This is the largest export agreement in Israel's history with any country.
In a historic move for the Eastern Mediterranean energy sector, NewMed Energy and its partners have finalized a colossal agreement to supply natural gas from Israel's Leviathan reservoir to Egypt. The deal, signed with existing off-taker Blue Ocean Energy (BOE), is valued at an impressive $35 billion and represents the largest export deal ever penned in Israel's history, as well as the most significant since the discovery of the country’s natural gas reservoirs.
The agreement specifies the sale of an aggregate total of around 130 billion cubic meters (BCM) of natural gas to Egypt, a contract that will last until 2040 or until the full contracted quantities have been delivered. This new deal is poised to eventually supersede an existing agreement signed in 2019, which saw the Leviathan reservoir begin exports to Egypt in January 2020. Since then, roughly 23.5 BCM of gas has been supplied to the Egyptian market under the current contract, which provides for an annual volume of 4.5 BCM.
The new agreement is structured in two distinct stages. Stage one involves the sale of an initial ~20 BCM of natural gas and is projected to take effect in the first half of 2026. This stage is contingent upon the completion of two key infrastructure projects: the connection of a third pipeline from the Leviathan reservoir to the production platform, which will boost annual production to over 14 BCM, and the completion of the Ashdod-Ashkelon transmission pipeline, which will increase capacity in the EMG pipeline connecting Ashkelon and el-?Arish. These projects will enable an additional 2 BCM of gas to be sold to Egypt annually.
Stage two of the agreement, which accounts for the lion’s share of the deal at ~110 BCM, will commence only after the completion of the Leviathan expansion project, known as Phase 1B. This ambitious expansion aims to increase Israel's natural gas production by approximately 30%, raising the reservoir's annual capacity to around 21 BCM, with the potential for further expansion to 23 BCM. This stage also requires the construction of a new pipeline to Nitzana to enhance export capacity to Egypt. Once in effect, this will bring the total annual sales from Leviathan to Egypt to approximately 12 BCM.
The financial terms of the deal are tied to a price formula primarily based on the Brent oil barrel price. The completion of this massive deal is expected to pave the way for a final investment decision (FID) on the Leviathan expansion project. The Leviathan partners have already submitted an updated development plan to increase annual production and an export permit application in anticipation of the deal's finalization.
