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.”

Egypt to pay Israel USD 500 mn settlement to end seven-year gas dispute - ENTERPRISE

Monday, 17 June 2019

DISPUTE WATCH- Egypt to pay Israel USD 500 mn settlement to end seven-year gas dispute: Egypt has agreed to pay USD 500 mn over 8.5 years to the Israel Electric Corporation (IEC) as a settlement for halting natural gas shipments in 2012, the Egyptian General Petroleum Corporation (EGPC) and EGAS said yesterday in a statement picked up by Reuters. Egypt agreed to the reduced fine in exchange for the IEC dropping its other claims that arose from an arbitration decision in 2015, when the International Chamber of Commerce ordered Egypt to pay USD 1.76 bn.

Background: The IEC admitted in April that it was willing to accept a USD 500 mn settlement, amounting to a USD 1.3 bn write-off of the original USD 1.76 bn fine. Egypt had appealed against the International Chamber of Commerce’s ruling, and made reducing the settlement a key condition for accepting a gas agreement with Israel. The two countries signed a USD 15 bn gas pact last year, which will see Delek Drilling and its partner Noble Energy supplying the Alaa Arafa-led Dolphinus Holding with 7 bcm of natural gas from Israel’s Leviathan and Tamar gas fields. Delek’s deputy CEO Yossi Gvura said earlier this month commercial sales of natural gas to Egypt could begin by the end of June. The gas dispute originates from 2012 when terrorist attacks in the Sinai resulted in the Egyptian government suspending shipments of natural gas to Israel.

Israel Electric Corp. Passed Up $1.3b to Let Delek, Noble Export Gas to Egypt - HAARETZ

Apr 03, 2019 5:21 AM

Ora Coren

The utility took an 85% haircut on Egyptian gas companies’ debt, saying this was 'important from a diplomatic standpoint'

The Israel Electric Corporation voluntarily gave up $1.3 billion in compensation after Egypt reneged on a gas-sale contract in order to let private-sector companies – led by Israel’s Delek and Houston-based Noble Energy – export Israeli gas to Egypt.

The electricity utility took an 85% haircut on the Egyptian gas companies’ debt, and intentionally did not inform the public, it emerged on Tuesday.

The IEC argued that its approach was “important from a diplomatic standpoint,” the Government Companies Authority said.

The agreement with the Egyptian gas companies came after two years of secret negotiations, after they reneged following the unrest in the country in 2011.

The companies had been ordered to pay the IEC $1.76 billion, not including interest and linkages due to inflation, under an international arbitration agreement.

Egypt Signals That $15 Billion Gas Deal Will Hinge on Israeli Debt Concessions - HAARETZ

Feb 26, 2018 6:46 AM

Ora Cohen

Egyptian officials have signaled that a giant $15 billion deal to buy natural gas from Israel hinges on Israel’s backing down from rulings awarding it $1.8 billion or more of compensation when Egypt cut off its supply of gas to Israel in 2012.

In Israel, however, officials deny that there has been any agreement on compensation. “Israel hasn’t given up on the debt and the matter did not come up for discussion during talks on the Leviathan export deal to Egypt that was signed [last] week,” Israel’s Ministry of Energy said.

Likewise, state-owned Israel Electric Corporation, which won arbitration in 2015 awarding it $1.76 billion for the loss of Egyptian gas, similarly denied any concessions had been made. “The company is not aware of any concessions on the debt. There won’t be any backing down on the debt. The company continues to seek to collect it,” IEC said in a statement.

Egypt resolving dispute, holding up $15-billion Israel gas deal - WORLD OIL

FEB/22/2018

ABDEL LATIF WAHBA

CAIRO (Bloomberg) -- Egypt said it was settling financial disputes with an Israeli electricity company and a key pipeline operator to turn a $15-billion deal to import gas from the Jewish state into reality.

The gas deal announced this week had been held up by arbitration rulings ordering Egypt to pay Israel Electric Corp. and East Mediterranean Gas Co. (EMG), which operates a section of pipeline, compensation for canceling an earlier contract.

