Israel Gas Partners to Alter Egypt Deal
(Bloomberg) -- Parties to a $15 billion deal to export Israeli natural gas to Egypt are seeking to change the landmark agreement to enable supplies to increase gradually and thereby reduce the risk of disruptions. Shares of Israeli gas firms rose.
Companies developing Israel’s two biggest gas finds, led by Noble Energy Inc. and Delek Drilling LP, are working on modifying their contract with Egypt’s Dolphinus Holdings Ltd. so that they can reach peak supply in two years, Delek Chief Executive Officer Yossi Abu said Wednesday on a call with investors.
The current contract, signed last year, calls for exports of 7 billion cubic meters of gas annually by 2020. Half of that is on a so-called interruptible basis, meaning that supply can vary during peak hours or adverse conditions. Firms developing the Leviathan gas field are seeking to make the entire supply non-interruptible, while taking longer to reach the target, Abu said.
The deal is set to strengthen economic ties between the two countries and give Israel a new export market, after the agreements it has with Jordan, for the gas it discovered in the eastern Mediterranean. Israel and Egypt have touted it as a harbinger of bigger export deals to come. While the companies are trying to ensure a smooth start, they still need to complete the purchase of a pipeline to transport the gas.
Delek Drilling, which owns a 45% stake in Leviathan, Israel’s largest gas reservoir, jumped 6.9% to 10.11 shekels at 5:04 p.m. in Tel Aviv. Ratio Oil Exploration 1992 LP, which holds 15% of the field, climbed 4.8%.
The partners in Israel’s Tamar and Leviathan discoveries would supply about 4.5 billion cubic meters of non-interruptible gas next year and reach 7 billion “later,” Abu said, without elaborating. They’re considering ramping up to 5.5 billion in 2021 and 7 billion in 2022, according to people with knowledge of the situation.
Leviathan’s partners are examining ways to increase the project’s annual capacity to provide larger amounts to Egypt, but for now they need to ensure they’ll be able to service the contract with Dolphinus.
At current capacity, the gas in both Tamar and Leviathan is almost fully committed to buyers, though Leviathan’s owners expect to be able to boost shipments to Egypt by early 2021. That’s when Greece’s Energean Oil & Gas Plc is expected to start piping gas from two smaller Israeli offshore fields to the local market.
Delek and Noble have eliminated some obstacles to a final arrangement with Dolphinus. A few weeks ago, they successfully tested a pipeline that Egypt had used for years to export gas to Israel, until attacks by militants in the Sinai Peninsula led Cairo to halt the shipments earlier this decade.
To contact the reporters on this story:
Mirette Magdy in Cairo at firstname.lastname@example.org;
Yaacov Benmeleh in Tel Aviv at email@example.com
To contact the editors responsible for this story:
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Bruce Stanley, Rakteem Katakey
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