Israel's Leviathan natural gas field has signed the largest export agreement in the country's history, worth up to $35 B to supply gas to Egypt, NewMed, one of the partners in the field, said on Thursday.

The deal should ease an energy crisis in Egypt, which has spent billions of dollars on importing liquefied natural gas (LNG) since its own supplies fell short of demand.

Egypt's production began declining in 2022, forcing it to abandon its ambitions to become a regional supply hub. It has increasingly turned to Israel to make up the shortfall.

Exports from Leviathan were halted during a 12-d war between Israel and Iran in June for security reasons, but have since resumed.

Under the deal announced on Thursday, Leviathan, off Israel's Mediterranean coast, with reserves of some 600 Bm3, will sell about 130 Bm3 of gas to Egypt through 2040, or until all of the contract quantities are fulfilled.

The gas is pumped via pipelines, which makes it cheaper than LNG, the cost of which is inflated by the super-cooling required to make it a liquid that can be transported by ship and regasifying it when it reaches its destination.

"It's much, much, much, much better, like dramatically better, than any LNG alternative, and it will save billions of dollars to the Egyptian economy," NewMed CEO Yossi Abu told Reuters in an interview on Thursday.

Egypt's Ministry of Petroleum, which is also responsible for energy imports, did not immediately respond to a request for comment.

Bigger and bigger. Under Thursday's deal, Leviathan in a first stage will supply Egypt with 20 Bm3 of gas starting in early 2026 after the connection of additional pipelines.

It will export the remaining 110 Bm3 in a second phase that will begin after completion of the Leviathan expansion project and the construction of a new transmission pipeline from Israel to Egypt via Nitzana in Israel, NewMed said.

The initial volumes could lower Egypt's LNG imports by roughly 1 Bm3–2 bcm in 2026 and reduce the strain on global LNG markets, said Rabobank energy strategist Florence Schmit.

"If the full 130 Bm3 promised under the agreement will ever materialize, Egypt will likely not have to rely on LNG imports anymore – although those volumes are still a long way off," Schmit said.

Israeli gas accounts for about 15%–20% of Egypt's consumption, data from the Joint Organizations Data Initiative shows.

"We'll increase the flow to Egypt practically early next year, from the 4.5 Bm3 to 6.5 Bm3. Then once we finish in 2029 the second phase of Leviathan, we will increase that to 12 Bm3 a year," Abu said.

Egypt has been struggling to get its gas production up. According to latest figures, production reached 3,545 MMm3 in May, compared to 6,133 MMm3 in March 2021 - a decline of over 42% in less than five years - according to the Joint Organizations Data Initiative (JODI).

The Leviathan reservoir began supplying Egypt shortly after production began in 2020. The field, operated by Chevron which also holds a 40% stake, also supplies Jordan.

Leviathan's expansion, which would cost around $2.4 B, should allow for production and supplies within Israel and to its neighbors through 2064, NewMed said.