Israel, Egypt reach $35 billion deal for natural gas supply

The deal reflects Egypt’s desperate need for gas due to surging domestic demand and declining output from its own fields. While the multiyear contract offers lower prices than those available on the short-term global market, it calls into question the North African country’s aspiration to return to being an exporter of the fuel.

Leviathan’s operators signed an agreement to send 130 billion cubic meters of gas to Egypt from 2026 to 2040, Israel’s NewMed Energy LP, which is a partner in the project, said in a statement on Thursday. The export deal is worth about $35 billion, making it the largest in Israel’s history, it said.

The gas field already has a contract to send around 4.5 billion cubic meters a year to Egypt, which will rise in stages starting next year and could reach as much as 12.5 billion cubic meters a year by 2033. Egypt also purchased 2.5 billion cubic meters last year on the short-term market, a volume that can vary from one year to the next. 

Egypt became a net gas importer in 2024 and has since been buying up large volumes of liquefied natural gas, doing deals for supplies out to 2028. The additional Israeli flows may mean Cairo can import less LNG in the future than it would otherwise have had to do. 

Importing LNG has also raised Egypt’s overall costs because the super-chilled fuel costs more than twice as much as pipeline gas from Israel. 

“This is a win-win for both sides. It means tremendous savings to the Egyptian market vis-a-vis LNG imports — it’s 50% down on the current LNG import market,” NewMed CEO Yossi Abu said in an interview. “It provides security of energy supply for many, many years to come to feed the growth of the Egyptian economy.”

While Leviathan’s gas is cheaper, the interruption of flows from Israel to Egypt because of the war with Iran in June highlighted possible vulnerabilities in the supply route. The disruption forced Cairo to halt supplies to some industries including fertilizer producers.

Under the new agreement, gas will be delivered to buyer Blue Ocean Energy over 14 years with payments determined by a formula based on the price of Brent crude oil.

During the first phase of the deal, set to take effect next year, 20 billion cubic meters of gas will be delivered to Egypt. The second phase, totaling around 110 billion cubic meters, requires completion of the Leviathan expansion project and the construction of a new pipeline from Israel to Egypt via Nitzana.

Shares of NewMed rose as much as 6.4% in Tel Aviv, the steepest intraday gain since Feb 4. NewMed holds a 45.34% stake in Leviathan alongside Chevron Corp. with 39.66% and Ratio Energies LP with 15%.