Tamar, Leviathan in talks with Egyptian customers

Delek Drilling has confirmed talks with Egyptian customers to sell gas to LNG facilities.

Israeli gas partnerships are in talks to sell natural gas from the Tamar and Leviathan fields to customers in Egypt. In a notice to the TASE on Friday, Delek Drilling LP (TASE: DEDR.L) confirmed, for the first time, that talks were being held. Energy market sources said today that the oil majors that operate Egypt's two liquefied natural gas (LNG) plants were participating in the talks with the Israeli partnerships. These plants are currently only operating at partial capacity because of the natural gas shortage in Egypt.

The LNG plants at Damietta and Idku are operated by BG Group plc (NYSE; LSE: BG), which is well known in Israel, and Union Fenosa Gas SA, a joint venture of Italy's ENI SpA and Spain's Gas Natural SDG SA. Egyptian daily "Al Ahram" reports that the two plants exported 4.7 million tons of LNG in 2012, a third of their total capacity of 12.2 million tons a year. Importing gas from Israel would allow ENI and Union Fenosa Gas to greatly boost the plants' production, after billions of dollars were invested in building them.

In addition to exporting gas to Egypt's LNG plants, Israel could make spot deliveries of gas from the Tamar field to Egypt via pipeline. The pipeline from the Tamar field to the onshore terminal is already struggling to meet peak demand by Israeli customers, but during off-peak hours, mainly at night, the pipeline could supply gas to Egypt, which is still connected to Israel via the pipeline built by Egypt's East Mediterranean Gas Company (EMG).

Gas shortage since the revolution

Egypt's well-known natural gas shortage has worsened in the two years since the fall of President Hosni Mubarak. Egypt's gas reserves are twice the size of Israel's, but development of country's gas fields lags far behind the growth in demand for gas. The problem is exacerbated by the Egyptian government's fear of cutting its generous gas subsidies on one hand, and the flight of the oil majors that specialize in developing gas fields and transport infrastructures, on the other. As a consequence, Egypt barely exports gas, not even to Jordan, which agreed to raise sharply the price it pays for Egyptian gas.

Israel has not consumed Egyptian natural gas since 2012, following a series of bombings of pipelines in Sinai, and after Egypt's national gas companies cancelled sales to EMG, a brokerage founded by Hussain Salem, an associate of Mubarak, and Israeli businessman Yosef Maiman. EMG has filed a request for arbitration against the Egyptian government for compensation.

Published by Globes [online], Israel business news - www.globes-online.com - on August 25, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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