It Is Just the Israeli-Palestinian Conflict
The Israeli parliament (The Knesset) approved yesterday the natural gas framework, which its proponents claim will lead to the development of the Leviathan natural gas field and for export of natural gas from Israel to Egypt for local consumption as well as for re-export through the LNG facilities in country. However this approval is only symbolic and without any meaningful significance. The second, and more significant draft resolution that was presented to the chamber, to convey the power of the Economy Minister to bypass the anti-trust regulator, to the government, was neither debated nor voted, since the government had no majority to pass it in the chamber.
However all those are only theoretical debates, since the option of Israeli natural gas export from either Tamar or Leviathan was always a remote possibility that its probability was reduced further with the discovery last month of new natural gas deposits in Zohr block by Eni SpA of Italy in Egyptian Mediterranean waters.
There are two obstacles stand on the way of Israeli natural gas export to Egypt: geopolitics, in the case of export to the local Egyptian market, and terror activities and logistics in case of LNG re-export.
Israel's geopolitical standing is influenced mainly from its conflict with the Palestinians and as long as this conflict will not be resolved Israel will not be able to trade with Egypt in open and free manner. Both countries adhere to the peace treaty signed 37 years ago however it is mostly a 'cold peace' and relationship are maintained only between the political and military establishments of both countries. Economic ties are almost nonexistent. And although recently the relationship became warmer, because of the common interest to fight ISIS terrorist activity in the Sinai Peninsula, Egypt is still pursuing a resolution in the IAEA to subject Israel's nuclear facilities to international inspections. Israel, according to media reports asked Egypt to stop that action, but so far without success.
A further proof to the difficulties in exporting Israeli natural gas to Egypt are evident from the implementation of a contract signed six months ago to sell gas to Dolphinus Holdings, a firm that represents non-governmental, industrial and commercial consumers in Egypt. According to sources in Delek Drillings, supply could have started in just a few weeks from the contract signing, however, so far, the Israeli government has issued no export permits needed.
It is also worthy to note that the contract was signed with a private Egyptian entity, as opposed to a contract with EGAS, the national natural gas company of Egypt.
There are a few more reasons and obstacles to why export of natural gas from Israel either to or through Egypt is not a viable proposition at the current time, like pricing and the expected consummation of the $70 billion deal in which Royal Dutch Shell will acquire British Gas a deal that will rob Leviathan project of its anchor customer. However the fundamental reason for the fading likelihood of natural gas export from Israel is its unsolved conflict with the Palestinians.
Ya'acov Zalel can be contacted at at zalely@gmail.com