Introduction
Egypt aspires to be a regional energy hub, without taking into account that it is actually a gas net importer. With a $US 4-5 billion arrears to international oil company, Egypt signed MoU with Syria to supply gas for power generation, through regasification vessels and transmission networks. Similarly, the lifting of the US Caesar sanctions on Syria opens the doors for Lebanon to import Egyptian gas.
Beyond its regional agreements, Egypt is also positioning itself as a key supplier for European markets. The MoU signed in 2022 between Israel, Egypt, and Europe is the latest’s effort to replace Russian energy imports. While European companies have been encouraged to participate in Israeli and Egyptian exploration tenders, LNG shipments from Egypt to Europe are expected to increase in the next years. Egypt is intensifying export efforts to balance the country’s petroleum trade balance. Through its liquefaction plants in Edku and Damietta, Egypt aims to re-export gas from neighbouring countries to Europe. Here is the knot: Egypt seeks to leverage its gas exports as a strategic and financial tool, but suffers from energy shortages and surging domestic consumption.
Israel-Egypt 20-years long relationship
The Israel–Egypt energy relationship dates back to a 2005 agreement in which the Israeli Electric Company (IEC) and the Israeli-Egyptian consortium East Mediterranean Gas signed a fifteen-year deal to supply 1.7 billion cubic metres of natural gas via undersea pipelines, covering up to 40% of Israel’s gas needs.
What began as a “business dispute” soon revealed deeper tensions rooted in the very terms of the sale agreement. Although the full details of the contract were never made public, government sources accused the parties involved of selling gas to Israel at significantly lower prices than those applied to counterparts such as Turkey, Greece and Italy. Egyptian prosecutors have estimated the loss at $714m.
The unpopularity of the agreement led to frequent gas disruptions after the resignation of President Hosni Mubarak. During the Arab Spring, the pipeline was bombed 14 times, leaving Israel without supply for 225 days in 2011 and 66 days in early 2012. Deliveries finally stopped for good after an explosion on March 5th.
Credit: European Pressphoto Agency
The beginning of the energy dependency era
After a decade of being a key gas exporter, Egypt became a net importer of gas by 2015. The expected surge in domestic demand was fueled by decades of heavily subsidised energy prices, coupled with falling domestic production. At their peak in 2012/2013, energy subsidies accounted for roughly 22% of total government spending.
Yet, with the discovery of the Zohr field in 2015, the drift of dependence was quite unexpected. The announcement of the largest gas find ever made in the Mediterranean Sea, along with the West Nile Delta project, the Taurus, Libra and Atoll fields, and the Greater Nooros Area, were promising a future of gas exportations
Estimated at 30 trillion cubic feet (around 850 billion cubic metres), the Zohr field was rapidly brought online. Production began in late 2017 and peaked at 3.2 billion cubic feet per day by 2019. It was enough to briefly restore self-sufficiency, halt LNG imports, and revive the Idku and Damietta liquefactions plants for exportation.
The discovery was celebrated as a turning point not just for Egypt, but across the eastern Mediterranean, where competing pipeline proposals and energy corridors had become entangled with geopolitical rivalries spanning Greece, Türkiye, Cyprus, Lebanon and Israel. With its strategic location and existing LNG infrastructure, Egypt seemed poised to emerge as a central regional player, The reality, however, proved more fragile.
Zohr’s production boom fed into a high-consumption domestic market, further exacerbated by low energy prices. As result, gas prices became financially unstainable and demand ended up exceeding domestic production. By 2024-2025, output had fallen to roughly 5 billion cubic feet, while domestic consumption exceeded 6.2 billion .
Zohr field’s decline reflected a deliberate strategy that prioritised rapid extraction over long-term sustainability. Caught in the grip of the economic crisis, Egypt was unable to reinvest in its domestic energy infrastructure.
Going back into the arms of Israel
Already in February 2018, Israeli exploration and production company, Delek Drilling, now NewMed Energy, announced a 10-year deal of gas export to Egypt, worth $15 billion. Yet, the biggest news arrived on August 2025, when NewMed closed the largest deal ever in Israel’s history with Egypt. The agreement is estimated to be worth $35 billion by 2040.
