Egypt to stop importing gas in 2018

Zohr gas field

The announcement by the Egyptian energy minister eliminates the possibility of exporting Israeli natural gas to Egypt.

Egypt will stop importing liquid natural gas (LNG) during 2018 and begin exporting gas, following the commencement of production from the giant Zohr gas field discovered off the Egyptian coast, Egyptian Minister of Petroleum Tarek el-Molla told the Bloomberg news agency yesterday.

el-Molla added that the giant field could supply Egypt's internal needs, and that the sale of gas to export markets could begin in 2019. "The Zohr reservoir is enormous. It is a very important discovery, and we may discover additional reservoirs on this scale. Another point is that more large projects will soon begin operating and supplying very large quantities of natural gas to the Egyptian system," he added.

Responding to a question about a decline in investments by major international energy companies in oil and gas drilling because of the drop in prices, el-Molla said, "There are large companies interested in developing Egypt's reservoirs, mainly Zohr. In addition to ENI and BP, there are other companies interesting in the Egyptian gas sector and the Zohr reservoir."

"This reservoir is enormous. It changes the entire situation in the Egyptian natural gas market in particular, and in the entire eastern Mediterranean," he added.

The share prices of Delek Group Ltd. (TASE: DLEKG) and the participation units of Delek Drilling Limited Partnership (TASE: DEDR.L) and Ratio Oil Exploration (1992) LP (TASE:RATI.L), which are involved in the development of the Leviathan gas field, responded today with a steep drop. The share price of Isramco Negev 2 LP (TASE: ISRA.L), which holds nearly 29% of the rights in the Tamar reservoir, was down 1.5%, and Tamar Petroleum's share price fell 2%.

In recent weeks, analysts and holders of shares and participation units of companies operating in Tamar and Leviathan have been awaiting an announcement of the signing of an agreement on exporting gas to Egypt for at least 3-4 years.

Bloomberg reported three months ago that the Leviathan partners had begun accelerated negotiations with Egyptian company Dolphinus on ways to implement the contract for supplying natural gas to Egypt. Leviathan is scheduled to begin supply natural gas for Israel and Jordan in the second half of 2019.

Egyptian companies Dolphinus and Taqa Arabia previously signed agreements to buy gas from Tamar and Leviathan. A binding agreement was signed with the Tamar partners under which Israel would export all the surpluses remaining after domestic use and exports to Jordan, amounting to 1 BCM for a relatively short period of 6-7 years. An agreement in principle was signed with the Leviathan partners for the supply of up to 4 BCM for 10 years.

These agreements were never implemented, among other things due to regulatory obstacles in Egypt. Israel can currently be connected with the Egyptian gas transportation system through the Arab pipeline system that passes through Aqaba, Jordan. This option was regarded as more expensive, and Egypt was afraid that it would add to the costs of the deal.

Another possibility was using the old gas pipeline built by EMG to import natural gas from Egypt to Israel. The EMG pipeline starts at the company's receiving station in Ashkelon, and connects to the Egyptian land-based gas pipeline in the El Arish region. The plan was to use the existing pipeline, out of use since 2012, in the opposite direction, with gas flowing from Israel to Egypt through the pipeline.

Published by Globes [online], Israel Business News - www.globes-online.com - on November 15, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Zohr gas field
Zohr gas field
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018