Gas exports give Israel its best chance at regional integration, advancing both energy cooperation and political stability.
In the Middle East, dealmaking between adversaries can be treacherous and drawn out for years. But recent energy deals have demonstrated a pragmatism and a new dynamic in which energy security and a concern for resource nationalism can supersede regional political obstacles. Israeli gas exports to neighbors Jordan and Egypt could help hold fragile peace agreements in place, while also accelerating national plans of energy independence via renewables.
The pressure for resource nationalism is pushing governments like Egypt to consider improving their attractiveness to foreign investors and international oil company partnerships for domestic gas production. Resource nationalism is also pushing traditional oil producers to diversify their assets and expertise in regional gas infrastructure, as we see in movements from Gulf national oil companies. In the interim, the gas deals have held firm even as bilateral relations are strained by the continued war in Gaza against Hamas and the dire humanitarian conditions faced by Palestinians.
Leviathan Gas and the Egypt Deal
NewMed Energy, an Israeli energy company publicly listed on the Tel Aviv exchange, holds 45.34 percent of the Leviathan Reservoir, the largest gas reservoir in the Mediterranean. The Leviathan gas production serves as a key source of energy for the State of Israel as well as for other countries in the region. NewMed announced a deal to sell about 130 billion cubic meters (bcm) of gas to Egypt via pipeline over the next 15 years for the amount of $35 billion.
In pricing, this would mean that the gas is more expensive than past deals for Israeli gas, as MEES estimates that the pricing amounts to a 30 percent hike on the $5.83/per million British thermal units (mn Btu) Egypt’s state off-taker Blue Ocean paid for Leviathan gas in the first quarter of this year. But sending gas from Israel to Egypt via pipeline rather than liquefied natural gas (LNG) cargoes is far less expensive for Egypt, as the Israeli gas is significantly lower than the $12-13/mn Btu Egypt is having to pay to import LNG, by MEES estimates.
For Egypt, the deal represents a significant reprieve in its gas supply woes because of the long-term nature of the contract and its stable price point. Egypt has struggled to meet domestic demand for natural gas, and earlier this year, it had to halt production at several industrial facilities due to gas shortages. Production from Egypt’s Zohr gas field, which supplies roughly 35 to 40 percent of Egypt’s gas output, has diminished due to technical issues and reservoir depletion. In the last year, Egypt has emerged as a significantLNG importer, signing a $3 billion deal with Shell and TotalEnergies to secure new LNG cargoes for 2025.
Regional Energy Independence
Israeli gas has become a kind of necessary bridge within the region, as earlier contracts with Jordan (agreed in 2016 and first exports in 2020) have demonstrated the political complexity of energy demand, where gas in the Eastern Med may be plentiful but has had limited commercial export viability from other producers besides Israeli operators. Jordan imports gas from Israel and Egypt, and during the recent conflict between Israel and Iran, some supply to both Egypt and Jordan was curtailed. Egypt tried to make up for some of the discrepancy by supplying Jordan, but it faces its own demand constraints. According to data from Energy Aspects, Egypt’s domestic output is expected to drop further by 22.5 percent by the end of 2028. Analysts expect Egypt’s power consumption to increase by 39 percent over the next decade, further pressuring its ability to export gas while domestic demand increases.
Egypt’s Economic Pressures
Egypt’s macroeconomic position continues to depend on regional financial intervention. Direct fund support in the amount of $7.5 billion from Qatar and $5 billion from Kuwait (announced in April) is set to be at least 50 percent disbursed by year-end. Egypt struggles with its current account deficit, but expectations of surging remittances (up 70 percent year over year in the last quarter), the ongoing export recovery, and softer import growth given lower energy prices. Most critical is recovery in Suez Canal revenue, which the government estimates at a loss of $800 million per month. Inflation is likely to remain sticky in the 13 to 17 percent year-over-year range until year-end amid higher health-care, food, fuel, and transport costs. The International Monetary Fund’s focus is set to shift from macro stabilization to advancing structural reforms and privatizations.
Gulf Players in the Eastern Mediterranean
The Gulf states and their national oil companies and state-owned energy investment vehicles are also interested in engaging in the growing Eastern Mediterranean gas market. For example, a joint venture of UK-based Shell and a state-owned Kuwaiti oil company has approved plans for a project to develop Egypt’s Mina West gas field. Kuwait Foreign Petroleum Exploration Company (Kufpec) and Shell have announced the final investment decision (FID) for the project. Shell has a 60 percent stake in the project, and Kufpec holds the remaining 40 percent stake. In terms of attracting partnerships, Israel’s New Med has also been an attractive target of acquisition, as recent considerations of a major investment and transaction with Abu Dhabi National Oil Company (ADNOC)-BP indicate a willingness to move quickly and secure access to a valuable gas field and its commercial prospects. That deal is on hold since 2024, but a move to take NewMed private (and a willingness to sell or government permission to sell to an IOC-NOC partnership) would both integrate Israeli gas infrastructure into the broader regional economy and into the Gulf sovereign funds and their related entities.
A Path to Regional Integration
The outcome is that Israel’s best chances of regional integration, and to some degree, normalization, rest on its commercial agency in delivering a consistent and affordable source of energy to its neighbors, and its value proposition as a site for investment and partnership. The ability to aid in the stabilization and energy security of Egypt is of mutual and shared benefit to Israel, Egypt, and the Gulf states as core sources of financial intervention. For Jordan, if Israel can demonstrate reliability in energy supply, it could help build other avenues of energy and infrastructure cooperation.
About the Author: Karen E. Young
Dr. Karen E. Young is a Senior Research Scholar at the Center on Global Energy Policy, Columbia University SIPA. She was the founding director of the Program on Economics and Energy at the Middle East Institute and remains a senior fellow there. She is the author of two books: The Economic Statecraft of the Gulf Arab States (2022) and The Political Economy of Energy, Finance and Security in the United Arab Emirates (2014), as well as editor of Energy Transitions of the Middle East (2024) and GCC Hydrocarbon Economies and Covid (2023) and a chapter contributor in: The Economy of Saudi Arabia in the 21st Century (2024), Routledge Companion to China in the Middle East (2023), The Gulf States in the Horn of Africa (2022), and The Economics of Renewable Energy in the Gulf (2019).
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