Egypt grants Israel access to LNG plants after reaching gas settlement - ENTERPRISE

Wednesday, 19 June 2019

Israeli gas could start flowing to Egypt’s LNG plants as soon as next month at an initial rate of 150 mcf/d, rising to 700 mcf/d within two years, according to a domestic press report citing an unnamed government official. The news comes after a USD 500 mn settlement this week resolved a dispute longstanding dispute with the Israel Electric Corporation and will give the operators of Israel’s Leviathan field, Delek Drilling and Noble Energy, clear access to global export markets.

Damietta-bound? Look for the Leviathan gas to move through the Arish-Ashkelon pipeline to Damietta, one of two Egypt’s two LNG facilities as the Idku facility still has no link with Israel. The Arish-Ashkelon pipeline is set to be used to supply Alaa Arafa’s Dolphinus Holding with the first shipments under the USD 15 bn agreement signed last year. The shipments were planned to begin in 1Q2019 but sources told Bloomberg in March that the date had been pushed to mid-2019 as the pipeline still required further maintenance.

An Israeli investment still in the cards? We had noted last March that Delek was looking to acquire a stake in either the Idku or Damietta liquefaction facilities as part of its drive to “broaden its export footprint.”

Delek hopes to start gas exports to Egypt by the end of June - ENTERPRISE

Monday, 3 June 2019

Delek looks set to meet its end-of-June target to start gas exports to Egypt: Israel’s Delek Drilling is on track to begin commercial sales of natural gas to Egypt by the end of the month, with technical testing on the pipelines that will carry the gas currently underway, Deputy CEO Yossi Gvura tells Reuters. 

Trial shipments from Israel’s Tamar and Leviathan gas fields were originally supposed to come in March of this year, but capacity restrictions posed by Israel’s domestic pipeline network meant that the imports had to be delayed.

Background: Under the terms of a USD 15 bn contract signed last year, Delek and its partner Noble Energy should supply Alaa Arafa-led Dolphinus Holding with 3.5 bcm from each of the Leviathan and Tamar gas fields for a combined total of 7 bcm. Delek, Noble and Egypt’s East Gas signed a USD 518 mn agreement for a 39% stake in Ashkelon-Arish pipeline operator Eastern Mediterranean Gas (EMG), intended to pave the way for Egypt to begin importing an initial 100 mn scf/d in 1Q2019. 

All set for Israeli gas coming to Egypt except one little thing: Israel has no enough pipeline capacity - ENTERPRISE

Tuesday, 12 February 2019

Israel is struggling to find a way to export its gas to Egypt. The southern Israeli gas pipeline that is meant to carry gas from the Leviathan and Tamar fields to the East Mediterranean Gas (EMG) pipeline into Egypt does not have the capacity to carry the volumes the fields’ partners have contracted to sell to Egypt, Haartez reports. Under the USD 15 bn contract with Dolphinus Holdings (a group fronted by the industrialist Alaa Arafa), Delek Group and Noble Energy should deliver 3.5 bcm from each field for a combined total of 7 bcm — but the Israeli pipeline’s current capacity does not exceed 3 bcm, the Israeli newspaper says. “Israel’s Natural Gas Authority added to the problem after it made clear that the pipeline couldn’t handle even that amount. In an announcement, the authority said that it couldn’t promise continuous access to the pipeline, but only when capacity was available.”

EMG, Israeli Electric are withdrawing arbitration cases against Egypt - ENTERPRISE

Monday, 1 October 2018

EMG, IEC have begun withdrawing arbitration cases against Egypt: East Mediterranean Gas (EMG) and Israel Electric Corporation have officially begun proceedings to drop their international arbitration case against state energy companies EGPC and EGAS, according to Oil Ministry sources. The two cases would have seen Egypt pay a combined USD 1.988 mn in fines for failing to supply IEC with gas in 2012.

Key step in our energy hub transformation: The withdrawal of the claims are conditions of the USD 518 mn agreement Noble Energy and Delek — the operators of Israel’s Leviathan and Tamar gas fields — and their Egyptian partner East Gas signed last week. The transaction gives Nobel and Delek a 39% stake in EMG, paving the way for the gas field operators to export natural gas to Egypt under a USD 15 bn agreement signed in February with Alaa Arafa’s Dolphinus Holdings.

Advisers: Shahid Law Firm acted as sell-side legal counsel on the EMG transaction, while Alliance Law Firm had was on the buy-side.

