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Israeli Minister Calls For Scrapping UAE Oil Pipeline Deal

Israeli Minister of Environmental Protection Gila Gamliel is looking to have the recent oil pipeline deal between Israel and the United Arab Emirates (UAE) scrapped because of security and environmental concerns, Israeli daily Haaretz reported.

Last October, Israel and the UAE signed a preliminary agreement under which crude oil from OPEC's third-largest producer could be shipped to European markets via an oil pipeline in Israel connecting the Red Sea with the Mediterranean. This was one of the first major energy deals after Israel and the UAE agreed to normalize relations in September 2020.

Under the deal, Israeli state firm Europe Asia Pipeline Co (EAPC) and UAE-based MED-RED Land Bridge Ltd signed a memorandum of understanding for cooperation in transporting crude oil and fuel from the Gulf to Western markets via the pipeline between Israeli cities of Eilat on the Red Sea and the Mediterranean port of Ashkelon.

The pipeline, built in the 1960s, was intended to serve the transit of crude oil from oil-producing countries in the Persian Gulf to customers in Europe. Israel built the pipeline together with Iran at the time—before the Islamic Revolution in Iran in 1979 and before Israel and Iran became bitter enemies. Israel nationalized the Eilat-Ashkelon pipeline after the Islamic Revolution.

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Six months after the preliminary Israel-UAE agreement was signed, minister Gamliel is now seeking to reverse it, saying that the pipeline carries the risk of oil spills on land and security risks for Israel in case oil tankers are targeted at Israeli ports. The number of tanker arrivals to Israeli ports could rise to as much as 50 per year, from six now, if the pipeline begins operations, according to estimates cited by Haaretz.

Gamliel has sent a letter to the head of Israel's National Security Council with warnings about the potential security and environmental risks, Haaretz reports.

Asked to comment on the letter, the Prime Minister's Office told the daily that "As early as last March, the National Security Council sent Gamliel a letter in which she was informed that the NSC does not deal with this matter. This publication, as well as the additional letter on the same topic, are puzzling."  

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on June 09 2021 said:
    The attitude towards the deal between the UAE and Israel to ship part of UAE’s oil exports to European markets via the Israeli Eilat-Ashkelon oil pipeline (EAP) depends on where one stands.

    The Israeli Minister of Environmental Protection Gila Gamliel is looking to have the recent oil pipeline deal scrapped because of security and environmental concerns according to the Israeli daily Haaretz.

    However, the EAP which connects the Gulf of Aqaba with the Mediterranean, will compete with the Suez Canal and the Egyptian SUMED oil pipeline, which also connects the Red Sea to the Mediterranean.

    This will certainly benefit Israel economically in terms of transit revenue and strategically, but it will reduce Egypt’s revenue from the Suez Canal and deprive it of an estimated 12%-17% of the oil trade transiting through the Suez.

    Egypt’s SUMED pipeline was designed to pump 2.5 million barrels a day (mbd) of Gulf crude oil from Ain Sukhna terminal on the Red Sea to the Mediterranean port of Sidi Kerir, near Alexandria thus allowing very large crude carriers (VLCCs) that would otherwise sit too deep in the water – to continue to use the Suez Canal. The vast majority of crude entering the pipeline comes from Saudi Arabia.

    Were Gulf oil and LNG producers to start using the EAP, it will deprive the Suez Canal of an estimated 12%-17% of the transited oil trade and cut Egypt’s revenues from both the Suez and the SUMED pipeline initially by an estimated $12 bn annually in addition to a loss of the strategic importance of the Suez Canal.

    On balance, the EAP doesn’t provide any advantages whatsoever over the SUMED pipeline in terms of cost of shipping, security, capacity which is 24% of SUMED or time.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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