Back in December I wrote “Egyptian Gas Deals Threaten Tamar Exploration” and a reader asked (I paraphrase), “What does Egypt have to do with oil and gas in Israel?”
As we’ve watched a revolution in Egypt unfold from our TV screens in the last two weeks, we now know the answer to our reader’s question … plenty!
Al Jazeera reported on Saturday. “Egypt gas pipeline attacked“. Israel gets about 40% of its natural gas from Egypt, from the Egypt gas pipeline. Fortunately, the terrorists blew up the side that supplies gas to Jordan rather than Israel. Unfortunately, Egypt shut down the gas pipeline to Jordan and Israel until they could quell the terrorist activity … which may be awhile. That means 40% of Israel’s natural gas requirement isn’t getting to Israel right now. According to a UPI report out today, that’s costing Israel $1.5 million per day in ‘alternate’ energy sources.
Al Jazeera reminded readers: “Israel is realising that their good friend (Mubarak) is on his way out, and they are not sure who is on the way in.”
Forbes’ Chris Barth asked the question in his Monday blog: “Will Egypt Protests Boost Israel’s Budding Energy Market?” Barth says:
“As protests in Egypt continue, investors are pondering the future of Israel’s energy supply, with one eye on Cairo and the other on Israeli energy companies. Although Israel has been quickly moving toward a more diverse energy structure, however, it still relies on Egypt for a full quarter of its energy needs, mainly natural gas delivered via the Arish-Ashkelon section of the Arab Gas Pipeline. Indeed, existing contracts with Egypt seem to prevent any large-scale shakeups in Israel’s energy imports, even in the face of recent domestic natural gas discoveries. Despite what has been a nerve-wracking month for energy-minded Israeli investors wary of instability, the state’s reliance on Egyptian gas doesn’t look to be going away any time soon.”
Israel’s gas supply from Egypt has been cut off by the unrest and terrorist bombings in Egypt. It’s long term gas supply from Egypt is jeopardy, depending on whatever form of government comes up on top after the revolution. No more gas from Egypt – that’s bad news for Israel, right?
Maybe not. In the short run it certainly hurts now; but in the long run, Israel, I believe, will be much better off.
Remember what I said in December’s article? “Egyptian gas deals threaten Tamar exploration.” The sweetheart gas deal Israel has had with Egypt for the last thirty years as a stipulation of the Camp David Peace Treaty (40% of Israel’s natural gas imports) means that actually producing the gas discovered inside Israel’s territory has been slowed or even threatened because Israel prefers cheap Egyptian gas to paying the price of getting Israeli gas to market. Why build Israeli infrastructure when we can get Egyptian gas for a few shekels less?
I’ll tell you why – sometimes ‘cheap’ isn’t so cheap. The Egyptian sweetheart gas deal won’t last forever – as far as we know, we could be witnessing its death on Cairo’s Tahrir Square right now. With not-so-friendly neighbors surrounding her and political turmoil rebooting the Israel ‘friendly’ Egyptian government, it’s a pretty good bet that the foreseeable future of ‘cheap’ Egyptian gas for Israel may be ticking down.
For Israel, energy isn’t just an economic issue it’s a national security issue. If Israel has a domestic energy source available she’d better start developing the infrastructure to bring it to market. Relying on the neighbors for natural gas doesn’t seem like such a good long term strategy anymore … even if it’s cheap.