Egyptian firm to buy $15 billion of Israeli natural gas

Andrew Cummings
February 20, 2018

Israel prevents the Palestinian Authority from drilling in the gas fields located in Palestine's territorial waters off the Gaza coast.

The total quantity of gas contracted in the Leviathan and Tamar agreements is approximately 32 billion cubic meters (bcm) for each agreement, which corresponds to up to 3.5 bcm per year.

"This is the first time since the signing of peace treaties in the Middle East that such significant deals between the countries have been signed", Israeli Energy Minister Yuval Steinitz said in a statement, adding that the agreement "is expected to strengthen bilateral relations".

In video footage published on Netanyahu's Facebook page, the Israeli Prime Minister describes the deal as a "historic" agreement, saying it will bring billions of dollars to the Israeli treasury.

Jordanian protest against gas deal in Amman on 14 October 2016
Jordanian protest against gas deal in Amman on 14 October 2016

In accordance with the deals, Delek Drilling will supply the Egyptian company with 64 billion cubic meters of natural gas from the Tamar and Leviathan gas fields.

According to Israeli energy group Delek, the value of the contract for the supply of natural gas is about 15 billion United States dollars.

Gabriel Mitchell, the associate director of the Israeli Institute for Regional Foreign Policies, said that for Israel the gas deal carries more economic than strategic signficance, specially for the Delek Drilling and Noble Drilling. There, he says, the Israeli LNG will be converted to natural gas in order to be used in the local market by Egypt's private companies, or alternatively it will be exported to Europe via Egypt.

The partners have also been trying to finalize a long-term deal to supply a Royal Dutch Shell Plc plant in Egypt.

Egyptian Petroleum Minister Tarek El Molla told the private Egyptian television channel ON E that outstanding disputes would have to be resolved for the deal to go through. The deal needs regulatory and governmental approvals in Egypt and Israel.

An Egyptian government official who declined to be identified said the deal did not mean Egypt itself would import any gas from overseas. "Many people did not believe in the gas outline", he said.

The gas price formula is the same under both agreements with linkage to Brent oil prices, similar to our other regional agreements.

Leviathan, located about 80 miles (130 km) west of Haifa, was discovered in December 2010 and is scheduled to start producing by the end of 2019.

The area from Cyprus to Lebanon and Egypt may contain additional gas riches, and countries in the region are eager to develop export plans.

Delek said it will begin talks with EMG over use of its pipeline.

The announcement followed news that the Egyptian gas company is going to pay compensation worth $1.03 billion to Israeli companies for losses incurred due to the blowing-up of the gas pipeline in Sinai. Isramco Negev 2 LP holds a 28.75% stake in Tamar.

Other reports by iNewsToday