Production halted at Chevron gas field following Middle East airstrikes

Pictured: Chevron's Leviathan gas field, offshore Israel

(Bloomberg) – Israel shut down production at its biggest natural gas field after it launched airstrikes against Iran, stopping supplies to import-dependent Egypt and raising concerns about fuel shortages there.

Israel ordered the halt of the offshore Leviathan field operated by Chevron Corp. due to security concerns, according to a statement from the Energy Ministry. Energean Plc has also suspended output in the country. 

The escalating tensions in the Middle East raise the risk of a wider war in a region that’s key to global energy supplies.

As pipeline gas flows from Israel fell, Egypt cut gas deliveries to some industries and is boosting the consumption of diesel by power plants “as a precautionary measure” so it doesn’t have to resort to power cuts, the Egyptian energy ministry said in a statement.

The disruption to regional supply coincides with rising summer demand in Egypt, which receives pipeline deliveries from Israel. The North African nation sometimes has to resort to heavier use of fuel oil for power generation, if LNG is too expensive or at times of elevated demand.

A prolonged period of lower Israeli supply may force Cairo to bring forward purchases of liquefied natural gas, further tightening global markets. Gas prices in Europe rose as much 6.6% on Friday. 

The Leviathan field is located in the eastern Mediterranean, supplying gas to domestic customers as well as Jordan and Egypt. 

The pause on exports to both countries together amounts to 35 million cubic meters a day, said Laurent Ruseckas, director of FIRST TAKE LNG Analysis at S&P Global Commodity Insights.

“Additional demand for cargoes could build quickly if the Israeli outages persist,” he said in an emailed note. “To fully replace Israeli pipeline imports, Egypt and Jordan between them would require another 10-12 LNG cargoes per month.”

Output at Tamar, also operated by Chevron, hasn’t currently been suspended, the Israeli energy ministry said. 

Energean’s Karish field only meets domestic demand in Israel, but a stoppage can affect overall fuel balance in the country.

Egypt is already heavily dependent on gas imports after domestic production slumped. It’s ramping up LNG imports, but recently agreed supply deals won’t start until next month.

Jordan can no longer directly import LNG, after a floating terminal that previously met its needs moved to Egypt. 

With the arrival of that terminal, whose connection to Egypt’s grid will now be expedited, there are three floating facilities for LNG imports in the nation, but only one is operational at the moment. 

Chevron referred questions to Israel’s energy ministry, adding that “our people and facilities are safe.”