Natgas market regulator sets fees for private sector’s use of the state grid at USD 0.38 MMBtu - ENTERPRISE (Corrected)

Sunday, 5 August 2018

The Natural Gas Regulatory Authority set on Thursday the fee that private sector players will have to pay to use the state’s national grid to transport gas at USD 0.38 / MMBtu, according to its official website. The rate applies for the first year of the program, suggesting a revision could be in the works after the initial trial period. License fees will be calculated based on the amount of gas transferred and can be settled in EGP. The regulator will be issuing permits for different types of commercial gas market activities, including grid operations and maintenance, supply, distribution, and shipping, with different fees set for each type as follows:

• USD 0.57/MMBtu for transmission licenses;
• USD 0.31/MMBtu for shipping licenses;
• USD 0.23/MMBtu for distribution licenses;
• USD 0.08/MMBtu for supply licenses.

Permit requests must be processed within 10 working days of application and any additional documents required by the regulator must also be submitted within 10 working days. The regulator will then have 45 days to approve or deny the request and fees must be deposited within seven days of that date.

Natgas market regulator to officially begin issuing import permits - ENTERPRISE

Thursday, 5 July 2018

Natgas market deregulation gets in full swing as regulator to officially begin issuing import permits: The board of directors of the new natural gas market regulator approved that it begin issuing and revoking licenses for private sector natural gas industry players, according to an Oil Ministry statement. The regulator — established under the Natural Gas Act, which deregulated the market and opened it up to the private sector — will begin its work “in the coming period,” according to the statement. Natural gas companies are currently gathering the necessary paperwork to submit their requests for a license to distribute natural gas, ministry sources said, Al Shorouk reports.

Is Shell nearing a USD 25 bn agreement that could see Egypt become an East Med export hub? - ENTERPRISE

Monday, 12 March 2018

Is Shell nearing a USD 25 bn agreement that could see Egypt become an East Med gas export hub? Shell is reportedly in talks to buy gas from the Israel’s Leviathan and Cyprus’ Aphrodite gas fields in a USD 25 bn, 10-year agreement, Israel’s Globes reports citing a report from Bloomberg. Shell is looking to buy 10 bcm of gas from both fields, industry sources said.

Background: Bloomberg had noted last year that Shell was looking for ways to move gas from Leviathan and Aphrodite, in which it holds a 35% stake, to Egypt’s Idku LNG facility, which it owns and from which it hopes to export. Last month’s USD 15 bn agreement between Leviathan operators and Alaa Arafa-led Dolphinus Holding to import gas to Egypt had opened options to moving gas to the country. Gas could be shipped to Egypt through Jordan via a pipeline as conditions for that appear ready, according to statements by Leviathan partners Delek Energy and Noble Drilling. Both are looking to purchase the rights to use the East Mediterranean Gas Company’s pipeline to transport gas to its customers in Egypt.

Gov’t will only approve gas imports from Israel after disputes are resolved -El Molla - ENTERPRISE

Tuesday, 14 November 2017

The government will not issue permits to companies to import natural gas from Israel until the arbitration cases between Egypt and Israel are resolved, Oil Minister Tarek El Molla said, according to Reuters. The government will sign off on agreements to import from our eastern neighbor only once the disputes are resolved and under the condition that the agreements “add value,” El Molla say. “Delegations [from Israel] are healthy as it means there are discussions and negotiations, but they have to meet the conditions put by the government as that is only fair,” he says. “In 2015, the International Chamber of Commerce ordered Egypt to pay USD 2 bn in compensation after [an agreement] to export gas to Israel via pipeline collapsed in 2012 due to attacks by insurgents in Egypt’s Sinai peninsula,” the newswire notes.

Leviathan Partners in Talks to Pipe Israeli Gas to Egypt Via Jordan - BLOOMBERG

August 10, 2017, 7:41 AM GMT+3
Yaacov Benmeleh, David Wainer, and Mohammad Tayseer

• Jordanian route would be more costly than going through Sinai
• Alternative path could circumvent Israel-Egypt dispute on fine

Egypt could be on its way to becoming a major market for Israeli gas. Companies developing Israel's biggest natural gas reservoir are said to be in talks to get around a dispute between the two governments by piping the gas through Jordan. Bloomberg's Yaacov Benmeleh reports on 'Bloomberg Markets: Middle East.' (VIDEO HERE)

Companies developing Israel’s largest natural gas reservoir are negotiating an alternative delivery route to key target market Egypt to skirt financial disputes that have held up an export deal, according to people in Egypt and Israel familiar with the matter.

