Egypt Says Massive Gas Find Does Not Kill Import Deal With Israel

Private-sector talks over deal to buy natural gas from Israel's Leviathan offshore field to continue, petroleum minister says.

Eric Knecht
Egypt's Oil Minister Sherif Ismail talks during an interview with the media in Cairo November 10, 2013. Picture taken November 10, 2013.
Egypt's Oil Minister Sherif Ismail talks during an interview with the media in Cairo November 10, 2013. Picture taken November 10, 2013.Credit: Reuters
Eric Knecht

REUTERS - The discovery of the Zohr natural gas field off Egypt will not undermine private-sector negotiations about buying gas from Israel, Egypt's petroleum minister said, playing down fears that potential deals could be under threat.

Italian energy company Eni announced on Sunday that it had found an estimated 30 trillion cubic feet (tcf) of gas in the Zohr field, making it the biggest discovery in the Mediterranean and the world's 20th largest.

Israeli gas platforms, controlled by U.S.-Israeli energy group Noble and Delek, are seen in the Mediterranean sea, some 15 miles (24 km) west of Israel's port city of Ashdod.Credit: Reuters/Amir Cohen

The find raised concerns in Israel's gas industry that its Leviathan field would lose a deal to supply gas to a liquefied natural gas (LNG) plant in Egypt.

"Any negotiations between private companies in Egypt and in the eastern Mediterranean, and by this I mean Israel and Cyprus, will not stop," Petroleum Minister Sherif Ismail told Reuters in an interview.

"These negotiations and initial agreements are ongoing."

Private companies will require government approval to import gas from Israel, the minister said.

Ismail's comments may improve sentiment on the Israeli stock market where leading energy companies on Monday suffered losses of more than 4.5 billion shekels ($1.1 billion) after news of the Zohr discovery.

Despite the minister's comments, Western oil companies operating in Egypt negotiating gas import deals with Israeli counterparts will have to decide for themselves whether recent finds in Egypt alter the equation.

"We do not object to the plans of private companies (which are) operating in Egypt and looking to import natural gas from eastern Mediterranean countries," the minister said.

For Egypt, the Zohr field offers hope in the country's battle with chronic, politically sensitive energy shortages. Egypt used to export gas to Israel and elsewhere but has become a net importer over the last few years because of booming consumption and depleted natural gas output.

State-owned EGAS has been forced to ration gas supplies to industry, crippling production and hampering Egypt's economic recovery. Blackouts deepened discontent with Islamist President Mohammed Morsi before the army toppled him in 2013.

Bedouins watch as flames rise into the air after masked gunmen blew up a terminal of the natural gas pipeline to Israel and Jordan in El Arish, northern Sinai, in a predawn attack, July 12, 2011.Credit: AP

Gas produced from the Zohr field will flow to Egypt, including Eni's share, Ismail said, suggesting Cairo has no export plans from Zohr. Eni will hold a 35 percent share of Zohr's reserves, with the rest claimed by the state, the Ministry of Petroleum said this week.

"The priority is for the domestic market," Ismail said.

Around 75 percent of the 30 tcf of gas in the new field is likely recoverable given it's "good quality" and this would bring Egypt's total natural gas reserves to an estimated 90 tcf, the minister said.

Once developed it is expected to produce between 2.5 and 3 billion cubic feet of gas per day, Ismail said. Eni is expected to deliver a development plan by the end of October detailing the number of wells it will dig, and production will likely begin at the start of 2018, the minister said.

Eni's Bouri Offshore oil terminal is seen off the Libyan coast, in the Mediterranean sea, Tuesday, ACredit: AP

Analysts say this timeline is ambitious and that at least in the short run Egypt may still look to Israel's Leviathan to fill its natural gas needs. The price paid to Eni to purchase the field's gas for domestic use is still under negotiation.

"We have not yet agreed with Eni over the price of the gas ...but the important thing is it's a number appropriate for both parties ...It's not a condition that it be the same number agreed upon in other deals," the minister said.

In July, Egypt raised the prices it pays Eni and Edison for the gas they produce in the country, a move intended to encourage needed investment in energy.

The petroleum minister said previously that Egypt is looking to be energy self-sufficient by 2020. The newest discovery does not mean this will be achieved any sooner, he said.

When asked about the prospect of exporting gas in the future, the minister said: "We have to be realistic...we need to cover the needs of the domestic market in full."

The prospect of relaunching exports depends on other discoveries and production levels from other, smaller fields expected to come online in the next few years, he said.

The Zohr discovery also makes it more likely that LNG plants which have suspended operations in recent years return to service.

"Of course the LNG plants will go back to operating in the coming period, as we have a plan to exploit the gas surpluses of Mediterranean basin countries for use at these plants," the minister said, adding he hopes to make Egypt a global gas hub.

"It's very likely that the new discovery will attract new international companies to work in the area," he said.

Click the alert icon to follow topics:



Automatic approval of subscriber comments.

Subscribe today and save 40%

Already signed up? LOG IN


United Arab List chairman Mansour Abbas in the Knesset on Monday.

Arab Voters Will Decide if Israel's Far-right Wins Power

נתניהו עם כיפה שחורה על הראש נשען בשתי ידיו על הכותל

Israel Is Heading for Its Most 'Jewish' Election Ever

An El Al jet sits on the tarmac at John C. Munro International Airport in Hamilton, Thursday, in 2003.

El Al to Stop Flying to Toronto, Warsaw and Brussels

FILE PHOTO: A Star of David hangs from a fence outside the dormant landmark Tree of Life synagogue in Pittsburgh's Squirrel Hill neighborhood in 2021.

American Judaism Is in Decline. That's Great News for American Jews

Crowds at Israel's Ben-Gurion International Airport, in April.

U.S. Official: West Bank Entry for Palestinian Americans Unrelated to Israeli Visa Waivers

Haaretz spoke with several people who said they had fled Ukraine, arrived in Israel,  and were asked to undergo DNA tests in order to establish paternity.

'My Jewish Grandmother Has a Number on Her Arm, Why Does Israel Greet Me This Way?'