Noble Energy, Israel's Delek to Supply Gas to Egypt in $15 Billion Deal
20 February 2018 - 10:07AM
Dow Jones News
By Rory Jones in Tel Aviv and Jared Malsin in Cairo
Investors in Israel's natural-gas fields agreed to supply an
Egyptian company with gas valued at $15 billion, a deal that will
build on growing ties between once-hostile neighbors that now share
a common enemy in the restive Sinai Peninsula.
Houston's Noble Energy Inc. and Israel-based Delek Drilling LP
will supply 83.2 billion cubic yards of natural gas over 10 years
from the Tamar and Leviathan fields to Egypt's Dolphinus Holdings
Ltd, Delek said.
Monday's long-awaited gas deal represents a political boon for
Israeli Prime Minister Benjamin Netanyahu, who has promoted exports
to build diplomatic ties in the Middle East and beyond. Israeli
officials hailed the deal as a step toward peace and regional
cooperation.
"This is a joyous day," Mr. Netanyahu said.
The deal could raise some tough questions for Egyptian President
Abdel Fattah Al Sisi. He had promised to use gas from Egypt's
offshore fields to make the Arab world's most populous nation
energy self-sufficient again. Now, ahead of presidential elections
in March, his government faces deepening suspicions about its
relations with Israel.
Egypt and Israel have significantly increased security
cooperation to deal with growing militancy in the Sinai Peninsula
in recent years.
Gas deals with Israel have been politically explosive in Egypt
in the past. Former President Hosni Mubarak came under attack for
selling gas to Israel in the years before he was ousted in a
popular uprising in 2011.
Analysts said the conclusion of the gas deal weeks before the
March vote was remarkable given the political sensitivity of the
matter and reflects Mr. Sisi's confidence with dealing with
domestic protests.
"At the end of the day, any dissent is completely dealt with,"
said Karim Ezzat, a Cairo-based oil and gas analyst with Pharos
Holding.
Mr. Sisi, who came to power following a military coup in 2013,
is running in an election in which his only credible challengers
have been jailed or otherwise sidelined.
Representatives for Mr. Sisi and Egypt's petroleum and
foreign-affairs ministries didn't immediately respond to calls
seeking comment. Dolphinus also didn't respond to multiple
calls.
The deal follows months in which the Egyptian government hailed
the new exploitation of the Mediterranean's largest offshore gas
field as a transformative step for the country's economy. Egypt
until 2014 was a net exporter of gas, but soaring local energy
consumption outpaced supply, forcing Egypt to turn importer.
Production began at Egypt's Zohr field in December and was expected
to help meet domestic demand. The Israeli gas deal complicates that
picture.
"It goes to show, being a net importer or exporter is too
two-dimensional," Mr. Ezzat said. "Probably what's going to happen
is, there are periods of the year where you're going to be a net
exporter, and there are going to be periods of the year where
you're going to be an importer."
The deal to import Israeli gas and production from its own
fields could help Egypt become a gas hub, some analysts said, with
at least some of it liquefied and exported after meeting domestic
demand.
The new deal also raises questions about how the gas would be
transported. Gas exports to Israel from Egypt ceased after a series
of militant attacks on a pipeline across the Sinai Peninsula, where
an insurgency has raged for years. The Egyptian armed forces are
engaged in a major offensive against Islamic State militants who
have killed hundreds of soldiers, police officers and civilians in
recent years.
"That's going to be one of the priorities, places to keep safe,
to be sure," Mr. Ezzat said, referring to the Sinai pipelines.
The agreement between the Israeli firms and Dolphinus follows a
deal signed in 2016 for the Leviathan partners to supply Jordan's
national power company with gas valued at as much as $10 billion.
The Tamar field also supplies some customers in Jordan.
The gas companies said one potential route of export from Israel
to Egypt could be through Jordan -- which is linked by a pipeline
to the Egyptian grid -- in a scenario that would neatly tie the
countries together economically. After fighting multiple wars,
Israel signed peace agreements with Egypt in 1979 and Jordan in
1994.
Dolphinus, a company that represents nongovernmental, industrial
and commercial consumers in Egypt, signed a preliminary deal in
2015 to import as much as 5.2 billion cubic yards of natural gas
for up to 15 years from Tamar. Monday's deal supersedes that
agreement, Delek said.
Egypt had frozen plans to import Israeli gas in 2015, demanding
that Israel drop an arbitration case over gas. An international
arbiter ruled that the North African country's state-owned energy
companies owed $1.76 billion to state-owned Israel Electric Corp.,
or IEC, after Egyptian exports to Israel abruptly stopped in 2012
because of militant attacks on a pipeline through the Sinai
Peninsula.
It wasn't immediately clear whether the arbitration was
resolved. Another option being considered for transporting the gas
from Israel to Egypt would be to reverse the flow of the pipe
damaged in the militant attacks, Delek said.
Noble is a major stakeholder in Tamar and the Leviathan, which
has an estimated 22 trillion cubic feet of gas, or enough to supply
Israel for 100 years. Other significant interest owners in the
fields are Delek and Israeli firms Ratio Oil Exploration LP and
Isramco Negev 2 LP.
Write to Rory Jones at rory.jones@wsj.com
(END) Dow Jones Newswires
February 19, 2018 17:52 ET (22:52 GMT)
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