The Tamar and Leviathan partners reported this morning that they have signed new contracts to supply offshore Israeli natural gas to Egyptian company Dolphinus Holdings Ltd.
Under the terms of the amended agreements, the Leviathan partners (Delek Drilling LP (TASE: DEDR.L), Ratio Oil Exploration (1992) LP (TASE:RATI.L) and Noble Energy Inc. (NYSE: NBL)) will provide 60 billion cubic meters (BCM) of natural gas to Dolphinus, almost double the 32 BCM stipulated in the original agreement. On the other hand, the quantity to be supplied by Tamar will fall from 32 BCM to 25.3 BCM over a 15-year period. The total to be supplied is thus being increased from 64 BCM to 85 BCM over 15 years. 2.1 BCM a year will be supplied from Leviathan in the first six months and 4.6 BCM a year for the next two years. Starting in the third year, 6.7 BCM will be supplied annually: 4.7 BCM from Leviathan and the rest from Tamar.
The revised agreements contain a take or pay mechanism in which Dolphinus has undertaken to pay for a minimum annual quantity, even if it has not actually consumed this quantity. As in the previous export agreement, the price of the gas to be supplied to Dolphinus under the agreements will be determined by a formula based on the price of Brent oil and including a floor price.
The gas field partnerships also announced that when the revised agreements were signed, an absolute majority of the conditions required for completing the deal had been fulfilled: regulatory approvals in Egypt, substantial financial approvals, etc. The remaining conditions for completing the deal are obtaining an export license from the Ministry of National Infrastructure, Energy, and Water Resources and approval from the Israel Tax Authority, which are slated for completion by the time when a commercial flow of gas from Leviathan begins, and completion of the deal for acquiring the shares of EMG and purchasing the rights to the EMG pipeline by EMED.
Concerning the EMG deal (arranging the operation of the pipeline transporting natural gas from Israel to Egypt), the Tamar and Leviathan partnership announced today that the deal, which was signed a year ago, was in the final completion stages. Closing the deal has already begun, after the sellers in the EMG deal deposited waiver letters with a trustee concerning the arbitration proceedings, and EMED, a company jointly owned by Delek Drilling (25%), Noble Energy (25%), and Egyptian company East Gas (50%), delivered $370 million to a trustee.
In the coming days, EMED is scheduled to deliver the balance of the sum to the trustee up to a total of $520 million. The parties are also acting to complete the formal approvals required in Egypt for transferring EMG's shares to EMED, and are making preparations for testing the continuous flow of gas to the Egyptian transportation system.
Delek Drilling CEO Yossi Abu said today, "In the current quarter, natural gas will begin flowing from Leviathan to the Israeli economy, and historic exports of gas from Israel to countries in the region will begin soon afterwards. The updated agreements for exporting gas to Egypt, which we reported today, and which substantially increase the total quantity of gas to be supplied from Israel to Egypt, once again prove that there is strong demand for gas from Israel in the Egyptian economy. This demand will increase in the coming years in order to supply the needs of the local Egyptian economy, together with the existing export facilities in Egypt. The agreements signed are further proof of the important economic cooperation between the two countries."
Published by Globes, Israel business news - en.globes.co.il - on October 2, 2019
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