The Leviathan gas field will supply the Egyptian market. It is one of the largest gas fields in the Eastern Mediterranean. In January 2026, its partners Chevron Mediterranean Ltd, NewMed, and Ratio Energies announced a $2.36 billion expansion project, signalling long-term confidence in the field’s output.
What has been celebrated a fiscal triumph on the Israel side, concerns linger. Critics in Israel warn about the over-commitment of reserves to the export market, and, above all, to a partner whose reliability cannot be overestimated Without doubts, 15-years agreement will provide sustenance to the state treasury “strained by security expenditure”
But the question remains: why has Egypt chosen Israel, of all partners, as its principal gas supplier?
Geopolitics over Economics: Why Israel?
The answer lies less in economics than in geopolitics. The deal’s significance extends well beyond its energy terms, carrying implications that reach deep into the region’s geopolitical landscape. Alternative options, such as Qatar, Algeria or Russia, were available. Yet, the choice of Israel was deliberate, and is, above all, the attempt to mend the fraying relationship between the two countries since the intensification of the genocidal war in Gaza.
The US have played a pivotal role in shaping this regional alignment. Since 2019, with the creation of the East Mediterranean Gas Forum (EMGF), Washington has brought together Egypt, Israel, Greece, Cyprus, Italy, Jordan and the Palestinian Authority, while excluding Türkie, and Russia. American private interests reinforce this strategic framework, with Chevron and other US firms deeply involved in the cooperation between the two countries.
El-Sisi government, for its part, has positioned as a “moderate interlocutor” with Israel in the East Mediterranean. Alternative alignments with Algeria or Russia would have drawn Cairo closer to the Iran-Russia axis in the Middle East, straining its relations with Washington and Tel Aviv and potentially jeopardising the $8 billion IMF loan.
Egypt as a regional hub?
With this deal, Israel gas supplies make up 15-20 percent of Egypt’s imports, though a significant portion is redirected to the European market. The disruption of Russian gas flows has created an opportunity both for Israel and Egypt to expand their exports to Europe: Israeli gas flows via pipeline to Egypt, where it is liquefied and exported westward. As the only country in the eastern Mediterranean with operational liquefaction facilities, at Idku and Damietta, Egypt has naturally emerged as the regional hub in the Mediterranean’s new energy system configuration.
Indeed, Egypt has accordingly ramped up LNG exports to Europe. In January, the Ministry of Petroleum reached an agreement to export 3.2 billion cubic feet of natural gas to the European markets. The profits, approximated to $40-45 million, will go entirely to the two foreign partners, Shell and Petronas, as partial settlement of accumulated arrears; in return, Egypt will receive the partners’ shares of locally produced gas.
Yet, beneath this hub ambition lies a fundamental tension that has run through this article from the outset. Egypt presents itself as a gas exporter, but in practice its domestic demand absorbs the vast majority of the gas it imports. The question, then, is whether Egypt can reconcile two competing imperatives: satisfying domestic consumption, on one side, and exporting enough LNG to service its accumulated debts and attract fresh investment on the other. The answer will determine whether Egypt’s role as a regional hub is a sustainable strategic asset, or simply a balancing act it cannot afford to maintain for long.
Questions
- With $4-5 billion in arrears to international oil companies, can Egypt realistically use gas exports to relieve its energy debt?
- In a Europe that is diversifying away from Russia yet struggling to secure stable alternatives, how long can Egypt count on European LNG demand as a financial lifeline?
- Given Egypt’s deep economic indebtedness, its $8 billion IMF loan, and its dependence on Western political backing, were any other energy partnerships ever truly viable?
Additional Readings
- Oxford Institute for Energy Studies. (2018). Egypt: Return to a balanced gas market?
- Belhaj, Ferid. “The Ebbs and Flows of Eastern Mediterranean Gas Politics in 2025.” Policy Brief No. 11/25, Policy Center for the New South, February 2025.
- Çıraklı, Mustafa, and Nur Köprülü. “Why the War in Gaza Matters for the Eastern Mediterranean.” Horizons, Center for International Relations and Sustainable Development (CIRSD), 2024.
