GAS FOR EGYPT: $10 BLN
Partners in Israel's Leviathan offshore gasfield have reached a preliminary agreement to export gas to Egypt's domestic market over 10-15 years, setting up a deal worth an estimated $10bn over the period.
News of a memorandum of understanding between Leviathan and Egyptian group Dolphinus lifted Israeli energy stocks on Wednesday, after a period in which their prices had been depressed by regulatory uncertainty and concerns over competition from a newly discovered "supergiant" offshore gasfield.
Leviathan's four partners — Houston-based Noble Energy, and Israel's Delek, Avner and Ratio — said that Dolphinus would purchase up to 4bn cubic metres of gas per year over a period of up to 15 years.
If completed, the deal is likely to revive hopes in Israel that its offshore gas industry can win export deals with its neighbours, something that the country's government and gas companies have been promoting as a source of future economic growth.
"The regional potential is being realised, and the Israeli gas discoveries look to play a key role in shaping the regional energy market," said Yossi Abu, chief executive of Delek Drilling, in a statement announcing the Egyptian agreement. "The deal with Dolphinus is further proof of the political and economic benefits that may be derived through regional co-operation between states and energy companies."
None of the companies involved put a specific value on the contract, but Israel's IBI investment house estimated that the total value of the gas sold to Egypt could be $10bn.
Leviathan, one of the gas industry's biggest recent offshore finds, has been bogged down in regulatory red tape since competition issues were raised by Israel's antitrust authority last year. Prime minister Benjamin Netanyahu had tried to overrule them but ran into political opposition and public protests from Israelis who felt their country was giving the gas investors too sweet a deal.
Confidence in Israel's fledgling gas sector was also hit by news that Italy's Eni had discovered Zohr, the largest offshore field ever found in the Mediterranean, thought to contain a possible 30tn cubic feet of gas.
Separately, the Leviathan partners said they were continuing talks to seal a potentially bigger export contract, supplying BG Group's liquefied natural gas plant in Egypt via an undersea pipeline over a 15-year period.
They have already done a preliminary deal to supply Jordan's electric power company with 3 bcm of gas over 15 years. Next year, Noble Energy and its Israeli partners are due to begin exporting gas from their smaller Tamar gasfield to Jordan's potash and bromine operations in a separate deal.
Israel has peace treaties with Egypt and Jordan, but public animosity in both countries over its policies toward the Palestinians runs high.
Gideon Tadmor, Avner's CEO, said: "The gas discoveries will enable the reinforcement of Israel's relationships with neighbouring countries and affect the lives of millions of citizens throughout the region."
On Wednesday, the Tel Aviv Stock Exchange's TA Oil & Gas Index rose 1.1 per cent to its highest level in three weeks.
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