The EU is on the hunt for a viable replacement for Russian gas. Ramping up imports from existing suppliers like Norway and Algeria would be impossible without major infrastructure upgrades; existing export terminals already operate at near maximum capacity. And so, a surprising partnership between Israel, which has found itself newly endowed with gas reserves, and Egypt, which boasts the infrastructure and capacity to liquefy, store and export gas, has caught the EU’s eye.

On 15 June 2022, the three parties signed a Memorandum of Understanding with a view to initiating natural gas exports from Israel to the EU via Egypt. Environmental protection, carbon capture and sequestration and green energy are referenced, although it is unclear how these elements might be implemented and with what priority. Palestine, which has been illegally occupied by Israel since 1967, is neither included as a signatory nor mentioned in the document. Initial gas exports to Europe are not expected to be substantial, reports Bloomberg, but are expected to climb as Israel’s output grows.

What’s the deal with Israeli gas?

Israel has reaped the benefits of elevated gas prices and increased global demand for non-Russian fossil fuels. Over the first half of 2022, the country’s gas exports grew by 22% and its revenues by 50%, jumping from $165m in 2021 to $250m. More leaps in production are to come; in September 2022, Israeli Prime Minister Yair Lapid announced plans for the country to supply the EU with enough gas to cover 10% of what it received from Russia last year (15.5 bcm). Undoubtedly, Lapid’s portrayal of a bolstered economy and stronger Western relations is a bid to appeal to voters ahead of the Israeli election on 1 November.

In parallel, Palestine has been unable to exercise much sovereignty over its economy since the Israeli military occupation in 1967 and the blockade of the Gaza Strip in 2007. This has denied Palestine much-needed tax and export revenue, putting its economy on the verge of collapse.

In 1999, the discovery of Gaza Marine, a large offshore gas field within Palestinian territorial waters, brought hope for economic prosperity to Palestine. Its exploitation was projected to bring in a total of up to $7bn in revenues, according to Washington-based think tank the Brookings Institution, and provide domestic energy whilst eliminating Palestine’s accrued debt, which currently stands at $4.7bn, or 74.1% of its annual GDP. But the Israeli government seized control of the waters above Gaza’s offshore natural gas reserves following the 2007 Gaza blockade. This was despite the 1995 Oslo Accord, an Israel-Palestine agreement that gave the Palestinian Authority (PA) jurisdiction over waters up to 20 nautical miles off its coast.

British Gas, the would-be contractor for Gaza Marine, has subsequently dealt with the Israeli government instead of the PA to discuss exploration and development rights.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

Onshore, in the occupied West Bank, Israel has assumed control of the Meged oil field, even though most of the reservoir is located beneath Palestinian territory. The field is being accessed from the Israeli side, draining Palestinian resources with no profit-sharing.

On 6 October 2022, an anonymous source informed Al-Monitor of a new agreement between Israel and Egypt that Israel would begin extracting gas offshore from Gaza Marine by the start of 2024, following “political pressure exerted by European countries on Israel to meet their needs for gas alternatives to Russian gas.”

On 19 October, the Israeli Broadcasting Corporation (Kan) reported that "Egypt, Israel and the Palestinian Authority have agreed to develop the natural gas field off the Gaza Strip," adding that profits from the field would go to both the PA and Israel.

Later the same day, in conversation with Middle East Monitor, a Palestinian source denied claims of a tripartite deal with Egypt and Israel, stating there was no mention of Israel’s involvement during discussions with Egypt. "We will not pay Israel to extract what belongs to us," added the source.

[Keep up with Energy Monitor: Subscribe to our weekly newsletter]

Though Israel alleges the agreement includes plans to allocate revenues to the PA and Gaza’s economy as well as its own, this has not been confirmed by the PA. The agreement also does not grant Palestine sovereignty over its own resource nor any share of profits from other disputed fields.

By commandeering Palestine’s resources, Israel is violating international law.

Before importing Israeli gas, the EU should use its influence as a potential major gas importer to push for a mutually beneficial resolution for Palestine’s oil and gas reserves.

The Memorandum of Understanding in June explicitly asserts it is not legally binding and further, “any dispute that may arise between [signatories][...] shall be settled amicably through mutual consultation or negotiation […] in good faith and in the spirit of this Memorandum of Understanding, through diplomatic channels.”

This cordial statement means two things. First, the EU can easily change its mind about partnering with Israel, a nation often condemned by the bloc for its own muddied record of annexation. Second, if the EU does begin to ramp up gas imports from this undeniably beneficial partnership, there is room to negotiate the matter of Palestine’s occupation, to which the EU has a “commitment to the vision of an independent and sovereign state".

The EU can facilitate Israel’s recognition of Palestine’s sovereignty and shake off the last of its Russian gas dependency. Two birds; one stone.

A new lease for the EU and Palestine

If the EU conditions its purchase of Israeli gas on the affirmation of Palestinian sovereignty over its energy resources, then all parties could reap the economic benefits.

New discoveries of natural gas in the Levant Basin, which stretches across Egyptian, Palestinian, Israeli and Lebanese shorelines, offer an opportunity to distribute and share about $524bn between the neighbours, found a 2019 study by the United Nations Conference on Trade and Development.

If given a fair portion of profits from Israel’s existing and planned, on and offshore gas fields, Palestinians would have a consistent funding stream to invest in long-term economic recovery, reconstruction and even an energy transition. The EU, which describes itself as Palestine’s most important donor, would no longer need to provide the level of financial aid it currently does. Since 2008, PEGASE, the EU’s mechanism for supporting the Palestinian people, has provided more than €‎551m in funding to Gaza and the Occupied West Bank.

Israel’s occupation of Palestine has had a profound impact: tight restrictions on the movement of people and goods; the confiscation and destruction of property and other assets; the loss of land, water and other natural resources; the fragmentation of the domestic market and isolation from regional and international markets; and the expansion of illegal Israeli settlements.

For now, Palestine’s economy is in Israel’s hands. But Israel has a real opportunity to demonstrate on the world stage it can be equitable and just. If the EU truly decries Israel’s annexation of the West Bank, then it should not import Israeli gas without working to ensure Palestine’s right to develop and profit from its own oil and gas. If successful, this could be a watershed moment towards a peaceful resolution between Israel and Palestine.