential of the Eastern Mediterranean to cover the shortfall in energy supplies to Europe.

It should be emphasised that, as a result of the Ukrainian conflict, Gazprom, the Russian energy behemoth, has suspended gas deliveries to Poland and Bulgaria and substantially cut supply to Germany, Italy, and France. The preliminary agreement negotiated in Cairo was signed by Egypt’s Minister of Petroleum, Tarek El Molla, Israel’s Energy Minister, Karine Elharrar, and the EU’s Energy Commissioner, Kadri Simson.

Ursula von der Leyen, the President of the EU Commission, who was present at the signing ceremony, said the MoU was “a big step forward in the energy supply to Europe that would put an end to EU’s dependence on Russian fossil fuel”, while Elharrar pointed out that Egypt and Israel make a commitment to share their natural gas with Europe to help with the energy crisis.

For his part, Egypt’s Petroleum Minister Tarek el-Molla described the deal as “an important milestone for cooperation between Egypt, Israel, and the EU. “The move is a benchmark that opens the road for concluding more deals in the future,” El-Molla said.

The European Union noted in a statement that the deal calls for natural gas from Israel, Egypt, and other Eastern Mediterranean sources to be supplied to Europe via Egypt’s liquefied natural gas export infrastructure. This would be done in accordance with “long-term decarbonization targets” and at market-related pricing.

The EU also stated that it will assist Egypt and Israel in increasing gas production and exploration in their own territorial seas. It also promised USD 104 million in aid to Egypt, which is suffering from severe grain shortages as a result of the Ukraine conflict.

The inked Memorandum of Understanding envisions gas from Israel being transferred by pipeline to two LNG terminals on Egypt’s Mediterranean coast, where considerable volumes would be liquefied and carried on tankers to Europe, expanding Egyptian LNG exports.

Because Eni, the Italian Energy Company, has discovered a massive gas find off the coast of Egypt, the volume of natural gas shipped to Europe is projected to grow dramatically.

Israeli gas will be transported to Egypt’s two liquefaction facilities, which are now underutilised, increasing the gas quantities to be exported or freeing up for export gas that is currently used in Egypt for domestic consumption. More importantly, it might be a crucial step toward fulfilling the Eastern Mediterranean’s long-discussed potential as an essential energy provider for European businesses.

However, a considerable rise in gas exports from Israel to Egypt would necessitate significant long-term infrastructure expenditures, especially if additional nations with commercial quantities of natural gas, such as Cyprus or Lebanon, may join the initiative.

In recent years, Israel has produced two big offshore finds totaling over 700 billion cubic metres of gas, and it is currently conducting fresh exploratory drillings. As a result, Israel has established itself as a major natural gas exporter. The fact that the US oil corporation Chevron purchased Noble Energy, the company that found the majority of Israel’s gas resources, for almost USD 4 billion two years ago demonstrates its significance.

Apart from shipping LNG to Europe, another means of delivering gas from the Eastern Mediterranean under consideration by the European Union is the use of underwater pipes.

Pipelines to Europe have long been considered, but possibly exorbitant costs and geopolitical difficulties have conspired against their construction.

Two years ago, Israel, Cyprus and Greece signed a deal to build the so-called EastMed a 1,900 km pipeline to carry natural gas from offshore fields in the Eastern Mediterranean to Europe. According to estimates, this pipeline could cover up to 10 per cent of Europe’s gas needs, but it should be noted that it is a very complex project that is expected to cost more than USD 6 billion and will take ten years to build. For the European Union, the key element is whether a pipeline will be commercially feasible or whether other options are on the table.

Last April, US Under Secretary of State Victoria Nuland stated unequivocally that the US has abandoned its earlier support for the project, citing a lack of time and funds to develop the EastMed.

In an interview with the Kathimerini newspaper, Nuland pointed out that Europe needs gas now, not after a number of years, and added: “We don’t need to wait for 10 years and spend billions of dollars on this stuff. We need to move the gas now. And we need to use gas today as a transition to a greener future. Ten years from now, we don’t want a pipeline. Ten years from now, we want to be green.”

Despite the fact that the United States has said that it would no longer fund the building of the EastMed pipeline, the tripartite agreement signed in Cairo states that the viability of the project should be investigated. According to Ursula von der Leyen, the pipeline will “hopefully one day become a hydrogen-ready pipeline.”

But not everybody is enthusiastic about the Memorandum signed. Frida Kieninger, director of EU affairs at Food & Water Action Europe, was quoted by Al Jazeera as saying: “The agreement will not deliver from the start and will not do anything or very little to reduce dependency on Russian gas, while at the same time it will stop the development of actual solutions.”