“We reached an agreement to receive part of the gas in Egypt via its pipelines and this is part of the resolution to the arbitration,” Prime Minister Sherif Ismail told reporters in Cairo when asked about the EMG case. He said an understanding had also been reached with the power company but declined to give more details.

Noble Energy and Delek Drilling-LP announced on Monday they had agreed to export 64 Bcm of natural gas over 10 years to Egyptian company Dolphinus Holdings Ltd. from Israel’s Tamar and Leviathan reservoirs.

The deal adds an economic dimension to a relationship dominated by security and clouded by mutual suspicion since the two countries signed a peace deal four decades ago. It also takes Egypt a step closer to its goal of becoming an energy hub for the East Mediterranean.

Egyptian minister sets conditions for approval of Israeli gas import deal - THE TIMES OF ISRAEL

21.2.2018

Egypt’s oil minister said Tuesday Cairo would set some conditions before approving the import of Israeli natural gas to the country, as agreed between US Noble Energy, Israel’s Delek and Egypt’s Dolphinus Holdings.

Tariq al-Mulla, quoted by Turkey’s Anadolu news agency, said the gas imports must “add value to the Egyptian economy” — a likely reference to pricing — and that “arbitration between the two countries” must be settled.

He was apparently alluding to a debt of $1.76 billion Egypt owes Israel for a 2015 court judgment that found Cairo violated an agreement to supply natural gas.

The ruling, made by three arbitrators at the International Chamber of Commerce, came after the Israeli Electric Corporation claimed over $4 billion in damages stemming from Egypt canceling their bilateral gas deal in 2012.

Arbitrator: EMG Due $1.03b From Egypt Over Canceled Gas Contract- HAARETZ

Feb 19, 2018 12:43 AM
Eran Azran 

A lengthy dispute over compensation after Egyptian gas companies cut off the supply of natural gas to Israel six years ago is moving forward in Israel’s favor, thanks to a ruling that the Egyptians had violated their country’s trade treaty with Poland.

The Cairo Regional Centre for International Commercial Arbitration ruled that East Mediterranean Gas, the company that operated the pipeline that had been delivering the gas to Israel, should be awarded $1.033 billion plus interest.

If the award is paid out, that could enable the bondholders of Ampal-American – an Israeli holding company controlled by Yossi Maiman that owned 12.5% of EMG – to collect on the 800 million shekels ($225.8 million at current exchange rates) still owned them after Ampal went bankrupt after EMG’s supply of gas was ended.

The decision by the Cairo-based arbitrator came after the United Nations Commission on International Trade Law, or UNCITRAL, ruled that the Egyptian Natural Gas and Egyptian General Petroleum Corporation had violated the terms of the Egyptian-Polish trade treaty’s clauses protecting investors.

FDI in oil and gas sector has hit USD 10 bn so far this fiscal year; El Molla sounding the right note on payments to IOCs, but what about mid-sized players? - ENTERPRISE

Wednesday, 14 February 2018

FDI in oil and gas sector up to USD 10 bn this year: Investment by international oil companies reached USD 10 bn so far in FY2017-18, Oil Minister Tarek El Molla said in an interview with Al Borsa. This will likely increase, as the ministry plans to issue exploration tenders, including in the East Mediterranean and in the Nile Delta region sometime in 2H2017-18, said El Molla. The ministry plans to float tenders in the West Mediterranean once seismic mapping of the area is complete and a marketing strategy for the field has been developed. He added that the Red Sea and South Egypt areas will also see tenders for the very first time once geological data has been collected.

El Molla once again reassured IOCs that Egypt is committed to paying its arrears, noting that they now stand at USD 2.3 bn since the last USD 2 bn payment was made in June 2017. He noted that these were lowest levels of IOC-debt since 2013. (The question remains, though: What about small- and mid-sized players, who have seen their receivables balloon at the same time as the global majors are being paid out?)

