In a milestone development for bilateral ties, natural gas from Israeli offshore gas reserves has started flowing to Egypt, the two countries’ energy ministers announced.
The exports are widely seen as a major development in Israel’s cold peace with Egypt, which has been rooted in security ties but has yielded virtually no trade, investment or tourism ties since the two sides signed a peace agreement more than four decades ago.
The Israeli gas is being bought by the Egyptian company Dolphinus Holdings, which has contracted to buy 85 billion cubic meters, worth an estimated $19.5 billion, from Israel’s Leviathan and Tamar fields over 15 years. The gas is being shipped via a subsea pipeline connecting Egypt’s Sinai Peninsula and Israel to the Idku gas liquefaction plant in Egypt for re-export to Europe.
According to Israeli sources, some of the gas will also go toward Egypt’s domestic needs, though the country has stopped importing gas as major new domestic reserves have been discovered in recent years.
The first exports to Egypt follow the start of Israeli gas exports to Jordan from the Leviathan field two weeks earlier, for a three-month trial period. Jordan’s National Electric Power Company has agreed to buy $10 billion worth of gas over 15 years.
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Exports will also help Egypt strengthen its position as the focal point of an emerging eastern Mediterranean natural gas hub that includes Cyprus.
On Wednesday, Energy Minister Yuval Steinitz told Reuters that Israel was talking to Egypt and India about exporting gas from the Eastern Mediterranean to India through the Suez Canal.
Also Wednesday, Steinitz and his Egyptian counterpart Tarek El-Molla were due to update the Eastern Mediterranean Gas Forum – an association of regional gas producers and consumers formed a year ago – on developments. Steinitz would be speaking with energy ministers from Cyprus, Greece, Egypt, Italy, Jordan and the Palestinian Authority. At a conference in Cairo, the participants were expected to announce that the forum was upgrading its status to an international organization.
The group is the first regional organization of which Israel is publicly and officially a member alongside Arab states. Israel’s delegation, led by Energy Ministry Director General Udi Adiri, worked with officials from other countries to draw up the forum’s constitution. The ministers are expected to ratify the document at the end of the conference.
Yossi Abu, the CEO of the company Delek Drilling that controls Leviathan along with Texas-based Noble Energy, praised Wednesday’s news. “After years of dedicated and uncompromising work, we started getting gas flowing to Egypt today,” he said.
Abu added that this could not have happened without the “stability and certainty” offered by Israel’s gas regulatory framework agreement, which would help the country “wean itself off coal and restore its reputation in the eyes of foreign gas companies.”
Reuters contributed reporting.