Israel has started exporting natural gas to Egypt at 200m cubic feet per day (scf/day) two days ago, in preparation for reexporting it to European markets via Idku LNG plant.
A source in the petroleum sector told Daily News Egypt that the Israeli gas supply will increase gradually, to 700m scf/day over the next two years.
Delek Drilling, Noble Energy, and Dolphinus Holdings signed an agreement to purchase 85bn cubic metres of gas valued at $19.5bn, according to estimates from the Israeli Leviathan and Tamar gas fields over 15 years.
The trio also signed another deal to acquire 39% stake in the natural gas pipeline connecting Egypt and Israel. Delek Drilling and Noble Energy, the operators of Israel’s largest natural gas fields Tamar and Leviathan, and the Egyptian Dolphinus Holdings, established a joint venture under the name EMED, which will buy the stake from East Mediterranean Gas Company, the owner of the Arish–Ashkelon pipeline, in a deal worth $518m.
A source close to the deal said Egypt does not need the Israeli gas for local consumption, as Egypt has a surplus in production, amounting to about 1.2bn scf/day.
He pointed out that the agreement includes directing Israeli gas for export through Idku plant, with a return to the state for using the gas network and the liquefaction plant.
Egypt had struck a deal last year with Israel to settle a fine for halting deliveries of natural gas. The settlement deal would reduce the $1.7bn fine to $500m. Egypt will pay the amount to the state-owned Israel Electric Corporation over eight and a half years. In return, Israel will drop other claims resulting from a 2015 arbitration decision by the International Chamber of Commerce.
A previous statement issued by Egypt’s Ministry of Petroleum indicated that $40m will be paid after six months from the date of the settlement’s activation, and the remaining amount will be paid on 16 semi-annual instalments, each worth $25m. The instalments will be cut from the fees that the Tel Aviv government will pay in return for exporting gas via Egyptian pipelines and liquefaction plants.
Payments will be guaranteed by issuing a letter of credit from the National Bank of Egypt in accordance with the the Egyptian law.
The settlement agreement stipulated that in the event of non-compliance with the payment plan for a period of two instalments, Israel has the right to terminate the settlement agreement and return all received payments per the agreement.
On a different note, Cairo will be hosting the East Mediterranean Gas Forum (EMGF) on Thursday. It includes Egypt, Cyprus, Greece, Israel, Italy, Jordan, and the Palestinian Authority, while other Eastern Mediterranean countries and transitory countries may join the forum later, the ministry said.