Israel resumes $35 billion gas deal with Egypt after months-long freeze and U.S. pressure

After months of shifting political dynamics, stalled negotiations, and rising regional tensions, Israel and Egypt are once again moving forward on one of the largest energy agreements ever signed in the Middle East and North Africa.

The deal, first signed in August 2025, will see Israel export roughly 130 billion cubic meters of gas from the Leviathan gas field to Egypt over the next 15 years, with partners including Chevron Corp., NewMed Energy, and Ratio Petroleum Energy guaranteeing a set price for the domestic Israeli economy.

Initially, the agreement was celebrated as a milestone for regional energy cooperation. Under the deal, Israel would supply Egypt with gas until 2040, supporting Egypt’s ambitions to expand LNG exports while meeting rising domestic demand amid persistent electricity shortages.

Phase one of the project is expected to produce approximately 20 billion cubic meters by 2026, with gradual increases over the following years.

To facilitate this, both countries planned infrastructure upgrades, including a new cross-border pipeline through Nitzana and capacity enhancements at Leviathan.

The delay was partly driven by broader political tensions at that time, including Egypt’s strong disapproval of the displacement of Palestinians, as well as unmet conditions related to security and pricing.

Cohen stressed that the agreement extends beyond fiscal concerns, carrying significant political and security implications. He explained that it safeguards the shekel, strengthens the economy, and promotes regional stability, all while navigating sensitive regional dynamics.

Meanwhile, the United States has actively encouraged a swift resolution. Diplomatic pressure intensified ahead of a planned visit by U.S. Energy Secretary Chris Wright, underscoring the deal’s importance for regional energy security and economic stability.

The deal comes at a critical juncture for Egypt. Last year, the country imported a record 981 million cubic feet per day of gas from Israel, an 18.2% increase year-on-year, accounting for nearly 20% of its gas needs.

Once a net exporter, Egypt’s production has fallen sharply from a 2021 peak of 6.6 billion cubic feet per day to below 5 billion cubic feet per day in early 2025.

Production at the massive Zohr field, which supplies 40% of national output, has dropped by roughly a third since 2019, while limited new discoveries and insufficient investment in exploration have further constrained supply.

These challenges make the Israeli gas agreement crucial for Egypt’s energy security and regional ambitions.

Following months of negotiation and Israeli hesitation, the deal is now expected to proceed. Both countries have committed to completing the necessary infrastructure upgrades, which will allow Israel to maintain its status as a major energy exporter while helping Egypt stabilize domestic supply and develop its LNG export potential.