Attack on Israel Could Have Wider Impact on Gas Markets

Gas markets are considering the possible wider implications following Hamas’ attack on Israel over the weekend. Chevron has already been told by the Israeli government to shut output from the Tamar gas platform, although operations are still ongoing from the Leviathan field.

• New York Times: “The fierce fighting that started on Saturday could potentially slow the pace of investment in gas fields in the region. It could also hamper Israel’s efforts to attract more international energy companies to drill for gas,” Stanley Reed said in a New York Times article.
• Israel uses most of its natural gas production to meet domestic demand, but it does export to its Arab neighbours Egypt and Jordan (the two states with which it has peace agreements). Exports to Egypt can be re-exported onto the global market as LNG.
• A drawn-out conflict, particularly with any spill over into Lebanon, could jeopardise a framework agreement for the exploration of gas along the Israeli-Lebanon sea border.
• Total and ENI are preparing to explore for natural gas off Israel and Lebanon after the two countries reached a US brokered agreement on the disputed maritime border.
• The conflict could also impact progress Israel has seen with Turkey on establishing wider cooperation in the field of natural gas. Turkish President Erdogan previously said that the two countries would take joint steps in drilling projects for natural gas exploration and could begin energy transfer networks to Europe via Turkey.
• Israeli-Turkish relations had been strained for some time, and another conflict in Gaza could put at risk any easing of those relations and hamper further cooperation.
• Israel has accused Iran of involvement in the attack, although Iran denies this. Iran is currently in dispute with Saudi Arabia and Kuwait over rights to the Durra gas field, estimated to hold 20 trillion cubic feet of reserves.
• The conflict is likely to delay or pause a wider rapprochement and normalisation of relations between Saudi Arabia and Israel, given that wider concessions to the Palestinians was a key demand from the Saudis.