Government to honor historical gas export contracts - ENTERPRISE

Monday, 18 December 2017

The Sisi administration plans to honor all export contracts Egypt signed before the nation became a net importer of gas back in 2012, said Oil Minister Tarek El Molla, Al Shorouk reports. The statement appears to signal that the government plans to use influx of gas from Zohr, which it hopes will help Egypt become a net gas exporter in 2018, to resolve outstanding contracts which has caused legal headaches for the government. Most significant of these is a ruling by a Swiss court which fined Egypt USD 2 bn in compensation to Israel Electric Corporation (IEC) for halting gas supplies to our eastern neighbor in 2012. The case had led to the government suspending any plans to importing gas from Israel as part of a region-wide collaboration to export gas from the East Mediterranean to Europe. Egypt and Israel have reportedly been holding talks behind closed doors to revive cooperation efforts.

Israel, Egypt government ministers said to discuss gas exports - WORLD OIL / BLOOMBERG

NOVEMBER/26/2017
DAVID WAINER

TEL AVIV (Bloomberg) -- Government ministers from Egypt and Israel held a call last week to discuss the potential sale of Israeli gas to Egypt, according to a person with direct knowledge of the matter.

Egyptian Oil Minister Tarek El-Molla and Israel’s energy minister, Yuval Steinitz, spoke after an interview El-Molla gave to Bloomberg earlier this month sent shares of Israeli gas companies tumbling on speculation Egypt would halt talks on buying gas from Israel, the person said. El-Molla told Steinitz that Israeli gas exports to Egypt, which would be carried via pipeline, are still on the table, the person said.

Shares of Israeli gas producers extended their gains, with Delek Group Ltd. up 7.8% to 550 shekels at 3:26 p.m. in Tel Aviv.

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.

Egypt lays gas-hub foundations - PETROLEUM ECONOMIST

10 August 2017
Gerald Butt

President Sisi has signed into law new gas-sector regulations expanding the role of the private sector

A casual reader of Egypt's Official Gazette mightn't find much in the way of excitement in Law 196 of 2017. But for anyone interested in the country's burgeoning natural gas sector it's hugely important.

In effect, Egypt is taking a giant step towards becoming the region's natural gas hub and putting itself beyond the reach of potential competitors like Cyprus and Turkey. The new law allows private-sector firms to use the state import and distribution infrastructure to trade in natural gas.

Ambitions clash in the Eastern Med - NGW MAGAZINE

July 6, 2017 11:00am

Unstable relations between the eastern Mediterranean countries threaten to make long-term gas deals impossible – even if there is enough gas to make them worthwhile.

The gas industry in the eastern Mediterranean has seen a lot of change in the last two years. Chief among the shifts have been:

• Egypt, which has experienced a severe shortage of natural gas and has become an LNG importer, is returning to self-sufficiency in two or three years;

Swiss Court Fines Egypt $2 Billion, Muddies Mideast Gas Market - BLOOMBERG

27 April 2017, 7:54 μ.μ. EEST

Yaacov Benmeleh & Tamim Elyan

• Court says Egypt breached contract to supply gas to Israel
• Israel now hoping to export natural gas to southern neighbor

A Swiss court ordered Egyptian natural gas companies to pay Israel’s state-owned electricity provider $2 billion in fines for breach of previous contracts, a step that could complicate chances for the two nations to sign future gas deals as Israel seeks to become an energy exporter.

The Federal Supreme Court of Switzerland said Egyptian General Petroleum Corp. and Egyptian Natural Gas Holding were liable for the damages caused by repeated attacks on a pipeline through the Sinai Desert that supplied gas to its neighbor, Israel Electric Co. said in a text message Thursday. The Egyptian companies had appealed a previous ruling from Dec. 2015 that imposed a $1.73 billion penalty.

Israel settles gas saga - IN CYPRUS / CYPRUS WEEKLY

Charles Ellinas — 29/05/2016

Israel has finally settled the long-running saga of the gas regulatory framework agreement with the gas companies.

It has also reached a deal with Egypt to settle the dispute that has arisen after the decision by the International Arbitration Court to award a $1.73-billion compensation to Israeli Electric Corporation against Egypt’s EGAS for discontinuing gas supplies in 2012.
But these do not necessarily mean that Leviathan gas will now be exported to Egypt. Such a deal also needs signed commercial gas sales agreements.

