image Photo: Flash90

Historic Israel-Egypt Gas Deal Set to Begin

Israel is set to begin the commercial streaming of natural gas to Egypt in two weeks, marking the first time the country will officially become an energy exporter.

The historic deal will go into effect following the signing of final approvals by Israel’s Minister of Energy Yuval Steinitz. According to a Ministry statement, “after all the processes and steps were completed on the professional level, the authorization to go ahead with the deal was received, based on the recommendations of government agencies, including those that regulate marketplace competition.”

Israel’s energy czar Steinitz hailed the deal with Egypt as “the most important economic arrangement between the two countries since the peace treaty between us was signed” 4 decades ago. “For the first time, Israel is now an energy exporter, and is an important part of the region’s energy economy,” he added.

The resource will be pumped from two of Israel’s vast offshore gas reservoirs. According to terms of the arrangement, over the next 15 years up to 25 billion cubic meters (BCM) of gas will be streamed from the Tamar field and 60 BCM from Leviathan.

Both fields are located in the Levant basin of the Easter Mediterranean Sea.

The contract was also signed by the two Israeli corporations which manage the fields, Delek Drilling LP and the Tamar Consortium; and their Egyptian counterpart Dolphinus Holdings Ltd., which is a natural gas trade company intent on supplying the large industrial and commercial consumers in the Arab Republic.

Earlier this year, Prime Minister Benjamin Netanyahu said the $15b deal would “strengthen our economy (and) strengthen regional ties.”

Egypt, which Israel’s first international energy customer, “is becoming a real gas hub,” Yossi Abu, CEO of Delek subsidiary Delek Drilling, told Reuters. “This deal is the first deal of potentially more to come.” While he said that he expects most of the gas to be used for Cairo’s domestic market, he added that it could also help pave the way toward turning Egypt into an export hub for Israeli gas. The partners have also been trying to finalize a long-term export deal with a Royal Dutch Shell plant in Egypt.

The development is a complete reversal in gas trade between the two countries. Israel used to buy gas from Egypt, but trade was severed in 2012 due to sustained attacks on pipelines in the Sinai peninsula by Islamist terrorists.

Tamar is the largest field ever discovered by the U.S. Noble Energy, Inc. hydrocarbon exploration company in 2009. It is located 1,700 meters below the Mediterranean Sea about 81 kilometers off the coast of Israel’s third-largest city, Haifa. Tamar contains proven reserves of up to 49 BCM. It is operated by Noble, which controls 25% of the site. Isramco holds 28.75%, Delek Drilling 22%, Tamar Petroleum (a spin-off of Delek) with 16.75% in addition to two smaller partners, Dor Gas Exploration with 4% and Everest at 3.5%.

Leviathan was discovered the following year some 47 kilometers from Tamar, 1500 meters deep, and around 129 kilometers from the Israeli coast. Delek Drilling and Noble Energy together control 85% percent of Leviathan, with the rest held by Ratio Oil.

— By Erin Viner