Israel’s Delek Group Ltd. and Houston-based Noble Energy Inc., the major stakeholders in the Leviathan gas field, are in talks to sell about 3 billion cubic meters a year to Egypt’s Dolphinus Holdings Ltd., according to Dolphinus’s co-founder, Alaa Arafa.

The Natural Gas Act is now law of the land - ENTERPRISE

Tuesday, 8 August 2017

Even if there’s pullback on electricity, the state took a clear step forward yesterday to deregulate the natural gas industry. President Abdel Fattah El Sisi signed into law the long-awaited Natural Gas Act, the drafting of which wrapped back in October 2015. The Act, published in Monday’s issue of the Official Gazette, will see the state become the primary regulator of the industry, but allow the private sector to directly trade gas using the pipeline and network infrastructure. The law will establish a state regulator that would have a say in pricing gas, set up the rules of the system, encourage investment in the sector, and ensure equal access by private sector players to the national gas infrastructure. The regulator will also be tasked with drawing up the timeline for privatization. Five primary industry roles are now open to the private sector: Pipeline operator, distributor, storage provider, gas shipper, and importer. Pipeline operators and distributors can set their own pipeline utilization fees. You can tap here for a refresher on other key points of the legislation, including definitions of the various roles open to private-sector players.

Taqa Arabia, Dolphinus call for licence to import gas from EGAS to private sector - DAILY NEWS EGYPT

Preliminary approval to be granted to companies that request licences to sell gas in local market, says source

Mohamed Adel September 20, 2016

Taqa Arabia and Dolphinus Holdings sent a formal request to Egyptian Natural Gas Holding (EGAS) to obtain a licence to import natural gas through the private sector in the Egyptian market.

A senior source in the petroleum sector told Daily News Egypt that the gas market regulation authority is awaiting the issuance of the law by the House of Representatives that will allow licences to be issued to private companies to import gas and sell it in the local market.

The source added that the foreign companies that applied to obtain the licence cannot be mentioned as of now.

It is expected to approve the completion of the gas market regulation law by the end of 2016, according to the source.

Egypt and Israel: Tensions over natural gas supplies | Daily News Egypt

Egypt seeks recourse to Swiss appellate courts to avoid paying compensation to Israel

Doaa Farid, 19 December 2015

When asked to describe Egyptian-Israeli economic relations in early 2015, head of the Foreign Trade Administration in the Israeli Economy Ministry Ohad Cohen  assured that they were “stronger than ever.”

2015 is however ending with renewed tensions concerning gas dealings between Cairo and Jerusalem, with the looming appeal of a Swiss court’s decision that the Egyptian General Petroleum Company (EGPC) pay $1.7bn to Israeli companies as compensation for the shortfall in natural gas supplies.

These tensions mark a divergence from the post-1979 period of peaceful relations and economic exchange between the bordering countries, a period following the Egypt-Israel Peace Treaty that allowed Israel to purchase oil from Egypt

However, the more recent history of Egypt-Israel resource exchange has been subject to turmoil. Immediately following the 25 January Revolution in 2011, pipelines transferring natural gas from Egypt to Israel were repeatedly targeted by militants. Egypt’s revolutionary climate and its political vacillations resulted in the cessation of natural gas exports to Israel in 2012, ending a 20-year agreement between the two parties and prompting Israeli firms to turn to international arbitration to seek compensation.

Earlier this month, the International Chamber of Commerce (ICC) ruled in favour of Israeli companies, requesting that Egypt pay $1.7bn. Israel, which now has two natural gas fields, hopes to continue negotiations with Cairo over exporting natural gas.

Ibrahim Zahran, the petroleum expert responsible for filing a formal complaint documenting purported collusion in the Egypt-Israel gas deal and the subsequent halting of natural gas exports to Israel, told Daily News Egypt he is not optimistic about the negotiations.

“The arbitration was wrong and Egypt has to take a legal action to respond,” Zahran said, stressing that Egypt does not have the financial resources to pay the court-ordered compensation.

Alternative means of compensation would prove equally unlikely, according to Zahran. As Egypt already has a wealth of natural gas reserves and expects natural gas production to augment in 2017, the country would not find it economically prudent to import gas from Israel, which despite its own reserves, does not anticipate an increase in production until 2019.

Halting gas export to Israel costs $1.7bn

International ruling forces state-owned EGPC and EGAS to pay $288m

In early December the Egyptian General Petroleum Corporation (EGPC) and the Egyptian Natural Gas Holding Company (EGAS) announced the ICC’s decision in the arbitration ruling mediating the conflict between the Egyptian companies and the East Mediterranean Gas Company (EMG) and Israeli Electric Corporation (IEC). The ruling stipulates that EGPC and EGAS must pay compensatory funds totalling $288m and $1.7bn to the EMG and IEC respectively.

