New conditions and needs, as well as geopolitical revisions, push the eastern Mediterranean energy producers to change plans, making Israel the main natural gas producer in the region, through its energy strategical cooperation with Egypt and Cyprus…

Once upon a time, Israel devised the energy plan of the construction of the EastMed pipeline, for the transfer of eastern Mediterranean’s gas to Europe, as well as to be a geopolitical tool for regional security and stability through the 3+1 trilateral scheme.
Greece, Cyprus and Israel signed in January 2020 an agreement for the construction of the Eastern Mediterranean (EastMed) natural gas pipeline. It was planned that through this natural gas pipeline Europe would be supplied from Israel’s Leviathan field and the Cypriot Aphrodite field through the islands of Cyprus and Crete to mainland Greece and in the future to bring gas to Italy (see: REPORT #6 EASTMED: A pipeline of Peace or War?)

The United States initially actively supported the project participating to the trilateral scheme of Israel-Greece-Cyprus through the EastMed Act of 2019, evolving it to 3+1, aiming to reduce the EU’s dependence from Russian gas, as well as the weakening of Russian influence in the region.

Shortly before the start of Russia’s invasion of Ukraine, however, the US withdrew its support, “viewing” the project from an environmental point of view. It also pointed out the uncertain financial future of the project and the fact that the pipeline would create tension in the region, since Turkey was opposing to its construction.

A Europe “thirsty” for natural gas…

In light of Russia’s invasion of Ukraine, Brussels made plans for its full and swift disengagement from Russian natural gas. Green growth remains the strategic long-term goal the war, however, and its devastating effects cannot help but affect planning, at least for the next few years delaying the transition to clean energy.
In this new environment, the need to exploit the large gas reserves in the eastern Mediterranean is increasing. Europe needs them more than ever. The region could play an increased role in Europe’s energy security as several resources in the region could be unlocked, including fields in Israel, Egypt and Cyprus.

In June 2022, Egypt and Israel signed a Memorandum of Understanding in Cairo along with the European Union that calls on the sides to explore the possibility of working together to send more Israeli gas to the EU through Egyptian liquefaction plants. But the agreement is not binding and does not set volumes.

Nevertheless, in February 2023, Egypt’s gas output fell to its lowest level in nearly three years, the latest data from the Joint Organizations Data Initiative (JODI) show. The decline was an indication of the country’s struggle to sustain high production levels at a time when it is trying to position itself as a regional hub for natural gas trade. The downward trajectory, coupled with high domestic consumption, is making Egypt’s gas dreams increasingly dependent on imported Israeli gas used for re-export.

Egypt began importing gas from Israel in 2020, initially through the East Mediterranean Gas pipeline connecting El-Arish and Ashkelon, and since last year also through the Arab Gas Pipeline, connecting the two countries via Jordan.
In 2022, Egypt’s imports of Israeli gas rose 48.5% year-on-year to a record 6.27 bcm, JODI data shows. January started the year with a new all-time monthly record supply of 843 million cubic feet per day (cfd).

In the short term, Egypt’s LNG exports will continue to increase thanks to high demand from Europe and rising Israeli gas flows. But the peak could be reached as early as this year. In the mid to long term the outlook is much bleaker, as its sustained fall in production and high domestic consumption will increasingly limit the volumes of gas available for export.
Without a Zohr-sized field discovery, or a new agreement to import gas for later export with another country in the region with vast fields such as Cyprus, Egypt will not be able to maintain production, let alone become a regional hub for gas.

Israel’s dual strategy: a new energy power is rising…

On the other hand, the medium and long-term outlook for Israel’s gas sector is promising. Its production capacity is set to increase in two years by around 65% from end-2022 levels thanks to expansion plans for the Tamar and Leviathan fields and the ramp-up at its third field, Karish, which came on stream last October, according to MEES. Israel also has plans to further expand Leviathan later this decade, and announced a new bid round for exploration in late 2022.

Israel will continue to supply gas to Egypt as part of its gas diplomacy, In this respect, in order to meet the urgent need of EU for new natural gas inflows, Israel’s cabinet has approved the plan to expand the scope of the natural gas supply infrastructure to Egypt. The approved plan includes an integrated infrastructure corridor including infrastructure facilities between Ashalim and Nitsana, which will increase the potential volume of natural gas exports to Egypt and a new pipeline between Ramat Hovav and Nitsana. The project and the program are being promoted by the Israel Natural Gas Lines Co. with the support of the Ministry of National Infrastructures, Energy and Water Resources.

The new land pipeline section on the route between Ramat Hovav and the border with Egypt in the Nitsana area, will serve as an infrastructure for exporting natural gas from Israel to Egypt, thus increasing options for exporting gas from Egypt to European countries seeking alternative natural gas sources in the wake of Russia’s invasion of Ukraine.
The new pipeline between Ramat Hovav-Ashalim-Nitsana will be 65 kilometers long and allow an extra 6 billion cubic meters of natural gas to be exported to Egypt annually. The extra gas will bring NIS 200 million revenue to Israel Natural Gas Lines annually and hundreds of millions of shekels annually in revenues from royalties and taxes to the Israeli government.

Minister of National Infrastructures, Energy and Water Resources Israel Katz said, “The current decision increases the potential for cooperation between Israel and Egypt in the field of natural gas in preparation for decisions on exports that will have to be made soon. Cooperation between the countries will strengthen the economy, strengthen the well-being of the citizens of the State of Israel and strengthen regional stability”.

