Israel’s new pipeline unlocks next phase of its largest-ever $35 billion gas export deal with Egypt

Israel Natural Gas Lines has completed a 45-kilometre subsea pipeline linking Ashdod and Ashkelon, clearing a major infrastructure bottleneck that had limited natural gas exports to Egypt.

The pipeline connects the Leviathan gas reception facility in Ashdod to the East Mediterranean Gas pipeline near Ashkelon, from where gas will flow to facilities in El-Arish, Egypt.

Its completion allows Chevron, NewMed Energy and Ratio Energies, the partners in the Leviathan gas reservoir, to increase supplies to Egypt’s Blue Ocean Energy under an export agreement valued at about $35 billion over roughly 10 years.

The new connection is expected to raise the East Mediterranean Gas route’s annual capacity from about 6.5 billion cubic metres to 8.5 billion cubic metres.

As a result, Leviathan’s annual supply to Blue Ocean Energy could increase from about 4.7 billion cubic metres to 6.7 billion cubic metres during the first phase of the expanded agreement.

The project follows the installation of a third pipeline between the Leviathan reservoir and its offshore production platform. Together, the projects will allow the field’s partners to produce and transport larger volumes of gas.

In the next phase, annual deliveries to Egypt could rise to nearly 13 billion cubic metres. Chevron and its partners are also expanding Leviathan’s production capacity, which is expected to reach about 21 billion cubic metres annually by 2029.

Egypt has continued with the agreement despite political differences with Israel because of its growing energy needs.

The country’s domestic gas production has declined while demand from power stations, factories and households has increased. Consequently, Cairo has resumed expensive liquefied natural gas imports and faced a greater risk of electricity shortages.

Israeli pipeline gas, therefore, provides a cheaper and faster alternative to LNG shipped from distant suppliers.

Meanwhile, Egypt has described the $35 billion agreement as a commercial transaction rather than a political endorsement of Israel.

Cairo said private energy companies negotiated the deal under market conditions, although its implementation still depends on public infrastructure and regulatory approvals.

The arrangement allows Egypt to criticise Israeli actions, particularly in Gaza, while maintaining energy trade that supports power generation and industrial production.

Egypt’s dependence on Israeli gas became clear during regional fighting in 2025, when Israel temporarily reduced exports.

Egyptian fertiliser plants suspended operations, while the government increased fuel oil use and arranged billions of dollars in LNG purchases.

At the time, Israeli gas accounted for about 20% of Egypt’s total consumption and as much as 60% of its gas imports.

However, the growing dependence also carries risks. Future conflict could force Israel to halt production or prioritise its domestic market, leaving Egypt exposed to supply shortages and higher import costs.

Egypt and Israel have maintained formal relations under their 1979 peace treaty despite recurring diplomatic tensions, while Cairo remains a key mediator in negotiations involving Israel and the Palestinians.

Despite this, energy cooperation has become one of the strongest commercial links between the two countries.

Israel gains access to a large export market, while the North African country secures relatively affordable gas.

Cairo can also process imported Israeli gas at the Idku and Damietta LNG plants for re-export when domestic demand allows, supporting its ambition to become a regional energy hub.