Egyptian firm Dolphinus Holdings and its Israeli partner Delek Group signed a non-binding letter of intent on Tuesday, confirming that they are making progress on a plan to import Israeli gas to Egypt.
According to a Wednesday press release from Delek, the letter of intent is a precursor to a binding agreement. Any agreement the companies reach will also have to be approved of by regulators in both countries.
Ultimately, the companies aim to strike a 10-15 year deal for an annual 4 billion cubic meters to be exported from Israel to Egypt via an existing pipeline owned by East Mediterranean Gas Limited.
The deal has been controversial since it was first announced in May 2014. For years, Egypt exported natural gas to Israel at cut-rate prices, using the same pipeline. By contrast, the deal between Delek and Dolphinus states that prices will be linked to global petroleum prices.
Gas exports from Egypt to Isreal ceased in 2012, after the Egyptian portion of the pipeline was repeatedly sabotaged. Since the 2011 revolution, Egypt’s gas deals with Israel have been the subject of several corruption trials, although most officials have since been acquitted.
The project has also faced obstacles on the Israeli side. Delek and its American partner Noble Energy have been tied up by anti-trust lawsuits, freezing the development of the gas field that is eventually supposed to supply Egypt.
In the meantime, the discovery of giant Zohr gasfield off Egypt’s coast has put pressure on the Egypt-Israel deal. Once the gas from the Zohr project comes online, Egypt will have little incentive to import gas from abroad.