London/New York CNN –
Chevron said Monday it had shut down a natural gas field off the coast of Israel at the behest of local officials, two days after Hamas militants launched their deadly attack on the country.
According to the US energy company, the Tamar field, located 15 miles off Israel’s southern coast, provides 70% of Israel’s energy needs for electricity generation.
A prolonged shutdown could lead to a decline in Israeli gas exports to its neighbors Egypt and Jordan, putting pressure on an already strained global gas market.
For now, Chevron (CVX) continues to supply gas from the larger Leviathan platform to its customers in Israel and the region.
“Chevron is focused on providing safe and reliable supplies 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 personnel, the communities in which we operate, the environment and our facilities.”
Jones said Chevron had been “ordered” by Israel’s Energy Ministry to stop production on the Tamar platform.
The closure comes as Hamas continues to fire rockets from Gaza into Israel and as Israel steps up its retaliation for last weekend’s deadly Hamas attack.
The Tamar platform is within range of rocket fire from Gaza, Portal reports.
Tamar’s closure comes as countries in the Northern Hemisphere approach winter, when demand for natural gas to heat homes increases.
Futures prices on the Dutch Title Transfer Facility – Europe’s benchmark gas exchange – rose 12% on Tuesday, reaching almost €49 ($52) per megawatt hour. They have risen a total of 29% since Friday, the last trading day before Hamas’s unprecedented attack on Israel.
Still, prices are well below their levels this time last year, when they reached 169 euros ($179) per megawatt hour as Europe emerged from its energy crisis triggered by Russia’s war in Ukraine.
Analysts at energy consultancy Wood Mackenzie attribute price increases since Friday mainly to the unfolding conflict in Israel.
Analysts at Goldman Sachs believe Tamar’s closure “contributed” to the rise in European gas prices.
“Should current events develop into a more sustained tightening of global LNG balances in the future, this will reduce the ability of European gas markets to deal with other unforeseen events such as cold spikes or other supply disruptions,” they wrote in a note Monday.
But Simone Tagliapietra, senior fellow at the Bruegel think tank, points to two factors that he believes are more important in driving up European prices.
Marc Israel Sellem/AP
The Tamar field typically provides 70% of Israel’s energy needs for electricity generation. The photo is from September 2, 2015.
One is the temporary shutdown of a gas pipeline in the Baltic Sea, the other is a planned industrial action by liquefied natural gas (LNG) workers in Australia, he told CNN.
On Sunday, the Finnish gas transport operator said it had closed a key pipeline in the Baltic Sea that carries 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 of its LNG plants 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 supply, according to Wood Mackenzie.
Tagliapietra said a prolonged shutdown at Tamar could add upward pressure on European gas prices as it could force Israel to source gas on the global market, which could increase competition for exports.
“That could put pressure on European gas prices,” he said.
Overall, however, the impact on the global gas market will be “very limited,” he added, as Israel is not a major supplier.
The more immediate impact of the shutdown According to Wood Mackenzie, the impact of the gas explosion at Tamar will be felt just to the left and right of Israel – its neighbors Jordan and Egypt, which import 7% and 4% of their total gas supply from the platform, respectively.
Although the Leviathan platform accounts for the majority of Jordan’s total gas supply, a prolonged outage at Tamar could force Israel to redirect gas produced at Leviathan for Jordan to its home market, Martijn Murphy, chief analyst at Wood Mackenzie, told CNN.
And according to Zongqiang Luo, senior natural gas analyst at Rystad Energy, the Leviathan gas field has “limited capacity to ramp up production to offset the loss of production at Tamar.”
For Egypt, a prolonged closure of Tamar would also limit the country’s ability to increase its LNG exports and “earn vital foreign exchange,” Murphy said.
In addition to imports, Egypt also produces a lot of its own natural gas and processes some of it into LNG for shipping abroad.
Luo notes that Cairo’s LNG exports have already fallen by about half in the first nine months of the year compared to the same period in 2022.
“This decline is due to increased local gas consumption in Egypt caused by an increase in domestic demand in the summer months,” he said.
The International Energy Agency expects gas demand in Egypt to grow by an average of 3.6% per year.
“This increase in domestic gas demand threatens Egypt’s LNG export ambitions and underscores the need to import gas via pipeline from Israel,” the agency said in a report on Tuesday.