Tamar Field Closure: Israel has just closed a gas field near Gaza. Here’s why this is important

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CNN
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Chevron announced on Monday that it had closed a natural gas field off the coast of Israel at the request of local officials, two days after Hamas militants launched a military operation. Fatal assault On the country.

Tamar field, located 15 miles off the southern coast of Israel, fulfills 70% Of Israel’s energy needs for power generation, according to the American energy company.

A prolonged closure could lead to a decline in Israeli gas exports to its neighbors, Egypt and Jordan, as well as putting pressure on the already limited global gas market.

Currently, Chevron (CVX) continues to supply gas to its customers in Israel and the region from the larger Leviathan platform.

“Chevron is focused on a safe and reliable supply of natural gas for the benefit of the Israeli domestic market and our regional customers,” Chevron spokeswoman Sally Jones said in a statement. “Our top priority is the safety of our employees, the communities in which we operate, the environment and our facilities.”

Jones said that Chevron had received “instructions” from the Israeli Ministry of Energy to halt production at the Tamar platform.

Tamar’s closure comes as countries in the Northern Hemisphere head into winter Demand for natural gas Increased heating of homes.

Futures prices of the Dutch Royal Transfer Facility — Europe’s standard gas exchange — jumped 12% on Tuesday to nearly 49 euros ($52) per megawatt hour. They have risen by a total of 29% since Friday, the last trading day before Hamas launched its campaign An unprecedented attack On Israel.

However, prices are still well below their levels at this time last year, when they reached €169 ($179) per megawatt hour, as Europe did. I came out of the energy crisis Sparked by the Russian war in Ukraine.

Analysts at energy consulting firm Wood Mackenzie attribute the rise in prices since Friday mostly to the ongoing conflict in Israel.

Goldman Sachs analysts believe Tamar’s closure “contributed” to higher European gas prices.

“Going forward, if current events develop into a more sustained tightening of global LNG balances, this will reduce the ability of Europe’s gas markets to deal with other unforeseen events, such as cold weather spikes, or other supply disruptions,” they wrote in a note. Monday.

But Simone Tagliapietra, a senior fellow at Bruegel Research Centre, points to two factors that he believes are more important in pushing European prices higher.

One is the temporary shutdown of a gas pipeline in the Baltic Sea, and the other is planned industrial action by LNG workers in Australia, he told CNN.

On Sunday, the gas transmission operator in Finland Announce It announced that it had closed a major pipeline in the Baltic Sea transporting gas between Finland and Estonia due to a suspected leak. Then, on Tuesday, Chevron said it had received Notice of strikes By some workers at two liquefied natural gas facilities in Australia.

If the strikes, scheduled for later this month, continue, they will disrupt production at Chevron’s Wheatstone and Gorgon sites, which account for about 7% of global LNG supplies. according to Wood Mackenzie.

Tagliapietra said that closing the Tamar field for a long period may increase upward pressure on European gas prices, because it may force Israel to buy gas from the global market, increasing competition for exports.

“This could put upward pressure on European gas prices,” he said.

He added that, in general, the consequences for the global gas market would be “very limited,” because Israel is not a major supplier.

The most immediate impact of the lockdown The Tamar terminal will be felt directly to the left and right of Israel – its neighbors Jordan and Egypt, which import 7% and 4% of the total gas supplies from the platform respectively, according to Wood Mackenzie.

Although the Leviathan platform represents the bulk of Jordan’s total gas supply, a long outage at Tamar could force Israel to divert Jordan-bound gas produced at Leviathan to its domestic market, said Martyn Murphy, principal analyst at Wood Mackenzie. For CNN.

According to Zhongqiang Luo, senior natural gas analyst at Rystad Energy, the Leviathan gas field has “limited capacity to increase production to compensate” for the loss of production at Tamar.

For Egypt, a prolonged closure of the Tamar field would also reduce the country’s ability to increase its LNG exports and “earn crucial hard currency,” Murphy said.

Egypt produces much of its own natural gas in addition to importing some of it, processing it into liquefied natural gas for shipment abroad.

Lu points out that Cairo’s LNG exports have already fallen by about half during the first nine months of the year, compared to the same period in 2022.

He said, “This decrease can be attributed to the increase in domestic gas consumption within Egypt, driven by the increase in domestic demand during the summer months.”

The International Energy Agency expects demand for gas in Egypt to grow at a rate of 3.6% annually.

The agency said in a report, “This increase in domestic demand for gas threatens Egypt’s ambitions to export liquefied natural gas and highlights the need to import gas via pipelines from Israel.” a report Tuesday.