Gas flow between Israel and Egypt resumes

The resumption of natural gas flows from Israel to Egypt marks a significant development in the Eastern Mediterranean energy landscape. After a temporary pause due to war-related disruptions, these gas deliveries have restarted, promising to stabilize energy supplies not only in the region but also beyond.

Disruption and its impact

The interruption of gas flows was a consequence of hostilities between Hamas and Israel, and the Israeli response led to the cessation of natural gas imports. Egypt, which used to import about 800 million cubic feet of natural gas from Israel, was hit hard. Israeli authorities have ordered Chevron to stop production at the Tamar field due to its proximity to the conflict zone. They ordered the big company to divert production from the Leviathan field to Jordan.

Chevron assumed control of the Tamar and Leviathan gas fields by acquiring the original operator, Noble Energy. The importance of these fields cannot be underestimated: Tamar has reserves estimated at around 11 trillion cubic feet of gas and Leviathan has twice that amount, according to estimates cited by Energy Intelligence.

Implications for Israel and Egypt

The resumption of natural gas flows from Israel to Egypt is not just about energy trade; has far-reaching consequences. These Israeli exports played a crucial role in securing Israel’s growing energy demand, with surplus gas reaching Europe, courtesy of Egypt’s LNG plant.

However, with the closure and diversion, Egypt faced a crisis that caused daily blackouts during a period of increased demand. Now that Israeli gas is flowing to Egypt again, the blackouts may stop. But it is important to note that exports to Europe may not immediately return to normal. Egypt’s main priority is to guarantee its domestic supply.

The European perspective

The resumption of natural gas flows from Israel to Egypt could raise questions about Europe’s energy supply, given its dependence on these imports. Europe, however, appears to be in a reasonably stable position. Recent reports from Reuters suggest that around 30 LNG tankers are currently in transit to Europe and the UK, and are expected to arrive by the end of the month. This influx of liquefied natural gas should help meet Europe’s energy needs.

Egypt, on the other hand, is prepared to resume its LNG exports. Still, the timing will depend on whether domestic demand declines.

Russia’s growing oil and gas revenues

In a separate energy picture, Russia’s oil and gas revenues rose in October, more than doubling to 1.635 trillion rubles ($17.63 billion) from 739.9 billion rubles in September. This increase is attributed to a cyclical increase in income tax.

Oil and gas sales have accounted for more than 28% of Russia’s total budget revenues this year. Revenue also marked a substantial increase of 27.5% compared to October 2022. The government’s decision not to pay the so-called “buffer payment” to oil refiners influenced this increase in revenue.

US sanctions on Russian LNG

Amid these revenue increases, the energy sector faces new challenges. The United States has applied sanctions to Novatek PJSC’s Arctic LNG 2 project. This move has raised concerns about Japan’s energy security, as the country is a major investor in this project, which will begin exporting LNG in the coming months.

This marks the first case in which the United States directly targets an LNG export plant in Russia. The companies involved are still examining the possible impacts of these sanctions.

Japan’s complex energy dilemma

Japan finds itself in a complex energy dilemma. While it imposed restrictions on Russia and banned the import of coal, it made exceptions for natural gas. This is because natural gas plays a critical role in generating about a third of Japan’s electricity and heating homes. With limited domestic energy resources, Japan has stepped up efforts to secure LNG after facing an energy crisis last year.

Japan is firm in its stance that Russian LNG is necessary to meet its energy needs. In fact, the Japanese government encouraged Mitsui & Co. and Mitsubishi Corp. to retain their investments in Russia’s Far East Sakhalin-2 LNG facility. This contrasts with Shell Plc, the largest foreign shareholder in a plant near Japan, which divested its stake following Moscow’s invasion of Ukraine.

Reenergizing energy: Israel, Russia and geopolitical challenges

The resumption of the flow of gas from Israel to Egypt comes as a relief to a region that depends on these vital energy supplies. It also highlights the complex dynamics of the global energy market, with Russia’s oil and gas revenues soaring as it faces challenges from international sanctions.

As we navigate the intricate world of energy trade and diplomacy, the resumption of natural gas flows from Israel to Egypt and sanctions on Russian LNG remind us of the intertwined nature of energy security and geopolitics. The search for stable and reliable energy sources continues to shape international relations, and these recent developments are just a snapshot of this ongoing saga.