Talks Underway to Build Gas Pipeline to Egypt



(Bloomberg) -- Talks are in progress to build an underwater natural gas pipeline between Israel and Egypt, part of efforts to transform the eastern Mediterranean into an energy export hub on Europe’s doorstep, Israeli Energy Minister Yuval Steinitz said. Israeli gas stocks rose.

Construction could begin as early as next year on the pipe to transport gas from Israel’s offshore Leviathan and Tamar fields to Egypt’s existing liquefied natural gas plants for processing and re-export, Steinitz said.

The new line would allow Israel to export much more to Egypt than the maximum 7 billion cubic meters per year that can flow through the existing EMG pipeline connecting southern Israel to Egypt’s Sinai peninsula.

“There’s no final decision yet, but there are talks,” Steinitz told Bloomberg in an interview in Cairo, where he took part in the first East Mediterranean Gas Forum. The event was aimed at boosting cooperation among the region’s nascent gas producers, consumers and transit countries. The next meeting will take place in April.

Oil ministers from Egypt, Israel, Greece, Cyprus, Jordan, Italy and the Palestinian Authority joined the gathering Monday, where they agreed to work together to monetize reserves by using existing infrastructure and adding more capacity.

The meeting came nearly a year after the signing of a $15 billion deal to export Israeli gas to Egypt over a decade -- a landmark deal reached after years of litigation.

The companies developing reservoirs in Israel and Cyprus, led by Noble Energy Inc. and Delek Drilling LP, are working on a deal to sell around 12 bcm of natural gas to the Idku LNG facility in Egypt, which is partly owned by Royal Dutch Shell Plc. Progress has been held up by a dispute between the Israeli and Cypriot governments over the development of the Aphrodite field that straddles both countries’ economic waters.

Shares of Delek climbed as much as 2 percent on the news. Ratio Oil Exploration 1992 LP, which owns 15 percent of Israel’s Leviathan, also gained as much as 2 percent in Tel Aviv trading.

Steinitz is the first Israeli minister to visit Egypt since the 2011 uprising that ousted President Hosni Mubarak, and his attendance reflects growing Egyptian openness toward cooperation with Israel. The two countries signed a peace deal in 1978, but ties had remained frigid for decades.

“Today’s meeting is extremely important, as it delivers a very important message to the international community that we’re working together in order to exploit our natural resources,” Steinitz said.

EMG Exports

Egypt’s East Gas and the companies developing Israel’s largest natural gas fields agreed in September to buy 39 percent of the East Mediterranean Gas Co., which owns the existing pipeline once used to export Egyptian gas to Israel. The buyout will allow the pipeline to transport gas in the other direction.

Steinitz said Egypt would begin to receive small quantities of Israeli gas through the EMG pipeline in April. Significant quantities would begin to flow in October or November, and the pipeline could reach full capacity next year.

Link To Europe

Major offshore gas finds have transformed the eastern Mediterranean region into an energy hot-spot.

Steinitz said work on the planned underwater East Med pipeline that will connect Israel, via Cyprus, to Greece and Italy was expected to start next year, and would take five or six years to complete. The European Union estimates the initial cost at $7 billion, with construction expected to be financed by private companies and institutional lenders, he said.

“It will be the longest and deepest gas pipeline in the world,” Steinitz said.

With assistance from Lin Noueihed and Yaacov Benmeleh. To contact the reporter on this story: Mirette Magdy in Cairo at mmagdy1@bloomberg.net. To contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net Tarek El-Tablawy, Michael S. Arnold.



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