Explosive Revelation: The Shocking Closure of Israel's Gas Field near Gaza – Unveiling the Intriguing Consequences
Chevron complies with local officials' request to shut down an Israeli gas field following Hamas attack Implications: tight global market & Jordan's energy security jeopardized
Chevron announced on Monday that it had closed down a natural gas field near the Israeli coast, following a request from local authorities. This decision came in response to the recent attack by Hamas militants, which resulted in casualties in Israel. The Tamar field, positioned 15 miles off the southern coast of Israel, is responsible for fulfilling 70% of the country's power generation requirements, as stated by the American energy corporation.
A longer shutdown may result in a decline in Israeli gas exports to Egypt and Jordan, while exacerbating the tight global gas market. Presently, Chevron (CVX) remains committed to providing gas from the extensive Leviathan platform to its customers in Israel and the surrounding region.
Hamas launched a salvo of rockets from Gaza towards the Israeli city of Ashkelon, October 10, 2023.
Mahmud Hams/AFP via Getty Images
Israel bolsters troops at border with Gaza as Hamas hits Ashkelon with rocket barrage
Chevron spokesperson Sally Jones stated that Chevron's primary objective is to ensure the safe and dependable provision of natural gas to both the Israeli domestic market and regional customers. She emphasized that their utmost concern lies in the safety of their personnel, the local communities, the environment, and their facilities. According to Jones, the Israeli Ministry of Energy has directed Chevron to halt production at the Tamar platform.
Hamas' ongoing rocket attacks from Gaza towards Israel, coupled with Israel's escalating retaliation for the recent deadly assault by Hamas, have prompted the shutdown. According to Reuters, the Tamar platform is susceptible to rocket fire originating from Gaza.
Tight global market
The closure of Tamar comes just as countries in the northern hemisphere head toward winter, when demand for natural gas to heat homes increases.
The futures prices on Europe's benchmark gas exchange, the Dutch Title Transfer Facility, surged by 12% on Tuesday, reaching almost â¬49 ($52) per megawatt hour. These prices have increased by a total of 29% since Friday, which was the last trading day before Hamas initiated its unprecedented attack on Israel.
However, it is important to note that the current prices still remain significantly lower than those observed at the same time last year. At that time, prices soared to â¬169 ($179) per megawatt hour as Europe recovered from its energy crisis triggered by Russia's conflict in Ukraine.
The surge in European gas prices is largely attributed to the ongoing conflict in Israel, according to analysts at energy consultancy Wood Mackenzie.
Goldman Sachs analysts believe that the Tamar shutdown has played a role in driving the rise in European gas prices.
"In the future, if the current events progress into a continuous adjustment of global LNG supply and demand, it will limit Europe's capacity to handle unexpected occurrences, like extreme weather conditions or supply interruptions," stated the authors in a note on Monday.
However, Simone Tagliapietra, a senior fellow at the Bruegel think tank, highlights two factors that he considers to have a greater impact on the increase in European prices.
The Tamar field usually meets 70% of Israel's energy needs for power generation. Photo is dated September 2, 2015.
Marc Israel Sellem/AP
One is a temporary shutdown of a gas pipeline in the Baltic Sea, and the other is planned industrial action by liquefied natural gas (LNG) workers in Australia, he told CNN.
Finland's gas transmission operator announced on Sunday the closure of a vital pipeline in the Baltic Sea that transports gas between Finland and Estonia due to a suspected leak. Chevron reported on Tuesday that it had been notified of upcoming strikes by several workers at two of its LNG facilities in Australia. These strikes, scheduled for later this month, have the potential to disrupt production at Chevron's Wheatstone and Gorgon sites, which collectively contribute approximately 7% of global LNG supply, as stated by Wood Mackenzie.
A lengthy shutdown at Tamar could contribute to the increase in European gas prices, Tagliapietra explained. This could potentially result in Israel having to source gas from the international market, intensifying the competition for exports and consequently pushing up the price of gas in Europe.
However, all in all, the consequences for the global gas market would be "very limited," he added, because Israel isnt a major supplier.
Jordan at risk
According to Wood Mackenzie, the shutdown at Tamar will directly affect Israel's neighboring countries, Jordan and Egypt, as they import 7% and 4% of their total gas supply from the platform respectively. Martijn Murphy, a principal analyst at Wood Mackenzie, explained that although the Leviathan platform supplies most of Jordan's gas, a prolonged shutdown at Tamar may compel Israel to redirect gas from Leviathan, which was intended for Jordan, to its own domestic market.
According to Rystad Energy's Senior Natural Gas Analyst, Zongqiang Luo, the Leviathan gas field has a limited capacity to increase production and compensate for the production loss at Tamar.
Additionally, if Tamar experiences an extended shutdown, Egypt's ability to boost its LNG exports and earn essential foreign currency would be negatively impacted, as Murphy pointed out.
Egypt has a significant production of natural gas, both through its own resources and imports. It also engages in the processing of a portion of its natural gas into liquefied natural gas (LNG) for international shipping. Luo highlights that Cairo's LNG exports have already declined by approximately 50% in the initial nine months of this year, in comparison to the corresponding period in 2022.
The decrease can be attributed to a rise in gas consumption within Egypt, as a result of a significant increase in domestic demand during the summer months. The International Energy Agency predicts an annual growth rate of 3.6% for gas demand in Egypt.
"This increase in domestic gas demand threatens Egypts LNG export ambitions and highlights the need to import gas by pipeline from Israel," the agency said in a report Tuesday.
