Knock-on effects for Egypt as Israel halts production of natural gas at Tamar field, deliveries via EMG pipeline

Deliveries of Israeli gas to Egypt via a subsea pipeline were halted on Tuesday, leaving natural gas volumes to be piped instead via an alternative route that passes through Jordan.

The day prior, Israel’s Energy Ministry temporarily suspended production from the Tamar field, an important source of gas exported to Egypt, resulting in an almost 20 percent drop in the country’s daily gas imports.

This comes as Israel wages one of its most aggressive wars on Gaza in years, following a surprise attack by Hamas last week. 

The energy supply decision delivers a major blow to the natural gas resources at Egypt’s disposal. According to former Petroleum Minister Osama Kamal, Israel is leveraging its weight as a gas exporter to apply pressure on Egypt in order to bring about political conditions related to dealing with the Gaza Strip crisis.

Egypt itself produces around six billion cubic meters of natural gas per day and imported around the same amount from Israel last year alone. The government uses the natural gas volumes at its disposal to generate electricity for the national grid, and liquefies and exports the surplus volumes to generate foreign currency revenue. 

But energy demand at home is increasingly rising. This past summer, the government found itself in an energy deficit as the load on the national grid increased beyond the capacity of existing fuel reserves. As a result, it rolled out a load reduction plan in July, still in action three months later, with daily power cuts lasting an hour or more affecting homes nationwide.

When Israel’s government decided to temporarily suspend production from the Tamar field on Monday, volumes of Israeli gas entering Egypt dropped by about 19 percent from 800 million cubic feet per day to 650 million, according to anonymous sources cited in Bloomberg.

According to Kamal and the head of the Gas Investors Association Mohamed Saad, the temporary halt on production at Tamar will mainly affect the revenues Egypt collects on gas passing through its national grid, as well as from fees for liquefaction taking place at the Damietta and Idku stations.

After Chevron, which operates Israel’s largest gas field, Leviathan, decided on Wednesday to stop delivering volumes via the East Mediterranean Gas Pipeline to Egypt and to reroute the deliveries via the Arab Gas Pipeline instead, Kamal added that the decisions have political implications and represent leverage on Egypt. 

Israel is also attempting to raise concerns on the European side, Kamal added, given Europe’s sensitivity to any shortage of gas resources liquefied in Egypt before being exported to the continent. 

Egypt, Israel and the EU signed an agreement in 2022 to boost natural gas exports to Europe via the East Mediterranean Gas Forum, as the bloc looked to break its dependency on natural gas deliveries from Russia.