EU signs energy deal with Egypt and Israel to give up Russian gas

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

It should be noted that in the wake of the war in Ukraine, Gazprom- the Russian energy giant-has halted gas flows to Poland and Bulgaria and has drastically reduced supplies to Germany, Italy and France.

The preliminary deal reached in Cairo, which was described as “a historic agreement” 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.

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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.

In a statement, the European Union explained that the agreement envisages that natural gas from Israel, Egypt and other sources in the Eastern Mediterranean region will be shipped to Europe via Egypt’s liquefied natural gas export infrastructure.

This would be done in line with “long-term decarbonization objectives” and would be based on market-related prices.

Furthermore, the EU declared that it would also help Egypt and Israel increase gas production and exploration in their respective territorial waters. It also pledged relief worth USD 104 million to Egypt, which is facing acute grain shortages due to the Ukraine war.

The Memorandum signed envisages that gas from Israel will be brought via a pipeline to two LNG terminals on Egypt’s Mediterranean coast, where significant quantities will be liquefied and transported on tankers to Europe, increasing in this way Egyptian LNG exports.

As Eni, the Italian Energy Company has developed a giant gas discovery off Egypt, it is expected that the volume of natural gas that will be exported to Europe will increase significantly.

Israeli gas will be brought to Egypt’s two liquefaction plants which are currently not operating at full capacity- and will increase the gas volumes to be exported or will free up for export gas currently used in Egypt for domestic consumption.

More significantly it could prove a major step in realizing the long-discussed potential of the Eastern Mediterranean as an important energy supplier for European industries.

However, a significant increase in gas exports from Israel via Egypt would require major long-term infrastructure investments, particularly as other countries like Cyprus or Lebanon which are believed to have commercial quantities of natural gas may join the project.

In recent years Israel has made two major offshore discoveries of about 700 billion cubic meters of gas, while it is very actively carrying out new exploration drillings.

Thus, Israel has become a natural gas exporter to be reckoned with. Indicative of its importance is the fact that two years ago the US oil company Chevron, bought Noble Energy, the company that discovered the majority of Israel’s gas fields, for about USD 4 billion.

Apart from the transportation of LNG with ships to Europe, another method of transporting gas from the Eastern Mediterranean that is under serious examination by the European Union is through undersea pipelines.

Pipelines to Europe have for a long time been under consideration, although potentially high costs and geopolitical tensions have so far worked against building them.

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 made it clear that the US has withdrawn its previous support for the project, saying that there is neither time nor money to build 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.”

Even though the US announced that it would no longer support the construction of the EastMed pipeline, the tripartite memorandum signed in Cairo mentions that the feasibility of the pipeline should be explored. Ursula von der Leyen even said that the pipeline will “hopefully one day become 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.”

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