$35B Egypt gas export deal ‘largest’ in Israel’s history

Israel’s NewMed Energy and its partners in a gas project in the Mediterranean Sea have signed an amended agreement with Egypt’s Blue Ocean Energy (BOE) to significantly expand the export of natural gas from Israel to Egypt.

The deal with BOE, an existing offtaker of natural gas from the Leviathan field, includes around 130 billion cubic meters (bcm), or approximately 4.59 trillion cubic feet (tcf ) of natural gas, with a value estimated at around $35 billion. 

According to NewMed, the agreement holds two records: the largest export deal ever signed in Israel’s history and the largest deal since the discovery of natural gas reservoirs in the country. The sale of gas to Egypt under the deal is expected to continue until 2040, or until all of the contract quantities are fulfilled.

“This is the most strategically important export deal to ever occur in the eastern Mediterranean, and strengthens Egypt’s position as the most significant hub in the region,” said Yossi Abu, NewMed Energy’s Chief Executive Officer (CEO).

“Since it begun production, Leviathan has brought many benefits both domestically and internationally, and the reservoir’s expansion has been NewMed’s key priority for years. This deal, made possible by our strong regional partnerships, will unlock further regional export opportunities, once again proving that natural gas and the wider energy industry can be an anchor for collaboration.”

Leviathan is believed to be the largest natural gas field in the Mediterranean Sea and one of the largest in the world. According to the latest prospective resources report for the reservoir, it contains an estimated 600 bcm of gas. Based on the discounted cash flow report, it is expected to remain in production until 2064.

Located approximately 130 kilometers off the shores of Haifa, the field comprises four subsea wells connected to an offshore platform via a subsea manifold and two 120-kilometer pipelines. It has been producing natural gas since the end of 2019.

New Med Energy holds a 45.34% stake in the project, with Chevron Mediterranean and Ratio Energies holding 39.66% and 15% stakes, respectively.

Gas exports to Egypt from the field started in early 2020. Around 4.5 bcm (0.16 tcf) is currently exported to Egypt through BOE, totalling around 23.5 bcm since starting exports. The original export agreement with Egypt, signed in 2019, is due to end once the full contracted quantity of 60 bcm has been sold, which is expected in the early 2030s. 

The new agreement is envisaged to bring the total sales from Leviathan to Egypt to an annual quantity of around 12 bcm (0.42 tcf). Under the deal, Egypt will get 130 bcm more gas in two stages, the first one entailing 20 bcm and the second 110 bcm.

Stage 1 is expected to take effect in the first half of 2026, right after the completion of two projects that will enable the expansion of production and the transportation volume.

The first one is the connection of a third pipeline from the Leviathan reservoir to the production platform, boosting the produced gas quantity to over 14 bcm (0.5 tcf) per annum.

The second is the Ashdod-Ashkelon transmission pipeline, which is currently under development. This is envisaged to add an additional 2 bcm natural gas transmission capacity in the EMG pipeline, which connects Ashkelon and el-ʻArīsh.

Stage 2 will start once the Leviathan expansion project is completed and a new transmission pipeline is built from Israel to Egypt via Nitzana to boost transportation capacity. This is expected to take effect after completion of the Leviathan expansion project (Phase 1B of the development plan). 

The expansion project will dramatically increase the natural gas quantity currently being produced in Israel by around 30% and bring the reservoir’s annual production capacity to approximately 21 bcm (0.74 tcf), as stated by NewMed.

The Israeli player believes the completion of the deal will pave the way for a final investment decision (FID) for the Leviathan expansion project. When the front-end engineering design (FEED) phase was greenlighted last year, the FID was expected to be taken in the first half of 2025.

As part of the preparations, last February, the Leviathan partners submitted an update to the reservoir’s development plan to increase annual production capacity to around 21 bcm, with a possibility of further expansion to 23 bcm of natural gas per annum. 

The reservoir expansion plan includes the drilling of additional wells, the addition of related subsea systems, and the expansion of the processing facilities on the platform, as well as the possibility of laying a fourth pipeline between the reservoir and the production platform. The export permit application was also recently submitted.

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