Israeli-U.S. Consortium Begins Pumping Natural Gas to Egypt

SEATTLE (Oil Monster): A consortium of Israeli and American companies has begun pumping natural gas from Israel to Egypt after years of doubt over whether the project could survive a number of the region’s political, security and bureaucratic challenges.

As part of the estimated $20 billion deal signed between the Israeli, U.S. and Egyptian partners nearly two years ago, Houston-based Noble Energy Inc. and Tel Aviv-based Delek Drilling LP will supply 85 billion cubic yards of natural gas over 15 years from Israel’s Tamar and Leviathan fields to Egypt’s Dolphinus Holdings Ltd.

The deal is “the first of its kind and scope since the peace agreement was signed between Israel and Egypt 40 years ago,” said Israeli Energy Minister Yuval Stienitz, speaking on Israel’s public radio.

The Israeli gas pumped to Egypt is expected to help the most populous Arab country meet local demand, but in the future could be liquefied and exported by Egypt elsewhere, Delek said.

Since 2014, Egypt had been importing gas as soaring domestic energy consumption outpaced supply. But it has regained self-sufficiency in natural gas production and resumed exports, mainly to Jordan, according to Egypt’s oil minister Tarek El-Molla.

The gas deal is important for developing Egyptian-Israeli relations by advancing their mutual economic and security interests, said Dr. Micha’el Tanchum, a fellow at the Truman Research Institute for the Advancement of Peace at the Hebrew University in Jerusalem.

“For Israel, Egypt provides a sorely needed export market for Israeli natural gas. For Egypt, Israeli natural gas is critical at this stage to ensure Egypt’s security of supply in order to resume being an liquefied natural gas exporter,” Mr. Tanchum said.

Unlike Israel, Egypt has the infrastructure to liquefy natural gas, making it easier to store and transport.

The Israeli-Egyptian gas deal is part of a broader U.S.-backed effort by Israel to export its natural gas and bolster relations with its Arab neighbors, including Jordan.

Egypt and Jordan depict the gas deals with Israel as between private companies rather than between governments, playing down any political elements. Still, they are the only two Arab nations to sign a peace deal with Israel.

In 2012, militants attacked a pipeline supplying Israel and Jordan, stunting supply and leading to a raft of legal cases between the companies involved. Militia linked to Islamic State remain in the Sinai Peninsula. Egypt and Israel have significantly increased security cooperation in recent years to deal with growing militancy in the area.

A spokesperson for the Egyptian oil ministry said the pipeline is secure.

Should the current deal between Israel and Egypt prove effective, there is opportunity for the two countries to greatly expand their natural gas industries by capitalizing on two existing liquefied natural gas terminals in Egypt for export to Europe, said Aditya Saraswat, a senior analyst at Norwegian consulting firm Rystad Energy.

There are also discussions for building a third liquefied natural gas terminal on the Red Sea, which would pave the way for exporting to Asia.

“If these countries come together and make sure there is enough cooperation between each other, then the Eastern Mediterranean hub is well-suited to deliver gas globally,” Mr. Saraswat said.

At the start of this year, Israel also signed a deal with Cyprus and Greece to build a pipeline from its natural gas fields to Europe. The plan faces tough political opposition from Turkey, which has its own pipeline to Europe.

Courtesy:www.wsj.com