Israel attacked the largest gas field in the world. What are the consequences?

In response, Iran threatens to attack facilities in the Gulf, while the price of oil continues to rise and stands at around $108 per Brent barrel. Qatar, which shares the gas field with Iran and uses it for export, condemned the attack. Together, the common field is considered the largest in the world.

What is the importance of the field?

Together with the Qatari part, known as the “North Dome”, it is a reservoir that contains about 5,100 BCM of natural gas, many times more than all of Israel’s gas reserves combined. The field is responsible for about 70% of Iran’s gas production.

Given that approximately 80% of Iran’s general electricity consumption is based on natural gas, even partial damage to the infrastructure is a particularly great danger to the electricity grid. In addition, the field is also used by Iran for limited exports. Exports to Iraq were shut down as a result of the attack, which raises fears of disruptions in the country’s already unstable electricity grid.

According to reports in Iran, parts of the production system in the field were shut down to prevent the spread of the fire that broke out following the attack. This means that Iran is now facing a real risk of power outages.

Ella Rosenberg, an expert on Iran at the Jerusalem Center for Foreign and Security Affairs and a member of the Deborah Forum, explains that “an attack on a gas processing plant is a direct blow to the soft underbelly of the Iranian electricity economy, since approximately 80% to 90% of electricity production in Iran relies on thermal power plants that operate on natural gas. A disruption in a central processing facility creates an immediate domino effect: a lack of gas leads to the shutdown of turbines, which which may cause a voltage drop in the national grid and widespread power outages in the major cities and industrial areas.”

According to her, “The danger to the regime is twofold: beyond the paralysis of the military industry and the economic collapse, prolonged power outages are a historical catalyst for civil unrest and violent street protests against the government, especially in a country where the infrastructure is already shaky. For Tehran, this is a threat that very quickly evolves from a technical question of ‘gas pressure’ to an existential question of losing control over internal security.”

According to a document by Columbia University’s Energy Policy Center, “Iran looks like a natural gas giant, due to its proven gas reserves and significant exports and consumption,” but “this external abundance hides deep structural limitations: years of sanctions have impaired Iran’s ability to increase its supply capacity for domestic needs and its export obligations.”

Since Iran’s gas production capacity is already strained, any damage to the production facilities could put it in a serious energy problem – both in the short term and even more so in the long term.

While Iran produces most of its gas for its own use, Qatar, which is smaller but more efficient in managing the energy economy, uses part of the field mainly to export liquefied natural gas (LNG), making it the world’s third largest gas exporter.

What will Iran do in response?

Now, Iran is threatening a counterattack. Since it finds it difficult to seriously threaten parallel infrastructure facilities in Israel, it directs its anger at the Gulf countries.

The Revolutionary Guards have now issued “evacuation warnings” to petrochemical facilities in Saudi Arabia, the United Arab Emirates and Qatar. The latter warns that the attack on the gas field in Iran is a “dangerous escalation”, but this does not prevent it from becoming a target for Tehran.

What are the broad economic implications?

The price of Brent oil rises following the attack and now stands at around $108 per barrel. Modi Shafrir, chief strategist at Bank Hapoalim, explains that “Oil prices, which were on the decline before, are now rising sharply following Israel’s attack on infrastructure facilities and the fear of another sharp response from Iran and an escalation against infrastructure facilities in the Gulf. The stock indices are also falling a bit, futures in the US are falling, the shekel has weakened after starting the morning by strengthening.” Nevertheless, Shafrir emphasizes: “Apart from prices Oil, the reaction in the markets is relatively moderate.”