The continuing battle between Israel and Hamas, poses a severe risk to the regional pure fuel market and will have knock-on results on Europe’s LNG provide as winter approaches. Though Israel has surplus fuel manufacturing, which at present helps Egypt and Jordan’s rising demand, a continued or escalated battle would have wide-ranging implications, based on Rystad Vitality evaluation.
The destiny of the three largest Israeli fuel improvement tasks – Tamar, Leviathan, and Karish – will have an effect on the regional market vastly. A regional geopolitical reshuffle may maintain up normalisation progress, danger upstream investments and spoil export targets at a time when exploration and discovery of low-cost assets have elevated.
Leviathan represents 44% of Israel’s present fuel manufacturing, adopted by Tamar and Karish with 38% and 18%, respectively. Tamar provides greater than 70% of Israel’s home fuel demand and is the first supply of gas-fired electrical energy era. It’s estimated that 5% to eight% of Tamar’s manufacturing is exported.
Egypt imports about 7 billion Ft3 per yr of pure fuel from the Tamar and Leviathan developments, serving to meet home demand and energy liquefaction crops. Rystad Vitality accounts that Egypt exported 3.7 million t of LNG between October 2022 and January 2023, with the best quantity being simply lower than 1 million t in December 2022. This peak manufacturing is roughly equal to Tamar’s 33-day manufacturing shutdown at present charges.
Israeli fuel at present meets lower than 10% of Egypt’s fuel consumption and, within the first three quarters of this yr, exports of LNG fell by about 50% in comparison with final yr. This decline resulted from a rise in home fuel utilization through the summer season season. Given these evolving dynamics, questions come up in regards to the sustainability of fuel exports to Egypt as winter approaches.
“Regardless of the awful forecast for the upcoming El Niño winter, the present state of affairs presents a bullish issue. EU storage at present stands above 97% and fuel consumption remains to be beneath ranges registered in 2022. Moreover, there’s a chance of elevated fuel exports from the US. The continuing battle is prone to have a restricted upward influence on near-term fuel costs that may mirror a geopolitical danger premium already manifested in oil costs. Nonetheless, there stays a danger of escalation right into a broader battle that might trigger a short-term improve in vitality costs. If excessive vitality costs result in inflation and additional rate of interest tightening, they might finally right down within the months forward if the financial outlook worsens on this account,” stated Aditya Saraswat, Vice President Center East Upstream Analysis at Rystad Vitality.
The Tamar fuel reservoir quickly developed over a interval of 4 years as a response to Egypt’s cessation of pure fuel provides to Israel. Tamar at present operates six manufacturing wells, with a each day output ranging between 7.1 million and eight.5 million m3 per day of fuel. The undertaking has performed a big function in boosting Israel’s vitality independence, fulfilling 70% of its electrical energy era wants and lowering its dependence on coal and oil.
If the Tamar fuel discipline has a brief shutdown, Israel will use different fuels like coal and gasoline oil to generate electrical energy. Nonetheless, extended shutdowns could require drilling extra wells, which may take months and Israel shall be compelled to make use of fuel from the Leviathan discipline to satisfy its personal wants as a substitute of promoting it to close by international locations like Jordan and Egypt.
Jordan will get most of its fuel imports from the Leviathan discipline -located close to Tamar, which can be the principle supply of fuel exports to Egypt. If the battle will get worse, there’s a danger of shutting down the Leviathan discipline. This is able to be a big setback for the area, on condition that Egypt has been importing nearly double the contracted volumes of fuel from Israel lately. In 2022, Leviathan exported 4.9 billion m3 of fuel to Egypt, in comparison with 3.1 billion m3 within the 1H23.
As well as, there’s a appreciable danger of shedding round US$4 billion in capital investments for vital upstream tasks through the subsequent three years as a result of potential shift within the regional panorama. This flip may undermine the progress made in the direction of normalising a area that has seen important exploratory success and the invention of low-cost assets.
In 2025, the Tamar enlargement undertaking would be the most closely impacted out of all of the upstream tasks in Israel. Out of the US$1.6 billion anticipated to be invested in these tasks, 75% – equal to US$1.2 billion – is designated for the enlargement of the Tamar pure fuel reservoir.
Leviathan Section 1B is one other plan impacted, notably in 2026, as US$435 million of capital funding is in danger. The aim is to arrange a FLNG unit with a capability of 4 to five million tpy as an alternative choice to tapping into the European market. The Leviathan discipline can produce as much as 2.1 billion f3 per day and its ramp-up potential is about 700 million f3 per day.
Israel, Egypt, and Cyprus will construct the Japanese Mediterranean pipeline that may transport pure fuel to Europe through Greece. The estimated price of the undertaking is US$6.5 billion and it faces challenges as a consequence of border disputes within the area. The undertaking might be worthwhile as a result of low price and ample provide of pure fuel and its capability might be elevated from 10 to twenty billion m3/y. Nonetheless, buyers could also be discouraged from investing within the undertaking as a consequence of its excessive price and conflicts.
Learn the article on-line at: https://www.lngindustry.com/special-reports/20102023/rystad-trouble-in-eastern-mediterranean-could-disrupt-regional-gas-market/