US-based Chevron Corp. has been forced to suspend production at
Israel’s flagship Leviathan gas field, a critical energy asset in
the eastern Mediterranean, following a directive from the
government in Jerusalem citing security concerns after recent
airstrikes against Iran.
The shutdown immediately chokes off a vital supply of natural
gas to neighbouring Egypt and Jordan, raising the spectre of fuel
shortages and economic disruption across the region. The move,
coupled with a separate suspension of output by London-listed
Energean, underscores the profound impact that escalating Middle
Eastern hostilities could have on global energy stability. The
heightened risk premium was reflected in European gas markets,
where prices climbed as much as 6.6% on June 13.
For Cairo, the timing is perilous. With its own domestic gas
production in decline and summer demand for power rising, Egypt has
initiated “precautionary measures” to avert electricity blackouts.
The country’s energy ministry confirmed it has curtailed gas flows
to some industrial users and increased the use of more polluting
diesel and fuel oil in its power stations.
The disruption threatens to compel Egypt to accelerate its
return to the spot market for liquefied natural gas, a move that
would inevitably tighten global supplies. Analysts are watching
closely to see how long the outage lasts, as a prolonged shutdown
would have significant repercussions.
The pipeline exports to Egypt and Jordan collectively amount to
35mn cubic metres per day, according to Laurent Ruseckas, a
director at S&P Global Commodity Insights. He told Bloomberg
that “additional demand for cargoes could build quickly if the
Israeli outages persist”.
Ruseckas calculated the scale of the potential supply shock,
noting that, “to fully replace Israeli pipeline imports, Egypt and
Jordan between them would require another 10-12 LNG cargoes per
month.”
For now, some supply is maintained from the smaller Tamar field,
also operated by Chevron, which has not been suspended. However,
the halt at Energean’s Karish field, though it serves only the
domestic Israeli market, will further strain the country’s overall
fuel balance. The situation leaves both Egypt and Jordan in a
precarious position. Jordan is without a direct LNG import
terminal, while Egypt is still awaiting the start of newly agreed
LNG supply deals scheduled to begin next month.
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