Egypt Clears the Way for Imports of Israeli Natural Gas

New law promises to put an end to years of uncertainty and could lead to big contracts for Tamar and Leviathan gas fields

Eran Azran
Eran Azran
Tamar natural gas rig, located 90 kilometers west of the city of Haifa, Israel.
Tamar natural gas rig, located 90 kilometers west of the city of Haifa, Israel.Credit: AP
Eran Azran
Eran Azran

After years of delays and uncertainty, Egypt could be on its way to becoming a major market for Israeli natural gas exports after President Abdel Fattah al-Sissi signed legislation on Tuesday forming a gas regulatory authority and permitting private sector companies to import gas.

Egypt, along with Turkey, is one of two regional markets that could buy large quantities of gas from Israel’s Tamar and Leviathan reservoirs, but none of the deals reached in the past have panned out.

In March 2015, the Tamar partners signed a seven-year deal with Dolphinus Holdings, a firm that represents nongovernmental, industrial and commercial consumers in Egypt, to sell it at least five billion cubic meters in the first three years. But the EMG, the company that owns and operates a gas pipeline linking Egypt and Israel, balked and regulatory approvals from Israel and Egypt never came.

A few months later, the Leviathan partners reached a nonbinding agreement to supply Dolphinus with up to four BCM annually for a period of 10 to 15 years. That also required EMG’s consent.

But the new Egyptian law should make it easier for these deals – and perhaps others – to go through. David Stover, CEO of the American oil and natural gas company Noble Energy, the operating partner in the Tamar and Leviathan fields, hinted as much last week.

“The [Leviathan] team continues to progress on new contract discussions with customers in Israel, Jordan and Egypt. I’m confident that the gross 1.2 billion cubic feet per day of Leviathan Phase 1 capacity will be mostly filled by start-ups,” he told analysts last Thursday.

The new authority and the law are expected to pave the way for private sector companies to import and distribute gas within the country using Egypt’s domestic pipeline network, activities currently monopolized by the government.

In addition, Egypt is home to two big foreign-owned liquefied natural gas plants – one owned by Royal Dutch Shell and the other by Union Fenosa – both of which have been shut since 2011 because the supply of local natural gas slated for export as LNG was cut off.

But the new law is part of what Egypt has said is a plan to become a regional hub for the trade in LNG. After a string of major discoveries led by the giant Zohr field, the country will end many years of gas shortages and once again become gas self-sufficient by the end of 2018. Nevertheless, imported Israeli gas could be a key part of the equation.

The new law, called Resolution No. 196 of 2017 and aimed at attracting greater private sector participation in the country’s rapidly expanding gas sector, will go into effect later this year. Petroleum and Mineral Resources Minister Tarek El-Molla is due to issue regulations and then the government company EGAS will begin issuing export licenses.

Apart from Dolphinus, at least four other Egyptian companies have expressed an interest in importing gas, according to local media reports.

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