Israeli Pipeline Operator Signs Preliminary Deal to Transport UAE Oil to Europe

If deal is finalized, time, fuel and costs will be saved through use of ‘land bridge’ between Eilat and Ashkelon instead of Suez Canal crossing

Hagai Amit
Reuters
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EAPC oil storage containers are seen on the shore of the Mediterranean Sea in the southern city of Ashkelon, Israel, January 27, 2015.
EAPC oil storage containers are seen on the shore of the Mediterranean Sea in the southern city of Ashkelon, Israel, January 27, 2015.Credit: Amir Cohen / Reuters
Hagai Amit
Reuters

In what could become one of the most significant deals to emerge since Israel and the United Arab Emirates normalized relations, the Israeli state-owned pipeline company Europe Asia Pipeline Company, or EAPC, said on Tuesday that it had signed a memorandum of understanding to store and transport oil and distillates from the UAE to Europe.

Under the preliminary agreement with MED-RED Land Bridge, a company controlled by Israelis and Emiratis, EAPC will manage storing and transmitting the oil. The oil will be shipped via EAPC’s pipeline, which connects the Red Sea city of Eilat and the Mediterranean port of Ashkelon.

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The MOU was signed in Abu Dhabi on Monday during a ceremony attended by U.S. Treasury Secretary Steve Mnuchin.

“This is a historic agreement that will increase cooperation between EAPC and regional and international players. Without a doubt, this agreement has great importance for the Israeli economy both economically and strategically, because it involves long-term joint investments,” EACP Chairman Erez Kalfon said.

MRLB will deliver petroleum distillates originating in the Gulf through the EPAC pipeline and sell them to European customers. MRLB will also source petroleum products for delivery through the pipeline to and from other countries.

MLRB is a closely held company, jointly controlled by Petromal, a unit of the Abu Dhabi-based firm National Holding; Israeli-based AF Entrepreneurship, which develops energy projects; and Lubber Line, a Gibraltar-based group focused on infrastructure and energy.

EAPC operates its eponymous pipeline, and deals in oil storage and the export and import of distillates. It was formed in 1968 as a joint venture between Israel and the National Iranian Oil Co., to build and operate an oil pipeline from Eilat to Ashkelon, plus ports for tankers and storage facilities.

The partnership stopped functioning following the 1979 Islamic revolution in Iran, and since then, the EAPC has mostly been used to transmit oil and distillates from Eilat to different parts of Israel. In 2014, EAPC was responsible for one of Israel’s worst environmental disasters after some five million liters of crude oil leaked into the Evrona Nature Reserve.

Along with UAE oil, the partners hope to use their “land bridge,” which saves time, fuel and costs versus crossing over Egypt’s Suez Canal, to transport oil back and forth between other countries — for example, oil produced in the Mediterranean and Black Sea regions for export to Asian markets.

“MED-RED is in advanced negotiations with major players in the West and in the East for long-term service agreements,” EAPC said.

EAPC did not disclose financial details, but said the arrangement “is likely to increase the transferred quantities by tens of millions of tons per year.” The UAE exports the vast majority of its crude oil to Asia.

A source familiar with the deal told Reuters that, if finalized, it could be worth $700 million to $800 million over several years and that supplies could start at the beginning of 2021.

Not everyone, however, praised the deal. Warning about its environmental consequences, Maya Jacobs, CEO of the Zalul Environmental Association, said that “the agreement with the Gulf states turning Israel into infrastructure for transporting oil from the Gulf to Europe is a death threat to the Gulf of Eilat, the coral reefs and the city’s tourism industry. It is proof of the urgent need to dissolve the EPAC.”

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