EU looking to step up energy cooperation with Israel: von der Leyen

The EU is looking to intensify its cooperation with Israel in the energy sector as Brussels looks to eliminate its dependence on Russian fossil fuels, European Commission President Ursula von der Leyen said June 14.

In a speech during a visit to Israel, von der Leyen pointed to two planned energy infrastructure projects designed to link Israel to Europe -- the 10 Bcm/year EastMed pipeline and the EuroAsia Interconnector electricity link.

Israel has vast gas resources and is being eyed by the EU as a key future supply source, though there is no infrastructure currently to provide a direct link between its offshore gas and the European market.

"We are exploring ways to step up our energy cooperation with Israel," von der Leyen said. "For us Europeans, the stakes could not be higher. The Kremlin has used our dependency on Russian fossil fuels to blackmail us," she said.

She added that Russia had deliberately cut off gas supplies to Poland, Bulgaria and Finland, and to Dutch and Danish companies, in retaliation for EU support to Ukraine.

"But the Kremlin's behavior only strengthens our resolve to break free of our dependence on Russian fossil fuels," she said.

EastMed progress

Von der Leyen pointed to the planned gas and power links as investments in both European and Israeli energy security.

Progress on the EastMed pipeline -- which would run for 1,900 km to connect gas discoveries offshore Israel and Cyprus with Greece -- has been slow, but the foreign ministers of the three countries plus US Secretary of State Antony Blinken last month held talks on moving the project forward.

The Russian invasion of Ukraine has given the Eur6 billion project new impetus, with the renewed US support seen as key after officials previously cast doubt on the project, although technical and economic challenges remain.

The pipeline is under development by a joint venture between Greece's DEPA and Italy's Edison, and is also listed as one the EU's Projects of Common Interest, making it eligible for European funding.

An intergovernmental agreement between Cyprus, Greece and Israel was signed in January 2020 on the realization of the pipeline.

Israel has vast gas reserves, estimated at some 921 Bcm by the energy ministry, with further exploration efforts ongoing.

Explorers will have been buoyed by the continued strength in European gas prices, with the benchmark TTF month-ahead price reaching a record high of Eur212.15/MWh on March 8, according to Platts price assessments from S&P Global Commodity Insights.

The contract was last assessed June 13 at Eur83.03/MWh, still 200% higher year on year.

Fourth round

Israel, too, is keen to become a gas supplier to the European market and is again preparing for a fourth bidding round for new offshore licenses in its efforts to increase gas reserves further.

The decision last month to move forward with the new licensing round reverses a decision made in December last year to shelve the new gas tender to focus instead on renewables.

Energy minister Karine Elharrar on May 30 said she had instructed the ministry to prepare for the new gas round given the global energy crisis and Europe's push for new sources of gas supply.

"The global energy crisis represents an opportunity for the state of Israel to export gas," she said.

Israel had previously intended to hold a fourth bid round for 25 offshore blocks that were to be offered in six clusters.

In the first competitive bid round, which ended in 2017, six exploration licenses were granted to UK-listed Energean and a consortium of Indian companies.

In the second bid round, which ended in 2019, 12 licenses were granted. However, no decision has yet been taken on the winner of the license for block 72, which was offered in the third competitive bid round in 2020.

Israel is also working with the EU and Egypt on a trilateral agreement to allow for the export of Israeli gas to Europe via Egypt's two LNG terminals.

In emailed comments to S&P Global Commodity Insights on June 6, the Israeli energy ministry said a joint working group had been established following talks between Elharrar and EU energy commissioner Kadri Simson, which includes Egyptian representatives.

"The political framework agreement will allow the gas companies to subsequently sign commercial agreements between them," the ministry said.

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.