Israeli Prime Minister Benjamin Netanyahu has frozen his country’s USD 35 bn natural gas export agreement with Egypt last week, amid rising Israeli-Egyptian tensions over the war in Gaza and Cairo’s military deployments in Sinai, according to industry publication Middle East Economic Survey (Mees).

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REMEMBER- The agreement, signed in early August, would see Leviathan partners — led by Chevron and Israel’s NewMed Energy — export 130 bcm of gas to Egypt between 2026 and 2040. Flows will first increase from 4.5 bn cubic metres in 2025 to 6.5 bn cubic metres as early as 2026 under the first 20 bn cubic meter phase of the agreement. Shortly after the agreement was signed, Prime Minister Moustafa Madbouly said that it will in no way affect Egypt’s stance on Palestine.

But why? Netanyahu reportedly decided to freeze the agreement due to Egyptian military deployment in Sinai — which Israel claims violates the 1979 Camp David Accords. Israel had already breached the accords, occupying the Philadelphi Corridor back in May 2024 during its ground offensive into southern Gaza.

Mees also reports that Netanyahu may be unhappy simply because he had no hand in the agreement, seeing as it was brokered with no direct involvement from the prime minister’s office. A source close to the matter told the outlet that the agreement “is just a very bad deal for Israel, any way you look at it. The ministry caved in, desperate for some publicity and a good news story.”

IN CONTEXT- Netanyahu over the weekend, said Egypt was “imprisoning Gaza residents who want to leave the war zone against their will,” adding that he would let Gazans escape their country through the Rafah Border if they wanted to but Egypt is blocking their exit. Following his statement, the Egyptian Foreign Ministry once again reiterated its stance regarding the displacement of Palestinians and referred to Netanyahu’s remarks as “an attempt to prolong the escalation and instability, and avoid confronting the consequences of Israeli violations in Gaza.”

Diaa Rashwan claps back: State Information Service chief Diaa Rashwan had strong words for Netanyahu in an interview with Al Mashhad’s Moataz Abdel Fattah (watch, runtime: 22:05). “I dare him to cancel the gas agreement — if he can bear the economic consequences,” he said, adding that Egypt has more than one option when it comes to energy. “The Israeli prime minister is completely delusional if he thinks Israel is our only route for gas. The Egyptian administration has alternatives.”

Even before Netanyahu’s freeze, there were logistical and commercial obstacles standing in the way of fully executing the agreement. The first phase — covering 20 bcm in supplies starting next year or upon Leviathan’s capacity expansion — hinges on the partners reaching a final investment decision to scale the field to 2.1 bcf/d. The Israeli Energy Ministry green lit the development plan in August.

But the second phase to supply 110 bcm starting 2029, could prove more challenging. It requires agreement on capacity allocations for the planned 600 mcf/d Nitzana pipeline connecting Israel to Egypt. Israel’s Energy Ministry approved a transportation agreement for the pipeline on 4 September — adding more color to what a government source told EnterpriseAM last week about construction of the pipeline starting next year. Still, disagreements persist over how Leviathan and Tamar partners will share the costs and split pipeline capacity. “The partners at Leviathan will be livid with the news that Netanyahu wants to freeze the gas deal,” a source told Mees, suggesting that the pipeline announcement was an attempt to placate them.

What’s next? “Israeli Energy Minister Eli Cohen will have the final say on whether the deal is finalized, at least from the Israeli side, though it remains to be seen if he will oppose Netanyahu on the matter,” Mees writes.

Vulnerable Egyptian-Israeli relations also received attention from the nation’s talking heads last night, with Ala Masouleety’s Ahmed Moussa (watch, runtime: 8:13) and El Hekaya’s Amr Adib (watch, runtime: 27:31) giving their two cents. “Netanyahu’s statements are stupid,” Adib said, adding that Egypt will never allow the displacement of Palestinians into Sinai. “Tension between the two sides is at its peak,” he added.

ALSO ON THE ENERGY FRONT-

Cyprus gas linkage moves ahead: Foreign Minister Badr Abdelatty and Oil Minister Karim Badawi discussed accelerating the integration of Cypriot gas fields into Egypt’s infrastructure during a visit to Nicosia this week, according to a statement. The visit included high-level talks with Cypriot President Nikos Christodoulides and’ a presser with Energy Minister Giorgos Papanastasiou, during which Badawi said the two sides are making “significant progress” on the project to link Cyprus’ Cronos gas field to Egypt’s liquefaction facilities, with exports to Europe expected to begin in 2027.

REMEMBER- Egypt and Cyprus inked multiple agreements earlier this year that will see Cyprus ship natural gas from its offshore fields to be liquefied in facilities in Idku and Damietta before being re-exported to foreign markets.

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