No more gas from Egypt? Modeling offshore discoveries and import uncertainty of natural gas in Israel

Israel depends on natural gas imports from Egypt for about 40% of its domestic needs, with the remaining met from domestic production. Gas supplies from Egypt have been erratic since their initiation: disruptions have increased after the 2011 revolution in Egypt and have been further ignited by public discontent. Despite these developments, Israeli policy makers have viewed the Egyptian gas deal as a positive factor in preserving peace with Egypt and have had no better alternatives than relying upon it. This has changed, however, after recent discoveries of three major offshore fields that are expected to satisfy domestic demand for an indefinite period and to provide gas for exports. We use an extended global CGE modeling framework that incorporates multiple households and factor ownership to investigate the effects of reduced gas imports from Egypt and the evolvement of domestic gas production as an alternative. In case of reduced gas imports from Egypt, the Israeli economy would slightly retract mainly due to lower production in energy intensive sectors. Poor households would be the most negatively affected, due to the strongest relative decline in income and the strongest increase of their consumer price index. In the case of increasing domestic gas production, Israeli GDP and domestic absorption would rise by about 0.2% and 0.4%, respectively. Poor households would be more positively affected than rich ones due to their composition of factor income and their higher expenditure shares for energy intensive commodities.

[1]  B. Shaffer,et al.  Natural gas supply stability and foreign policy , 2013 .

[2]  Roman Keeney,et al.  How Confident Can We Be in Cge-Based Assessments of Free Trade Agreements? , 2004 .

[3]  K. Siddig,et al.  A 2004 Social Accounting Matrix for Israel: Documentation of an Economy-Wide Database with a Focus on Agriculture, the Labour Market, and Income Distribution , 2011 .

[4]  Itay Fischhendler,et al.  In the name of energy security: the struggle over the exportation of Israeli natural gas , 2014 .

[5]  Liu Yu,et al.  GTAP 8 Data Base Documentation - Chapter 7.B: China , 2012 .

[6]  Michael G. Waller,et al.  Current and theoretical maximum well-to-wheels exergy efficiency of options to power vehicles with natural gas , 2014 .

[7]  M. Ferrantino,et al.  Alternative Approaches in Estimating the Economic Effects of Non-Tariff Measures: Results from Newly Quantified Measures , 2003 .

[8]  Harald Grethe,et al.  The natural gas sector in post-revolution Egypt , 2016 .

[9]  Michael Ratner,et al.  Israel’s Offshore Natural Gas Discoveries Enhance Its Economic and Energy Outlook , 2011 .

[10]  Marko Wagner,et al.  Global Trade Analysis Modeling And Applications , 2016 .

[11]  Martina Brockmeier,et al.  A Graphical Exposition of the GTAP Model , 2000, GTAP Technical Paper Series.

[12]  MyGTAP Model: A Model for Employing Data from the MyGTAP Data Application-Multiple Households, Split Factors, Remittances, Foreign Aid and Transfers , 2013 .

[13]  Brenda Shaffer,et al.  Israel--New natural gas producer in the Mediterranean , 2011 .

[14]  G. Malcolm Adjusting Tax Rates in the GTAP Data Base , 2000, GTAP Technical Paper Series.

[15]  K. Siddig,et al.  INTERNATIONAL PRICE TRANSMISSION IN CGE MODELS: HOW TO RECONCILE ECONOMETRIC EVIDENCE AND ENDOGENOUS MODEL RESPONSE? , 2014 .