Why does Egypt need Israeli gas - and what does it risk?

Israel’s decision to move ahead with a long-term gas export agreement to Egypt, valued at around $35bn and running until 2040, has drawn attention not because of its novelty, but because of its timing.

The deal comes amid a deepening energy crunch in Egypt, months of Israeli hesitation, and heightened political sensitivity surrounding Gaza and regional security.

While the agreement is often framed publicly as mutually beneficial, a closer look shows it is driven less by choice than by constraint - and that Egypt is taking all the risks.

Why Egypt needs Israeli gas now

Egypt is facing a structural gas shortfall that has become increasingly difficult to manage.

Domestic production has declined sharply in recent years, most notably from the Zohr field, which once underpinned Egypt’s return to gas self-sufficiency. At the same time, local demand has continued to rise, driven by population growth, electricity generation needs, and industrial consumption.

This imbalance has forced Egypt back into the international liquefied natural gas (LNG) market, where prices are volatile, and purchases are dollar-denominated, placing additional strain on foreign currency reserves.

Importing pipeline gas from Israel offers immediate financial relief: it is cheaper than spot LNG purchases and allows Egypt to stabilise supply without committing scarce hard currency at the same scale.

In the short term, Israeli gas functions as a pressure valve. It helps Egypt reduce emergency LNG imports, manage peak demand during summer and winter months, and maintain baseline supply for electricity generation.

Why Egypt has no real alternative

Beyond short-term cost considerations, geography and infrastructure leave Egypt with few realistic alternatives. Egypt already possesses the pipelines, processing facilities, and liquefaction plants needed to absorb Israeli gas quickly.

The Idku and Damietta liquefaction plants on the Mediterranean coast remain central to this equation, allowing gas imported from Israel to be liquefied and either used domestically or re-exported to Europe.

For Israel, Egypt is also the only viable export corridor. Plans to export gas via Cyprus and Greece have stalled for years due to cost, technical complexity, and political uncertainty.

Prospects for routing gas through Turkey or Lebanon have deteriorated further following the war on Gaza and regional instability. As a result, Leviathan gas is effectively landlocked without Egypt.

This mutual dependence, however, is not symmetrical. Egypt needs gas to keep the lights on; Israel needs a route to monetise production. But control over supply interruptions, contract clauses, and timing sits largely with the exporting side.

Who holds the leverage - and why

The core risk for Egypt lies not in volumes but in control. Gas contracts typically include force majeure clauses allowing supply to be halted during war or major security incidents.

In practice, this has already occurred, with supplies disrupted during periods of military escalation.

For Egypt, even short interruptions carry outsized consequences. Electricity generation, industrial output, and LNG re-exports are all affected almost immediately. While pricing is tied to international benchmarks and handled by companies rather than governments, the political decision to suspend flows sits elsewhere.

This asymmetry means that Egypt may physically host the infrastructure, but does not ultimately control the tap. The longer the agreement runs, the more this exposure becomes embedded in Egypt’s energy planning.

The US and Chevron factor

The timing of the deal cannot be separated from American interests.

US energy companies, particularly Chevron, are deeply invested in the Leviathan field. Delays in exporting gas translate directly into delayed returns on investment and rising operational costs.

Washington has a broader strategic interest as well. Ensuring steady Eastern Mediterranean gas flows supports European energy diversification and limits any renewed dependence on Russian or Venezuelan supplies. From this perspective, the Israel-Egypt gas corridor is not just a bilateral arrangement, but part of a wider US-backed energy architecture.

This helps explain why the agreement moved forward despite Israeli domestic opposition and months of delay. Economic pressure and strategic alignment ultimately outweighed political hesitation.

Why Cairo is staying silent

Despite the scale of the agreement, Egypt’s official response has been notably restrained. The Ministry of Petroleum has declined to issue detailed statements, and the deal has not been subjected to parliamentary scrutiny.

This silence reflects domestic political sensitivity. Linking Egypt’s energy security to Israel remains deeply unpopular among the vast majority of the Egyptian public, particularly amid ongoing violence in Gaza. There is also reluctance to open debate over pricing, long-term dependency, and the risks of supply disruption.

By keeping the deal largely technocratic and opaque, the government limits political fallout — but also limits public accountability.