Israel’s Agreement to Sell $700 Million in Natural Gas to Egypt Awaits Gov’t Approval

Israel’s Tamar gas field’s partners announced signed letter of intent to sell 5 billion m3 of gas valued at $700 million to Egypt over the next 3 years, awaits final approval by Israel & Egypt.

By Hezi Sternlicht, Reuters and Israel Hayom Staff


The partners in Israel’s offshore Tamar gas field announced Sunday that they have signed a memorandum of understanding for the sale of at least 5 billion cubic meters of gas to Egypt’s Dolphinus Holdings over the next three years, via an old pipeline built to send gas in the other direction.

The Tamar offshore drilling site [Archive] – Photo: Albatross

Energy industry experts hedged Monday that the deal could be worth some $700 million.

The supplies would pass through an underwater pipeline constructed nearly a decade ago by East Mediterranean Gas, the company that oversaw a now-defunct Egyptian-Israeli natural gas deal.

Egypt had been selling gas to Israel as part of a 20-year contract, but the deal collapsed in 2012 after months of attacks on the gas pipeline by militants in Egypt’s lawless Sinai Peninsula. It has since been out of commission and EMG has filed a damages suit against Cairo on the matter.

Recent offshore discoveries such as Tamar, with an estimated 280 billion cubic meters of gas, and Leviathan, more than twice the size, have turned Israel into a potential energy exporter. Egypt has been slow in developing its own sizable gas resources and now faces an energy crisis.

The Tamar consortium, led by Texas-based Noble Energy and Israel’s Delek Group, said in a statement that they have signed a letter of intent to negotiate with Dolphinus, which represents non-governmental, industrial and commercial consumers in Egypt.

Any deal would be subject to various approvals in Israel, Egypt and from EMG.

The gas to be sent through the pipeline would be “interruptible,” meaning it would only come from excess reserves. It would be sold at a price comparable to other export agreements from Israel and based mainly on a linkage to Brent oil prices.

Tamar began production last year and output is mostly earmarked for the Israeli market. In addition, the Tamar partners are already in talks to provide an annual 4.5 billion cubic meters of gas for 15 years to Union Fenosa Gas for its liquefied natural gas plant in Egypt and a total of 1.8 billion cubic meters over 15 years to Jordan. Union Fenosa Gas is a joint venture between Spain’s Gas Natural and Italy’s Eni.

Noble and Delek are also developing the Leviathan field and are working on a major deal with BG Group to export 7 billion cubic meters of gas a year over 15 years for their LNG plant in Egypt.

“The memorandum of understanding with Dolphinus is another important link in the series of agreements that will allow the supply of natural gas to the domestic market in Egypt,” said Avner Gideon Tadmor, chief executive of Delek subsidiary Avner Oil Exploration. “I have no doubt these agreements will lead to a strengthening of ties between Israel and its neighbors.”

Yossi Abu, CEO of Delek Drilling, said that “once the letters of intent signed with Dolphinus and Union Fenosa are realized, we will be able to maximize Tamar’s production capabilities. The Tamar and Leviathan export deals to neighboring countries strengthen Israeli economy and they will lead to an increase in state revenues.”


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