Israeli Gas Exports to Egypt Could Flow Through pan-Arab Pipeline

The CEO of Delek Drilling also says he’s bullish on exports to Egypt and the whole region

An Israeli natural gas platform in the Mediterranean, September 2, 2015.
Tomer Appelbaum

When exports of Israeli natural gas to Egypt being sometime in the first half of next year, they won’t be going through the EMG pipeline in Sinai but through Israel’s domestic network and then on to the so-called pan-Arab pipeline.

Yossi Abu, chief executive of Delek Drilling, a partner in the two Israeli gas fields that will be selling energy to Egypt, said the EMG pipeline would only be used at a later stage. Later still, he said, gas from Israel’s Tamar and Leviathan fields could be delivered directly to EMG, thereby avoiding the Israeli domestic pipeline network altogether.

Speaking at an energy conference, Abu expressed optimism regarding exports not only to Egypt but to elsewhere in the region. Apart from exports to Egypt, he said the pipeline between Israel and Jordan would begin pumping in May or June next year and be fully operational by the end of 2019, ahead of schedule.

“We’ve succeeded in opening up the Egyptian economy, but that’s just the start,” Abu said. “There’s a lot to do on a regional level and that way become a global player.”

Abu spoke as Ron Adam, a Foreign Ministry official, told the conference that a decision on a Mediterranean gas pipeline linking Israel to Italy via Cyprus and Greece would be made next year after a market survey was completed.

If the survey reveals there is demand from European customers, the projected 2,100-kilometer, 25-billion-shekel ($6.75 billion) pipeline would come on line in 2025. An agreement between all the countries involved is expected to be signed at the end of the month.

The pipeline would open the Mediterranean market to Israeli and Cypriot gas, but it faces a host of engineering and cost challenges. Some experts say it will cost 35 billion shekels to build.

Regarding the Egyptian market, Abu answered critics of the deal by noting that even if Egypt continues to discover big reservoirs of gas off its Mediterranean coast, there is still likely to be demand for imported gas.

Earlier this year, Delek and its partners led by Texas-based Noble Energy signed a deal to sell 7 billion cubic meters of gas to the Egyptian company Dolphinus, half from the Tamar field, which will start exports in the first half of 2019, and half from Leviathan, after it goes into product toward the end of next year.

“We are taking into account that there will be other discoveries in Egypt,” he said, estimating that Egypt will need between 20 and 40 BCM of gas imported from Israel and from Cyprus, where Delek and Noble are partners in the Aphrodite field.

“There’s room for everyone. The Egyptian economy has become the father of the regional market,” he said.

Regarding demand in Israel, Abu put it at about 11 BCM, of which 10 BCM will be supplied from Tamar. By 2020, demand will have grown to 14 BCM partly due to the huge power needs of desalination plants, while another big jump in usage will come when Israel Electric Corporation’s Orot Rabin plant goes over to gas in 2021.

Abu said Delek Drilling is looking to spin off its remaining 22% stake in Tamar in 2019 overseas.

Last year Delek sold a 9.25% stake in Tamar to a new company called Tamar Petroleum, which has since expanded its stake to 16.75%. Abu said Delek Drilling is now focusing abroad, including the Euronext market, because the local market is already fully exposed to Tamar as an investment.

“We are looking to duplicate what we did with Tamar Petroleum but in the international market. It’s a process that is gaining momentum and we hope to finish it in 2019,” Abu said at the Israel Energy & Business Convention.