In parallel, Israel’s Prime Minister Benjamin Netanhahu in an effort to increase Israel’s standing as a major regional energy power, agreed with the President of Cyprus Christodoulides to continue building the 3+1 alliance of democracies in the Eastern Mediterranean: Israel-Cyprus-Greece + U.S.A. During the latter’s visit to Israel, they focused on the supply of Israeli gas to Europe via a pipeline from Israeli gas field to a huge liquefaction facility that will be built in Cyprus, exporting the liquefied natural gas to Europe either by LNG ships or via a pipeline to Egypt and then possibly to Greece or straight to Italy.

This link will jump the Israeli economy forward to new heights and will strengthen Israel’s standing as an important international energy supplier.

Shift of energy strategy…

In accordance to the above plans, only recently, Cyprus’ Minister of Energy George Papanastasiou had announced that the country’s energy strategy now favors the exploitation of Cypriot natural gas and other natural gas fields in the region for power generation in Cyprus and the possibility of exporting liquefied natural gas to Europe.
The minister stressed the importance of having storage space in the electricity supply network so that the energy produced by renewable energy sources is not wasted.

Mr. Papanastasiou, commenting on the above plans, appeared to play down prospects for the actual EastMed pipeline taking eastern Mediterranean gas to continental Europe, saying a shipping corridor could be set up instead from a hub in Cyprus to transport liquefied gas.
“It could be a virtual pipeline which would link though Cyprus to the rest of Europe in liquefied form,” he added, saying liquefied gas could be dispatched from Cyprus to any markets, including Asia.
He said a liquefaction plant could take about 2.5 years to build, and a pipeline with Israel about 18 months, adding that Cyprus would host a workshop with industry stakeholders on May 29, before final decisions.

Papanastasiou had emphasized the need to take advantage of the European Union’s stance on natural gas as a “transition” fuel toward achieving the goals of the Green Agreement, with a substantial reduction in the cost of energy in Cyprus. The government aims to secure quantities of natural gas, mainly from the Eastern Mediterranean region, with its first natural gas discovery in December 2011 and quantities ranging from 12 to 15 trillion cubic feet discovered in the Cypriot EEZ since then.

Meanwhile, the partners in the Aphrodite natural gas field, which include Israel’s NewMed Energy, announced that they have started drilling an appraisal well at the field offshore Cyprus.
Israel’s NewMed Energy, formerly Delek Drilling (part of Yitzhak Tshuva’s Delek Group), which owns a 30% stake in the Aphrodite field announced that drilling the appraisal well is expected to take about three months. Other partners in the Aphrodite gas field, which holds an estimated 124 billion cubic meters of gas, are US energy giant Chevron and Shell, who each own a 35% share.

Discovered in 2011, the Aphrodite natural gas field is located about 170 kilometers (some 105 miles) south of Limassol in Cyprus and 30 kilometers (some 18 miles) northwest of Israel’s Leviathan gas reservoir, one of the world’s largest deep-water gas discoveries.
Earlier this year, partners in the Leviathan field -NewMed Energy, Chevron and Ratio Oil Corp- announced plans to to boost annual gas production and exports in 2025 to meet growing demand. Currently, a maximum capacity of up to 1.2 billion cubic feet of natural gas per day, or 12 billion cubic meters per year, is piped up from the Leviathan reservoir for the supply and sale of gas to Israel, Egypt, and Jordan.

EurAsia Interconnector
At the same time, the realization of the EuroAsia Interconnector (EAI) has now entered the home-straight. The project is close to achieving several important milestones.
The EAI constitutes a critical infrastructure for the European Commission, Cyprus Greece and Israel. As such, it was included in all five European Project of Common Interest (PCI) lists since 2013.
The project has already secured all the relevant permits and licensing. EAI is partnered by Greek power grid operator IPTO (ADMIE), who are taking a stake in the project.
When completed by 2027, the EAI will be the world’s longest, over 1200km, and deepest, up to 3000m, subsea electricity interconnector, linking the national electricity grids of Israel, Cyprus and Greece with the European electricity grid, creating a reliable green interconnector for Europe. The first phase consists of a 1000MW HVDC subsea cable between Cyprus and Crete, with total estimated construction costs of €1,57billion. The Israel-Cyprus connection and a second 1000MW cable will be installed at a later stage.
A companion project to EAI is the EuroAfrica Interconnector, a project that would connect Egypt to Cyprus, Greece and Europe. It has the full support of the Cypriot and Egyptian governments and has also been approved by EU regulatory authorities. In October 2021, the Cypriot, Greek and Egyptian energy ministers agreed on a declaration of intent to progress this project.

What about Greece?

Although Athens participated from the start in the formation of the Tripartite alliance and signed for the construction of the EastMed pipeline, after years of ambivalent energy strategy, resulting in its indecision on the exploration and exploitation of its potential energy reserves of natural gas, it decided rather late to start the research with the ExxonMobil – Hellenic Energy (former HELPE) consortium, expecting the first results around the end of 2023.
In any case, the long-term electoral processes and government schemes that will emerge in conjunction with the results of the Turkish elections, with the almost certain re-election of the current Turkish President Tayyip Erdogan together with broader geopolitical and energy developments and realignments in the wider eastern Mediterranean region, are very likely to create further delays to Greece’s energy program.

For in-depth analysis on the EastMed pipeline project you may read the following:

  1. REPORT #6 EASTMED: A pipeline of Peace or War
  2. The Day After EastMed Agreement…


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