The East Mediterranean Gas Company (EMG) requested $1.5bn, but was granted $288m, while the Israel Electric Corporation (IEC) was granted $1.7bn, almost half of the $3.8bn it requested.

The ICC’s ruling supported EMG’s and IEC’s contention that compensation is necessary for the shortfall in gas supply and its attendant damages on the Israeli energy sector following Egypt’s halt in gas supply.

Egypt, in response, is following-up on the annulment of the ICC ruling before Swiss courts. International legal advisor Shearman & Sterling law firm told EGAS that it has the right to appeal the ruling in line with Swiss law.

Following the announcement of the ruling, the Egyptian government froze negotiations between companies seeking to import gas from Israeli fields and suspended decision on import approvals until the legal position of the arbitration ruling against Egypt and the results of its appeal become clear.

The unilateral action by the Egyptian government has confused Egyptian company Dolphinus Holdings, among whose responsibilities include negotiating the import of Israeli gas, as to how to proceed. The company said they were told it is necessary to freeze negotiations with Israel after the ruling of the international arbitration.

Dolphinus Holdings, which Alaa Arafa is heading, is a consortium owned by Egyptian investors and partners in Israel’s Leviathan field.

Egypt’s decision to halt negations and subsequent trade with Israel could be a strategic decision, as Egypt is an important export destination for Israel. Following the Egyptian government’s decision, Israeli Prime Minister Benjamin Netanyahu sent a special envoy to Cairo for talks concerning the Swiss court’s decision.

Plot twist: Egypt considers importing gas from Israel

Egypt was said to receive gas imported from Israel at a price no greater than $8 per million BTU

Once dependent on natural gas imports, Israel is establishing itself as an exporter after the exploration of Tamar and Leviathan fields in 2009. Israel’s burgeoning resource economy coupled with Egypt’s energy shortage after the revolution in 2011 has prompted some companies to consider importing gas from Israel through the already-built pipelines between both countries.

Talks over exporting gas from Israeli fields to Egypt started in May 2014 when partners in Israel’s Tamar natural gas field – discovered in the eastern Mediterranean in 2009 and holding an estimated 10 tcf of gas – announced a signed letter of intent with Spanish Union Fenosa Gas (UFG) to export up to 2.5tn cubic feet (tcf) of gas over 15 years to liquefied natural gas (LNG) plants in Egypt.

The deal includes several parties, notably Texas-based Noble Energy, which has a 36% stake in the Tamar field.

As UFG has an 80% stake in an LNG facility in Damietta in Egypt and acts as a third-party mediator between Israel and Egypt alleviating historical concerns over relations between the two countries, the EGPC has approved factories in the city to import gas from Israel and obtain a share of the imported gas to meet the needs of the local market, the EGPC said in August 2014.

Egypt was said to receive gas imported from Israel at a price no greater than $8 per million BTUs, compared to an average price of $16 per million BTUs from other countries.

However, despite the apparent savings, there are several externalities not factored into the quoted $8 per million BTUs. Ancillary costs for importing the gas include: regasification and transportation expenditures centred on the regasification boats that convert the liquefied natural gas back into its gaseous form. The EGPC estimates the cost adjusted for externalities per million BTUs to reach $18.

In October 2014, a non-binding letter of intent was signed between the Tamar Partners and Dolphinus Holdings, which confirms the intention of the involved parties to carry out negotiations facilitating the transfer and sale of natural gas from the Tamar gas field to Egypt.

The gas supply will be 250,000 MMBtu (One million British Thermal Unit) over a period of seven years, of quantities of surplus gas from the Tamar field.

Gas quantities will delivered to Egypt through the Egyptian-Israeli East Mediterranean Gas (EMG) pipelines, constructed a decade ago to transfer Egyptian gas to Israel. Mubarak-era business tycoon Hussein Salem, currently in Spain, owns shares in EMG and is a defendant in a number of cases regarding profiteering and seizing public funds.

Negotiations have continued in 2015. In March, officials from the Ministry of Petroleum were reported to have met representatives from international oil companies, British Gas (BG) and Union Fenosa, in London to discuss Israeli gas supply to Egyptian power plants.

In November, Egyptian head of Dolphinus Holding, Alaa Arafa, signed a letter of intent with Israeli Leviathan Partners (Delek Group and Noble Energy) to supply Arafa’s company with gas from Israel.

