Egypt signs $1.2 billion gas deal with Israel, acquiesces to less than ideal conditions
there is a clause in the contract allowing gas supply to be interrupted at short notice
The Tamar partners have signed a natural gas export deal with Egyptian company Dolphinus Holdings. The deal worth $1.2 billion is for 5 billion cubic meters (BCM) of gas over three years.
The supply of gas to Dolphinus will be based on the amount of surplus gas available to the Tamar partners. In other words there is a clause in the contract allowing gas supply to be interrupted at short notice. The fact that the Egyptian customer has agreed to this clause is an indication of the shortfall of gas in the country. The agreement also allows the Tamar partners to increase the amount of gas sold to Dolphinus Holdings according to the level of demand in the Egyptian market.
This is the first such agreement signed with Egypt, and the first export deal signed by the Tamar partners. The Tamar partners have also signed a letter of intent to sell 70 BCM of gas to Union Fenosa's liquid petroleum gas installation in Egypt and a small deal to sell 1.8 BCM to Jordan's Arab Potash and Bromine Company. However, due to the regulatory uncertainty in Israel's gas sector, these deals have been suspended for the time being.
The Tamar field gas will be transported to Egypt via Israel Natural Gas Lines pipelines to Ashkelon, and from there to Egypt via the EMG (East Mediterranean Gas Company) pipeline that formerly served to transport gas from Egypt to Israel. The pipeline is constructed to transport gas in one direction only, but it is estimated that it can be converted to be bi-directional at an investment of some $10 million.
Delek Drilling chairman and Avner CEO Gideon Tadmor said, "The contract with Dolphinus is an historic step for the State of Israel and the partnership. It is the first fruit of the geopolitical and economic ramifications of gas exports for the State of Israel, and similar regional collaborations in the energy field. We must ensure regulatory certainty in the energy sector to make possible the development of fields on time and maximize the huge potential in the sector, from which all Israelis can benefit."
Delek Drillng CEO Yossi Abu said, "We are proud to be part of the transformation of Israel into an energy supplier for the region. The agreement with Egypt, together with the MOUs with the Jordanian Electric Co., and British Gas and Union Fenosa in Egypt will completely change Israel's geopolitical standing in the region, and create revenue iof hundreds of billions of shekels for the state coffers. There has been placed before us an historic opportunity, and it is important that we will know how to take maximum advantage of it for the benefit of the State of Israel.
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