Israel considers constructing an interstate pipeline from Israel to Egypt in order to facilitate natural gas export to the neighbouring country amid the prevailing tight global supply chain that has seen a spike in the worldwide gas prices globally, the Israeli energy ministry said on October 21, 2021.

The anticipated $200 million-worth pipeline would connect the two neighbouring countries through their natural gas grids via the north of the Sinai Peninsula. The gas pipeline could be operational in just two years, sources close to the deal hinted.

A subsea pipeline coupled with a new onshore pipeline will make Israel a key energy hub in the energy-thirsty Eastern Mediterranean region, despite having upended diplomatic ties with some countries in the past.

Israel became one of the key energy supplies in the region after its Leviathan and Tamar offshore gas fields started gas production in January 2020, supplying around 5 billion cubic metres (bcm) of gas per year via the Israel-Egypt subsea pipeline running through the Egyptian Sinai Peninsula.

"Israel and Egypt are holding talks on possible cooperation in the supply of natural gas. Following a request by Egypt for further natural gas supplies, one of the options being studied is an onshore gas pipeline," Israel's energy ministry stated to Reuters.

The pipeline linking the two countries will be owned by Israel Natural Gas Lines, an Israeli natural gas distribution company. The route of the new pipeline is already in the process of approval from local authorities.

While the gas prices have been hiking in European and Asian markets, the 15-year gas supply contract Egypt signed with Israel protects the country from unprecedented price fluctuation. According to a source privy to the deal, the anticipated new gas pipeline between the two countries will result in an additional 3-5 bcm of natural gas supplied to Egypt annually.

The increased gas supply will supply the Egyptian power grid and further boost liquefied natural gas (LNG) exports from Egypt to Europe and Asia.

"There is no doubt Egypt has all the qualities and conditions to become global hub which will concentrate additional volumes of gas from Israel, Cyprus and surrounding regions and be a focal point of gas trade both regionally and globally," Yossi Abu, Delek Drilling CEO told Reuters.

While an onshore gas pipeline could be at a risk of being attacked by extremist Islamists who have tried to sabotage the gas facility at the Sinai Peninsula, the new pipeline would boost Israeli's export capacity from 5bcm to 8 bcm annually by 2023. The anticipated boom in Israel's gas export is attributed to the debottlenecking of pre-existing structures and giant Leviathan field's expansion.

The expanded field is owned by operated by a large corporation known as Chevron Corp., where Delek Drilling is part of a conglomerate known as Delek Group holding 45% of the stake.

Moreover, Israel's gas output is expected to increase exponentially in the future as Energean plans to commence gas production from the Karish/Tanin gas fields, which are prospected to begin operations in mid-2022. Energen also plans to drill five new wells in February, which will further boost Israel's gas output in the future.