Israeli Partners to Sell Gas to Egypt
Delek Drilling, one of the main shareholders in Tamar and Leviathan, the two offshore Israeli gas fields, announced February 19 two new gas supply and purchase agreements with Egypt's Dolphinus Holdings.
The two PSAs are worth $15bn during a 10 year period. Delek announced the contracts in a filing to the Tel Aviv Stock Exchange (Tase). The contract was signed in Cairo by representatives of Delek Drilling, Noble Energy, two of the main shareholders in Tamar and Leviathan and Dolphinus Holdings.
According to the filing, each of the two partnerships would supply up to 32bn m3 during the contracts' 10 year period, at up to 3.5 bn m³/yr. The gas price is Brent linked. Each of the contracts is estimated at $7.5bn which translates into $6.44/mn Btu.
The Leviathan contract is a firm contract though no date was given to the start of supply. Leviathan should come online towards the end of 2019. Delek Drilling said in its Tase filing that a the drillship, Ensco DS-7 would arrive off Israel in the next few weeks in order to drill Leviathan 3 well. The Tamar contract is interruptible but the sellers have the option to convert it into a firm contract between July 2020 and December 2021.
Despite the two contracts, it is still unclear how the gas will be transmitted to Egypt. One option is to use the EMG undersea pipeline previously used to export Egyptian gas to Israel, but the pipeline owners have previously denied that this has been discussed. But if it were adopted, gas supply could start in a few weeks, according to a Delek Drilling spokeswoman.
Another option is to use the new pipeline from Israel through Jordan, which will be connected to the Pan-Arab pipeline that runs from Egypt to Syria through Jordan. This pipeline is built in order to transmit gas from Leviathan to Nepco, the Jordanian National Electric Company. A third option is an overground connector between Kerem Shalom, Israel, and El-Arish. That pipeline has yet to be built and has an estimated cost of $100mn. The agreement has yet to be approved by the regulatory bodies in Egypt and Israel.