Oxford – Gaza crisis tightens regional gas balances

The recent conflict between Hamas and Israel has had significant impacts on Israel's gas sector. Following the attack by Hamas, the Israeli Ministry of Energy requested the shutdown of the offshore Tamar gas field, which accounted for nearly half of Israel's gas production. In addition, gas exports to Egypt through the offshore EMG pipeline were suspended, although some were re-routed through Jordan. This situation has not only affected Israel's gas market but also has wider implications for regional energy balances. The European Union (EU) may no longer be able to rely on gas from the East Mediterranean as a replacement for Russian volumes lost due to the conflict in Ukraine. Furthermore, the investment climate for gas production and infrastructure expansion in the region has become uncertain. In terms of Israel's gas supply, the domestic market is still secure due to rising output from the Karish field. However, export volumes will necessarily be reduced, with exports to Egypt expected to decrease. Egypt's gas balances were already strained due to falling production and high demand, and the prospect of the EU receiving more liquefied natural gas (LNG) from Egypt in the short and medium term is unlikely. If Israeli production falls further, potentially due to issues at the Leviathan and/or Karish fields, global LNG supply could be tightened by approximately 10 million tonnes per annum. This would be a combination of lower Egyptian supply and Jordan returning as an LNG buyer. Overall, the conflict has disrupted gas production and flows, affecting not only Israel but also neighboring countries. It has created uncertainties in the energy market and is likely to delay new investments in the Israeli gas sector.