Noble Energy and Delek Drilling Limited Partnership (TASE: DEDR.L), the partners in the Leviathan natural gas reservoir, have begun accelerated negotiations with Egyptian company Dolphinus Holdings on ways of implementing the contract for supplying gas to Egypt, the Bloomberg news agency reported today. Two days ago, Egyptian President Abed Fattah el-Sisi approved a law allowing the private sector in Egypt to import natural gas. The law will become effective in September.
"There is great potential for the Mediterranean to be a gas hub for the region and we want to be partners with Israel in this," Dolphinus owner Alaa Arafa told Bloomberg today.
Egyptian companies Dophinus and Taqa Arabia previously signed agreements to buy gas from the Tamar and Leviathan reservoirs. A binding agreement was signed with the Tamar reservoir in which Israel will export all the surpluses remaining after local use and exports to Jordan, amounting to 1 BCM, for a relatively short 6-7-year period. An agreement in principle was signed with Leviathan for supplying up to 4 BCM for 10 years.
These agreements were never implemented, due among other things to regulatory barriers in Egypt. Now that the bureaucratic obstacle to exports of gas to Egypt has almost been removed, the question remains of how they will be implemented.
Israel can now connect to the Egyptian gas transportation system through the Arab Pipeline passing through Aqaba in Jordan. This option is thought to be more expensive, and Egypt fears that it will add to the costs of the deal.
Another possibility is using the old gas pipeline built by EMG to import gas from Egypt to Israel. This pipeline starts at the company's receiving station in Ashkelon, and is connected to the Egyptian land gas transportation pipeline in the El Arish area. The plan is to use the existing pipeline laid in 2012 to transport gas in the opposite direction - from Israel to Egypt.
Market sources predict that the Egyptian concerns will eventually prefer the first option of importing gas via Jordan, even though it is more expensive. According to Bloomberg, the problem with using the Egyptian pipeline is the arbitration ruling in the case of the violation of the old EMG agreement to export gas to Israel. The arbitrator in Switzerland ruled in February that the Egyptian gas companies would have to pay Israel Electric Corporation (IEC) (TASE: ELEC.B22) $2 billion in compensation.
Israel currently exports only small amounts of gas to Jordan from the Tamar reservoir, the only one currently active. A $10 billion agreement was signed last September to export gas from Leviathan to the Jordan National Electric Power Company (NEPCO).
Published by Globes [online], Israel Business News - www.globes-online.com - on August 10, 2017
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