Israel discusses gas pipe deal to supply Egyptian buyers

The flow of natural gas from the Israeli Tamar field to Egyptian domestic buyers could begin as early as the second quarter of 2015, ICIS understands.

Israeli gas and exploration company Delek Group signed a non-binding Letter of Intent with a group of Egyptian companies known as Dolphinus Holdings on 19 October.

The agreement joins several others which could see Israeli piped gas head to Egypt and Jordan from the existing Tamar and planned Leviathan fields.

The deal could see around 7 million cubic metres/day of gas delivered on an interruptible basis through the existing EMG pipe – commonly known as the Arab Gas Pipeline – that runs between the two countries.

A minimum cumulative volume of around 5 billion cubic metres over three years may be shipped, although the buyer group is not bound to take any minimum volume.

The EMG pipe has not been used for the last two years and was designed to transport gas from Egypt to Israel. It suffered numerous acts of sabotage before Egypt’s ability to export ebbed away. Work to allow reverse flows through the pipe from Israel would be required.

Delek said the price of the deal would be linked to Brent crude and would be similar to other Israeli export deals.

Dolphinus Holdings is understood to be a consortium of major Egyptian non-governmental and commercial gas consumers. The growth of Egyptian demand for gas-fired power generation and other industrial uses has met falling supply from domestic production and triggered widespread shortages.

Next steps in the pipe deal will involve seeking the required authorisations from Israeli, Egyptian authorities and between the Egyptian holding company and the EMG pipeline operator.

A number of letters of intent have been signed this year linking Israeli gas to Egypt and Jordan. Israel needs to monetise gas from the Tamar and planned Leviathan fields while gas infrastructure in neighbouring countries is under pressure from rising demand and undersupply.

ICIS understands a separate deal on Tamar gas into the liquefaction plant at Damietta with Spain’s Union Fenosa, in Egypt that would involve the construction of a new sub-sea pipe could progress further this year.

Delek has a 15.625% share in the Tamar gas field alongside Noble Energy (36%), Isramco Negev (28.75%), Avner Oil (15.625%) and Dor Gas Exploration (4%). Edward Cox