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Egypt, Israel settle gas differences
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a deal between two Egyptian state-run com- panies and Israel Electric corp. (IEc) looks set to resolve the two countries’ dispute – and pave the way for gas trade to pick up. a Reuters-re- ported statement from Egyptian General Petro- leum corp. (EGPc) and Egyptian Natural Gas Holding (EGaS), on June 16, said they would pay US$500 million to IEc over eight and a half years.
Under this agreement, IEc is expected to drop all remaining claims against the Egyptian companies.
e settlement appears to have been amicable and is a major win for Egypt, which had faced a bill of US$1.76 billion, following an Interna- tional chamber of commerce (Icc) ruling, in December 2015. IEc had applied for US$3.8 billion.
EGPc and EGaS had opposed the Icc nd- ing, saying the decision demonstrated overreach on the part of the tribunal.
e dispute arose in 2012, when Egypt was struggling to meet domestic demand and satisfy its foreign obligations. e Egyptian companies terminated the gas sales agreement in april 2012, although shipments had been declining for some time.
is came as terrorism was on the increase in the Sinai, with a number of attacks reported on the arab Gas Pipeline. e pipeline has capacity of around 7 bcm per year, with the potential to increase to 9 bcm.
IEc has been showing signs of taking a so er tack on Egypt for some time. Reports in the Israeli press, in april, said the company had decided to push for a reduced amount, accept- ing US$500 million over the eight and a half year period. IEc approved the deal at the end of Janu- ary and disclosed it in early april, the company’s reports for the rst quarter said.
e deal, IEc said, “is in the best interests of
the electricity consumers”.
IEc said US$60 million would be due on
completion of the agreement. In its rst quar- ter report, the company said the companies authority – a part of the Ministry of Finance – had not provided an opinion on the feasibility of the deal with the Egyptian companies. Instead, it asked for more information.
Resolving this issue is a major step forward in allowing gas to ow once more through the arab Gas Pipeline. is time, it will be coming from Israel’s o shore elds into Egypt.
While the North african state has made sub- stantial progress in boosting its self su ciency – since the start up of the Zohr eld – domes- tic demand is strong and growing. For the time being, there is enough to go around, with some to spare, allowing Egypt to export gas through its two under-used liquefaction plants.
assuming that demand continues to grow, though, this will put pressure once more on Egypt’s gas balance, probably at some point in the late 2020s. More resources can be found domestically but allowing and encouraging cross-border ows from Israel – which may also serve to unlock gas from cyprus’ o shore – will help secure Egypt’s future.
Delek Drilling, which is working on the Leviathan and Tamar elds, was reported at the beginning of the month to expect gas sales to Egypt to begin by the end of June. Leviathan is due to start at the end of 2019 with production of 12 bcm per year. is should increase to 21 bcm, from a resource calculated at around 600 bcm.
Delek struck a deal with Egypt’s Dolphinus Holdings, in February 2018, for the supply of around 3.5 bcm per year from Leviathan, with a total contracted amount of 32 bcm, with sim- ilar numbers for exports from Tamar. e total revenue from this sale for the partners has been estimated by Delek as US$15 billion.™
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w w w . N E W S B A S E . c o m Week 24 18•June•2019