Dolphinus is expected to receive 4 BCM (billion cubic meters) of gas per year over 10-15 years in the final agreement.

Commenting on the preliminary agreement, Egypt’s Ministry of Petroleum issued a statement indicating that the Egyptian petroleum sector is not involved. It highlighted that it was already announced that any agreement will not be reached without the approval of Egyptian authorities and the projects to be implemented must be aligned with the national interests of Egypt and contribute value to the economy.

The statement noted that the petroleum sector in Egypt is not opposed to private companies’ needs to import gas using the state’s facilitations and infrastructure, and in return the state would receive a tariff that is to be agreed upon.

Hidden competition between Cairo and Jerusalem on who is next major gas exporter

Italian company Eni announced the discovery of a giant natural gas deposit in the deep waters of Egypt

The recent discovery of offshore gas reserves has shifted Israel’s regional position in the resource market. While Israel was once dependent on imports to cover its needs of natural gas; the discovering of the Leviathan offshore deposit in 2009 enabled the country to establish itself as an exporter after covering domestic needs.

Production in the Leviathan field is scheduled to start in 2019-2020, delaying Israel’s emergence onto the regional energy sector temporarily.

Egypt has similarly seen a potential significant shift in its resource future, after a period following the 2011 revolution in which it suffered energy shortages. In August 2015, the Italian company Eni announced the discovery of the Zohr natural gas deposit in the deep waters off Egypt’s north coast.

While estimates are yet to be conclusive, early reports suggest that the deposit could hold a reserve of 30tr cubic feet of gas on an area of approximately 100 sqkm. The Zohr reserve is the largest gas discovery ever made in Egypt and in the Mediterranean Sea, according to Eni.

EGPC has reached an agreement with the Italian petroleum company Eni to begin production from the Zohr gas field by 2017, with the goal of a daily production capacity that will reach 1bn cubic feet (bcf).

Between the newfound resource prosperity of both countries, several extenuating factors will determine the future of the region’s resource market.

Notably, Egypt has a highly developed resource infrastructure, with the largest terminal for gas in the Mediterranean that can receive up to 9bn cubic feet of natural gas per day, in addition to a liquefaction plant that can export 1,880m cubic feet per day, securing for the country more foreign currency reserves after export.

However, Israel produces gas from eight fields, in addition to the newly discovered Ishai field in the Israeli and Cypriot territorial waters.

Outside of the geopolitical posturing, the two sides have seen an enforced entwinement of their interests, tainted as they are by recent corruption scandals.

On 1 July, 2005, then Egyptian petroleum minister Sameh Fahmy and Israeli Minister of National Infrastructure Benjamin Ben-Eliezer signed an agreement whose framework aims to supply 1.7bn cubic meters of natural gas annually to the Israel Electric Corporation (IEC) starting October 2006.

A confidential document prepared by the US embassy in Cairo, revealed by Wikileaks in September 2011, said the US perceived the gas deal as “the most lucrative ever”.

The gas deal at that time had faced strong opposition from activists and civil society organisations, but with a few years, financial corruption was proven in the case. In June 2012, Fahmy was sentenced to a prison term of 15 years and businessman Hussein Salem was also found guilty and sentenced to 15 years in absentia for profiting from the gas deal.

The defendants were found guilty of harming the interests of the country and squandering public funds by selling and exporting natural gas to Israel at below market rates.

Egypt lost an estimated $715m in revenue due to the collusion between Fahmy and Hussein with Israel, according to the general prosecution. All of the defendants in the case were collectively fined approximately $2.5bn.

Despite this recent tension, Israel has shown signs that it wants to improve the relations. Last week, Israel revealed intentions to give Cairo 2% of earnings from the Qualified Industrial Zone (QIZ) in Egypt, following the release of Israeli Ouda Tarabin from Egyptian prison.

The QIZ concept was established in 2004 under a trilateral agreement between the US, Egypt, and Israel. The agreement grants Egyptian products from pre-approved zones tariff-free entry to the US provided they contain a minimum of 11.7% as inputs from Israel.

Egypt has tried several times to reduce the Israeli component in products exported under the QIZ agreement from 11.7% to 8%, a concession that was made to Jordan. Egypt’s exports to the US under the QIZ agreement amounted to $920m in GDP in 2014, about 50% of the total Egyptian exports to the US, according to the embassy’s official data.

As Egypt does not have the resources to pay the gas deal compensation, it is expected that Egypt can carry on negotiations over importing Israeli gas as indirect way to avoid the fine. However, negotiations have seemingly reached an impasse as Israel insists on receiving the compensation.

Source