A $15 billion deal to export Israeli gas to Egypt is moving forward after months of talks, bringing the Jewish state a step closer to becoming an energy exporter to the most populous Arab country. Noble Energy Inc. and Delek Drilling-LP said they plan to supply around 64 billion cubic meters of natural gas over 10 years to Egypt’s Dolphinus Holdings Ltd. from Israel’s Tamar and Leviathan reservoirs. Shares of Israeli gas companies soared the most in nine years on Monday. The deal needs regulatory and government approvals in Egypt and Israel.
The move could add an economic plum to a relationship that has focused on security since the two countries signed a peace accord that changed the face of Middle Eastern politics nearly four decades ago. Tavy Rosner, an analyst at London-based Barclays Plc, said he expects more agreements to follow, including the sale of Israeli gas to Royal Dutch Shell Plc, which operates a liquefied natural gas plant in northern Egypt.
The deal with Egypt follows an agreement with Jordan in 2016. Egypt, for its part, is trying to leverage the discovery of the giant Zohr field to attract investment and foreign currency. Egypt has idle liquefaction plants such as Shell’s, making it a suitable location for a regional hub.
“This paves the way for further deals and cements Egypt as a regional energy hub,” Yossi Abu, Delek Drilling’s chief executive officer, said in a phone interview. “This will be an engine for both the Egyptian and Israeli economies alike. We’re proud to be part of this moment.”
Security Risks
Questions remain, including how Noble and Delek will transmit the gas to Egypt in a region rife with security risks. Egypt used to supply Israel with gas but the pipeline was sabotaged repeatedly by Islamist militants in the Sinai Desert.
Cairo had frozen talks on a gas deal after an international arbitration court ruled Egyptian companies must compensate Israeli electricity providers for that past deal. EMG, which operates the pipeline that used to bring Egyptian gas to Israel, also is seeking damages.
Egyptian Petroleum Minister Tarek El Molla told CBC television Monday night that the arbitration must be resolved before the deal can go through, without elaborating.
Executives at Dolphinus couldn’t immediately be reached for comment. Egypt’s Petroleum Ministry said it will take decisions that help it achieve its goal of becoming a regional gas hub, and that Egypt is keen to settle any disputes.
Nameless Partner
The Egyptian statement didn’t mention Israel, reflecting sensitivities in a country where many still resent the Jewish state over past wars and its ongoing conflict with the Palestinians. Molla, in his comments to CBC, said Egypt was right to import gas “from Cyprus or from anywhere else” in its quest to become a regional energy hub.
Israeli Prime Minister Benjamin Netanyahu called it a “joyous day,” lauding the deal’s potential to “put billions into the state treasury to benefit the education, health and social welfare of Israel’s citizens.”
The area from Cyprus to Lebanon and Egypt may contain additional gas riches, and countries in the region are eager to develop export plans. The United States Geological Survey estimates the area could hold more than 340 trillion cubic feet of gas, more than U.S. proven reserves.
The emerging wealth is also threatening to spark conflict. Israel and Lebanon have traded threats in recent weeks as the two countries disagree about where their border should be.
It’s not clear how the new deal fits into Egypt’s plans to export gas from its giant Zohr field. Italy’s Eni aims to pump 2.7 billion cubic feet of gas per day from Zohr by end-2019. Delek has said that even at full production Zohr won’t be able to keep up with rising demand.
Delek said it will begin talks with EMG over use of its pipeline. Another possibility could be to use an existing pipeline that connects the Israeli transmission system with the Jordanian one, they said.
This article was originally published on www.bloomberg.com viewed 21st February 2018.
