Israeli Energy Company Denies Egyptian Attack on Gas Pipeline

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File photo: A gas pipeline blown up in the northern Sinai Peninsula, 2011.
File photo: A gas pipeline blown up in the northern Sinai Peninsula, 2011. Credit: REUTERS

Delek Group denied Monday that its pipeline carrying Israeli natural gas to Egypt via Sinai had been attacked by militants, saying gas deliveries were not interrupted.

“There has been no damage to the EMG gas pipeline system connecting Israel to Egypt, nor has there been any damage to the systems that carry the gas from Leviathan. The flow from Leviathan to Egypt continues as usual,” Delek and its partners in the Leviathan gas field said.

The Israeli company’s statement came hours after Egyptian security officials were cited Sunday night as saying that at least six masked militants planted explosives under the pipeline in the town of Bir al-Abd.

The pipeline transported gas to El-Arish, the provincial capital of North Sinai, and a cement factory in central Sinai, said the officials, who spoke on condition of anonymity. No group immediately claimed the attack. The explosion sent thick flames shooting into the sky, and authorities were only able to extinguish the fire by stopping the flow of gas.

The offshore Leviathan field came online a month ago and began supplying Egypt and Jordan with natural gas shortly afterward. The gas exports to Egypt are carried over the EMG pipeline, which Delek and its partners, including Texas-based Noble Energy, acquired last year.

The incident conjured up memories of attacks on the pipeline that nearly a decade ago delivered Egyptian gas to Israel. The attacks repeatedly disrupted supplies and Egypt canceled the export deal with Israel in 2012.

Delek shares ended down 4.4% at 411 shekels ($119.30) on the Tel Aviv Stock Exchange. Its Delek Drilling subsidiary dropped 5.5% to close at 6.68 shekels.

Yitzhak Tshuva, the billionaire controlling shareholder of Delek Group, attributed the news to parties seeking to undermine the export deal.

“Anti-Egyptian channels have spread tendentious and politically motivated rumors in order to harm our relations with Egypt. The rumors are false. Leviathan gas is flowing to Egypt. There were no malfunction and no delays. The pipeline is protected,” he told a conference in Tel Aviv.

Delek CEO Yossi Abu elaborated: “Over the past two and three years of our activities with Egypt, there was no shortage of fake news that reached Israel. The latest was yesterday. In the process, there are quite a few players who do not want the gas to come to Egypt, for example, liquefied natural gas importers to Egypt, and of course Islamic extremist organizations. In fact, I don’t even know if any gas pipeline was damaged.”

Under a landmark deal – by far the most important commercial agreement between the two countries – Egypt’s Dolphinus Holdings is buying 85 billion cubic meters of gas, worth an estimated $19.5 billion, from Leviathan and the smaller Tamar field over 15 years. At least some of the gas is expected to go to LNG plants in Egypt for reexport to Europe.

The deal is critical to Israel, which has struggled to find export markets for its gas, and to Egypt, which hopes to leverage its own substantial gas reserves to turn itself into a regional energy hub.

However, Egypt is battling an Islamic State-led insurgency in Sinai that was responsible for the pipeline attacks in 2011 and 2012. The violence intensified after the Egyptian military overthrew the Islamist President Mohammed Morsi in 2013.

The militants have carried out scores of attacks, mainly targeting security forces and Christians.

The collapse of the agreement for Egyptian gas exports to Israel led state-owned Israel Electric Corp. to sue the state-owned Egyptian General Petroleum Corporation and Egyptian Natural Gas for compensation. Arbitrators awarded IEC $1.7 billion, but in July agreed to accept just $500 million.

Meanwhile, Delek Drilling said Monday it expected to make a final investment decision on expanding exports from Leviathan this year, via either the Idku LNG plant in Egypt, which is partly owned by Shell, or by building a floating terminal at sea, Abu said.

He told a conference of investors that in order to further develop Leviathan, his company was in talks with banks for securing $2.5 billion of long-term funding, either through bank financing or bonds.

He later told Reuters that his goal is to turn Leviathan into a global supplier now that it already supplies its home market and neighboring countries. “Potentially, we can reach anywhere LNG reaches in the world, so any place that consumes LNG we can be a supplier,” Abu said, citing Europe and Asia.

Delek’s Abu said it was too early to say which method would be used and that the company was examining the commercial and regulatory aspects, as well as the risk and reward of each project.

However, he noted that since Delek already works with Shell, it was looking for ways to “cooperate with respect to exporting LNG to the world” from Idku.

Either way, the cost of ramping up production from a current plan of 12 billion cubic meters of gas a year to 24 bcm will require billions of dollars and will take up to three years to complete.

Reuters and The Associated Press contributed to this report.

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