Private Egyptian energy company signs US$15b deals to import gas from Israel

Delek and Noble Energy, the lead partners managing Israel’s largest gas fields, signed two binding agreements valued at US$15 billion to export gas to private Egyptian company Dolphinus Holdings, Delek Drilling announced on Monday.

The deals will span 10 years and supply an estimated 64 cubic billion meters of gas from Israel’s Tamar and Leviathan natural gas fields.

Four private and public sector sources previously told Mada Masr on condition of anonymity that Egypt had reached preliminary agreements with Israel to resolve an international arbitration case, in which Egypt is required to pay a US$1.76 billion fine for suspending gas exports to Israel in 2012, in exchange for allowing the private sector to import gas from Israel, in addition to reconsidering the countries’ maritime border demarcation.

“There is an understanding between Egypt, Cyprus, Greece and Israel on the demarcation of the maritime borders to enable the extraction of natural gas in the eastern Mediterranean basin, which would help convert the area into a regional energy center,” one of the four sources previously told Mada Masr.

Israeli Prime Minister Benjamin Netanyahu took to his Twitter account to applaud Monday’s agreement in a video statement. “[The deal will] strengthen our security, strengthen our economy, strengthen regional relationships, and most importantly, it will strengthen the citizens of Israel,” Netanyahu said.

The Israeli newspaper Haaretz has reported that the Dolphinus deal has resulted in a 17-percent rise in the shares of Delek Group, the parent company of Delek Drilling, trading on the Tel Aviv Stock Exchange.

Little information is available about Dolphinus Holdings, the Egyptian private company part to the agreement. According to an October 2014 statement from Delek Group, Dolphinus is “a consortium of major Egyptian non-governmental industrial and commercial gas consumers, gas distributors and entrepreneurs, headed by Dr. [Alaa Arafa].”

And while Dolphinus has not issued an official statement regarding its plans for the gas, Arafa was quoted in a 2017 Bloomberg article as saying, “There is great potential for the Mediterranean to be a gas hub for the region and we want to be partners with Israel in this.”

An anonymous government source told Reuters that the Egyptian government will not import gas from abroad. “International private companies will import gas from abroad to supply their needs, as well as liquefying it and re-exporting it,” the source stated.

The East Mediterranean Gas (EMG) company-owned pipeline, which previously transported gas from Egypt to Israel, is among the possibilities being considered for transmission of the gas to Egypt, according to the statement released by Delek Drilling, who, along with the US-based Noble Energy, intend to start negotiating with EMG to use the pipeline.

In accordance a 20-year contract, Egypt began exporting gas through EMG’s infrastructure to Israel in 2008. However, following the January 25 revolution, the company’s pipelines to Jordan and Israel were subject to several militant attacks.

The Egyptian Natural Gas Holding Company (EGAS) terminated the contract with Israel in April 2012, attributing the decision to a breach of contract by EMG for delayed gas payments.

Companies operating in Egypt signed a series of initial agreements with Israel in 2015 to import gas and liquefy it at their plants for re-export.

In March 2015, the Leviathan gas field’s four partners — Noble Energy and Israel’s Delek, Avner and Ratio — announced a preliminary agreement under which Dolphinus would purchase up to 4 billion cubic meters of gas annually for a period of 10-15 years.

British Gas Egypt, which was taken over by Shell in April 2015, signed a preliminary agreement to import 7 billion cubic meters of gas annually from Leviathan to the Idku liquefaction factory, which is owned by the Egyptian Company for Liquefied Natural Gas (LNG) and founded by foreign investments worth approximately $2 billion. The contract’s length spanned 15 years at a value of $30 billion.

The Spanish-owned energy company Union Fenosa Gas signed a preliminary agreement to import 2.5 trillion cubic feet of gas from American Noble Energy, which owns 36 percent of the Israeli Tamar gas field, to be channeled to the Damietta liquefaction factory. The preliminary agreement covers a period of 15 years.

Dolphinus requested a license from EGAS in September 2016 to import natural gas for the private sector in Egypt, according to the privately owned Al-Borsa newspaper.

The status of Dolphinus’s request, however, is unclear. However, the government issued a decree in August 2017, on the back of a law ratified by President Abdel Fattah al-Sisi and approved by Egypt’s Parliament in July of the same year, which will permit private sector companies to import and sell gas on the Egyptian market after obtaining a license from Egypt’s Natural Gas Regulatory Authority, which is headed by Karim Mahmoud.

AD