NewMed Energy's announcement that the Leviathan partners are selling 130 billion cubic meters of natural gas to Egypt for $35 billion is a tumultuous regional development. Not so much because of the size of the deal but rather the timing. At a time when we see how Israel's political status in the world has been badly shaken, the largest Arab country in the region, the one that until recently suggested that it could again become an enemy, is closing a deal that drastically increases its dependence on Israeli gas.
Already today, the Egyptian gas economy is almost entirely dependent on gas from Israel. This was seen several months ago when production disruptions at the Leviathan and Karish fields forced the diversion of more gas from the Tamar field to the domestic Israeli economy, and many parts of Egypt went into darkness. The typical weather of Egypt in general and the effects of global warming in particular, have created a situation for President Abdel Fattah al-Sisi's country, in which electricity consumption in the summer is about 30% higher than average, and in the winter about 30% lower than average. Therefore, when such a gas shortfall occurs in June, problems abound.
Entering the perfect storm
In 2024, Israel exported a record 10 BCM to Egypt, despite the war, up 16% from 2023. Exports to Egypt are via two pipelines: the EMG underwater pipeline, which runs from the Ashkelon coast to El-Arish, and the Jordan-North line, which connects to the Jordanian pipeline system, and from there transports some of the natural gas to Egypt. Jordan imported 3.1 BCM of Israeli gas last year, up 6% from 2023. However, the potential for export growth to Jordan is immeasurably lower than that of Egypt, which has a much larger population.
The Leviathan partners deal will ease a dire situation in Egypt in which the local energy economy is entering a "perfect storm". Population growth (from about 44 million people in 1981 to about 100 million people in 2020), global warming, and above all a fundamental failure in the management of local energy resources have brought Egypt to a situation where, despite the many sensitivities in the Arab world, it is now signing such a deal.
In 2021, Egypt's annual gas production rate reached 71 BCM, a record that brought optimism. However, malfunctions resulting, among other things, from irresponsible production at excessively high rates led to a drop in production at an average annual rate of 14%, to only 45 BCM in 2024. While Egypt's annual consumption stands at about 70 BCM. This is fatal for the local energy economy. Cairo's level of failure is enormous. The potential of the Egyptian gas economy is large, with total reserves amounting to about 2,209 BCM, while that of the Leviathan reservoir - Israel's largest - is about 600 BCM. The gap lies in the quality of strategic management.
Implementing the deal will come into effect next year
Leviathan partner NewMed (formerly Delek Drilling) has a significant privilege in the regional energy sector, and its CEO since 2011 is Yossi Abu. His seniority in that position has led to the creation of an extraordinary network of contacts with energy executives in the region, from Egypt to Turkey. This relationship is so close that he has become a real friend of the Egyptian executives, and his face has become familiar in the corridors of the Egyptian energy sector as if he were a local figure. Therefore, it is no surprise that within two years, "only" considering that this is a period of war, the negotiations have matured into an historic agreement.
In short, the first phase of the deal, which includes about 20 BCM, is expected to be implemented as early as next year. The reason for this is the Egyptians' immediate need for Israeli gas. They no longer look to the export of liquefied natural gas (LNG), which brought them wonderful revenue until a few years ago due to record local production, but from their point of view, they want to secure a stable flow of power. El-Sisi and his people understand the importance of this. They prefer criticism of the relationship with Israel, than being in danger of a coup, because their citizens don't have electricity during the harsh heat of the summer.
Outwardly, the Egyptian Natural Gas Holdings Company (EGAS) is careful to convey that it is business as usual, and only recently announced 13 upcoming drillings in six blocks. The companies involved include, among others, a consortium of NewMed, IPR and Franco. However, these are processes that, even if they aree realized (which is not at all certain), take years. Therefore, Egypt has two options which are either economically or politically bad. LNG, which is economically bad because it is much more expensive than Israeli gas in pipelines, or Israeli gas, which is politically bad for Sisi. The bottom line is, he chose the politically bad option, believing that it will help him survive as president in the long term.
Published by Globes, Israel business news - en.globes.co.il - on August 7, 2025.
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