The Abraham Accords Can Help Solve the EU’s Energy Crisis
March 27, 2023
Despite progress in reducing Europe’s dependency on Russian gas, the EU’s energy outlook remains volatile. An increase in Chinese liquefied natural gas (LNG) purchases, along with periods of harsh weather, could set off repeated energy crises in the coming years. To address this critical challenge, Europe should look to the Eastern Mediterranean for energy solutions, leveraging the new opportunities for cooperation made possible by the Abraham Accords.
Such cooperation to address Europe’s energy needs, spanning the Mediterranean and Middle East, would have the added benefit of promoting stability and prosperity across the region. It is not surprising that this was one of the main topics of discussion during Israeli PM Netanyahu’s March meeting with Italian Premier Meloni.
According to the International Energy Agency, Europe may face a gas shortfall of 57 billion cubic meters (bcm) in 2023. While part of this shortfall may be made up by current EU initiatives, it is likely that costly shortages will recur. Already, dozens of European plants in energy-intensive industries such as steel, aluminum, fertilizers and power have been forced to shut down.
To date, Israel has developed approximately 1,000 bcm of natural gas, and it may have further reserves of 1,000-2,000 bcm. According to leading natural gas expert, Gina Cohen, “Israel could supply 15 bcm a year to Europe, for a period of 15-20 years from 2025.”
Cyprus, Israel’s Mediterranean neighbor, has estimated gas reserves of 200-400 bcm. Combining Israeli and Cypriot reserves, and potentially in the future, gas from additional regional players such as northern Iraq and Libya, could play a substantial role in filling the gap left by Russian gas.
Yet despite the significant gas reserves in the region, utilizing them to provide solutions for Europe will require overcoming numerous obstacles.
Today, the primary means to deliver gas to Europe from Israel is via Egypt’s liquefaction facilities, from where the LNG is shipped to Europe. However, the existing Israel-Egypt pipelines suffer from bottlenecks and capacity limits.
One potential solution is to build a new pipeline directly from Israel’s gas fields to Egypt’s LNG facilities. While this option has the benefit of strengthening Israeli-Egyptian cooperation, it presents a serious risk that Egypt will divert gas for its domestic needs, rather than send it to Europe.
In our view, the two most promising mid-term options for regional solutions to Europe’s gas crisis are the EastMed Pipeline project, or the construction of a Floating Liquefied Natural Gas (FLNG) facility off of Israel’s coast. Both of these options have become more realistic in the wake of the Abraham Accords.
The proposed 1,900 km EastMed Pipeline would link Israel to mainland Greece via Cyprus and Crete. The transportation capacity of the pipeline is expected to be 10 bcm per year, potentially expandable to 20 bcm per year. The estimated cost is $6-7 billion, with an estimated construction time of 4-5 years.
At the beginning of 2022, the EU reconfirmed the status of EastMed as a ‘Project of Common Interest’. Yet a final decision to proceed with such an ambitious pipeline will require identifying strategic European offtakers. It will also require substantial investment and expertise. Israel’s new GCC partners could play a key role in the successful execution of such a complex project, which could complement Emirati sovereign wealth fund Mubadala’s purchase of a 22% stake in Israel’s Tamar gas field.
The EastMed Pipeline has the added benefit of potentially being designed to carry hydrogen or other low-carbon fuels in the future, thereby supporting the EU’s energy transition.
The second promising option is stationing a FLNG facility off the Israeli coast, from where Israeli and Cypriot gas could be shipped to Europe. The Leviathan partners are examining options for a floating LNG facility of 6.5 bcm a year. Such a facility could cost about $7 billion. While FLNG facilities pose high up-front costs, here too, partnerships between Israel and other Abraham Accords countries could help make this option more feasible and commercially viableLooking towards the future, a partnership between the EU and Abraham Accords countries could accelerate the sustainable energy transition, particularly with regards to green hydrogen.
According to PwC, “Although many countries have ambitious plans for green hydrogen, the GCC states also have unique advantages that could allow them to lead the hydrogen economy.”
At the same time, Israel is a recognized leader in clean energy technologies. Startup Genome’s 2022 ‘Global Startup Ecosystem Report: Cleantech Edition’ ranked Tel Aviv as the number 2 cleantech ecosystem globally. Europe, Israel and the Gulf can combine their relative strengths to scale innovative clean energy production, storage and transportation.
Given the urgent need to advance European energy security, it is vital that the EU work with the countries of the Eastern Mediterranean and Abraham Accords to advance strategic solutions, such as those proposed here. Frameworks such as the East Mediterranean Gas Forum and Negev Forum should be utilized to facilitate cooperation among a broad range of public and private stakeholders. Israel must develop a comprehensive energy strategy, which includes overcoming regulatory hurdles. The possibility of resurrecting the UAE-Israel Med-Red agreement to transport Emirati oil to Europe could also be examined.
Together, Europe and the countries of the region can advance energy independence from Russia, while building a more stable and sustainable future for the Mediterranean and the Middle East.