The European Commission, Israel and Egypt on June 15 signed a trilateral memorandum of understanding on the supply of Israeli gas via Egypt's LNG export infrastructure to Europe.
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The EU's energy commissioner Kadri Simson hailed the agreement with Israel and Egypt as a "historic" day for the EU's energy engagement and energy security, calling the countries "reliable and strategic" partners.
The EU has intensified efforts to find alternative gas suppliers since Russia's invasion of Ukraine in February, with Israeli gas seen as a potential new source for Europe.
However, there is currently no infrastructure in place to allow for direct Israeli gas supply to Europe, meaning deliveries would have to be facilitated via Egypt's two LNG plants.
"With this EU-Israel-Egypt agreement we will work on the stable delivery of gas to the EU from the East Mediterranean region," EC President Ursula von der Leyen said on Twitter June 15. "This will contribute to our European energy security," she said.
In comments June 14, von der Leyen said she was grateful that Israel was willing to supply gas to the EU via Egypt.
"This will help step up the deliveries of energy to Europe. You will bring gas from Israel, via pipeline -– hopefully one day hydrogen-ready pipeline –- to Egypt, it will be liquefied to LNG and then brought to the EU," she said.
Israel has become a key regional gas supplier in recent years and now exports to both Egypt and Jordan, while Egypt last year raised its own gas output to 71 Bcm, according to the energy ministry, up 10 Bcm year on year.
Egypt has two LNG export facilities -- the 7.2 million mt/year (9.9 Bcm/year) Shell-operated Idku facility and the smaller Eni-operated 5 million mt/year Damietta plant.
The two plants are considered key to European efforts to source additional LNG, including from Israel, which since March has increased its supplies to Egypt through a new route.
Israeli gas was previously delivered to Egypt only via Israel's own transmission system and the now-reversed offshore East Mediterranean Gas (EMG) pipeline.
The new arrangements with Egypt allow for the export of Israeli gas entering the Jordan gas transmission system at Beit She'an to be piped southward into Egypt at Aqaba via the Arab Gas Pipeline (AGP).
The Israeli energy ministry said exports via the new route were expected to be 2.5-3 Bcm in 2022 and could increase to 4 Bcm in subsequent years.
Egypt's LNG exports have already reached 5.7 Bcm of gas equivalent so far in 2022, with some 55 cargoes delivered to export markets, according to data from S&P Global Commodity Insights.
Europe and Turkey have become the markets of choice for Egyptian LNG as European gas prices trade at a premium to spot Asian LNG prices.
Turkey has taken 15 cargoes so far in 2022, followed by eight into Spain, six to France, and two each to Greece, the Netherlands and the UK, the data showed.
Single cargoes were also delivered to Belgium, Croatia, Italy, Malta and Lithuania.
For most of 2021, markets in northeast and south Asia took the bulk of Egypt's LNG until European gas prices moved to a premium over spot Asian LNG prices.
Egypt said in February that both LNG export plants were operating at "full capacity" and making the most of sustained high spot LNG prices.
The Platts JKM benchmark price for spot LNG into northeast Asia reached a record-high $84.76/MMBtu in early March.
The JKM has averaged $28.44/MMBtu so far in 2022 and was last assessed at $24.10/MMBtu June 14.
As Egypt is relatively exposed to spot LNG prices, the current price strength is beneficial to the country, whose LNG exports totaled 9.5 Bcm in 2021, according to S&P Global data.