Israel, Egypt Said Close to Accord on Natural Gas Dispute - BLOOMBERG

May 18, 2016
David Wainer, Yaacov Benmeleh, Jonathan Ferziger

Israel said willing to compromise on fine Egypt must pay
Damages have hurt progress on exporting Israeli gas to Egypt

Israel and Egypt are nearing a compromise that would sweep away a major obstacle to a multibillion-dollar natural gas deal.

Israel may agree to settle for half of the $1.73 billion fine Egypt was ordered to pay it so talks on exporting Israeli offshore gas there can go ahead, two people familiar with the negotiations said, requesting anonymity because the talks are private. Payments would be spread over 14 years, one of the people said.

Negotiations are still under way, and authorities in both countries would have to approve any final figure, the people familiar said. State-owned Israel Electric Corp., which had sought the award from Egypt, and the Egyptian Foreign Ministry declined to comment.

Beware False Hopes in the East Med - NATURAL GAS EUROPE

March 09th, 2016

The Eastern Mediterranean contains a cluster of proven gas fields that are capable of contributing significantly to both national and regional energy security. But there is a very real danger that the peoples of all three countries that have so far discovered gas in their waters -- Egypt, Israel and Cyprus -- may suffer from false expectations.

In Israel, there is a need to explain the paradox that export-led development is necessary if the giant Leviathan field is to be harnessed for domestic use as well; in Egypt, it concerns the government's desire to eliminate domestic price subsidies at the same time as the country's biggest gas discovery is due to come on stream; in Cyprus, it's about the contrast between finding a relatively modest field, Aphrodite, and officially-raised hopes that Cyprus may be able to replicate discoveries on the scale of Egypt's Zohr or Israel's Leviathan and the role this could play in furthering a settlement to the island's 40-year-old partition.

Egypt looks to UK as hub model - INTERFAX

ELNG in Idku. Egypt hopes its existing facilities can be used by 
other producers in the region. (BG Group)

Rachel Williamson, 28 January 2016

Egypt is looking to the UK as a model for its plans to become a regional energy hub, and bringing in trading companies will be vital to achieve this goal, according to Khaled Abu Bakr, executive chairman of the country’s largest gas distribution company, Taqa Arabia.

Abu Bakr told Interfax that North Sea success stories would be a good guide for the country, which has been producing gas to export around the world for decades but is now looking to become a more regional player.

With domestic gas and LNG imports being reprioritised for certain industries, including the power sector, the time is ripe for trading companies to enter Egypt’s gas market, which is slowly liberalising, and become the new middlemen between producers and customers.

Weekly Overview on Eastern Mediterranean Natural Gas Matters | Natural Gas Europe

January 22nd, 2016

Israel

Israeli waters may hold more natural gas than previously expected. On January 17, an Israeli gas exploration group led by Isramco Negev and Modiin Energy announced it had encountered indications of a possible natural gas field off the country’s coast. The Daniel East and Daniel West licenses may contain up to 8.9 trillion ft³, according to a report by the companies.

Israel’s largest discoveries to date are the Tamar field, estimated at 10 trillion ft³, and the Leviathan, estimated at 22 trillion ft³. The country has not yet been able to develop the giant Leviathan delayed by domestic regulatory disputes.

Weekly Overview on Eastern Mediterranean Natural Gas Matters | Natural Gas Europe

January 15th, 2016

Cyprus

On a visit to Nicosia on January 11, Vice President of the European Commission, in charge of Energy Union, Maroš Šefčovič, met with Cypriot Minister of Energy Giorgos Lakkotrypis and President Nicos Anastasiades to discuss the role the eastern Mediterranean could play in diversifying Europe’s sources of supply.

At the meeting, Šefčovič stressed the importance of Cyprus in regards to the EU, pointing out that natural gas could reach Europe from the Eastern Mediterranean if future exploration activities prove successful. He also said that the discoveries made thus far in the Levant basin (offshore Israel) are promising.

Europe’s annual consumption of 400-500 mn m3 could partly be met by gas from the eastern Mediterranean, but that would depend on the size of the discoveries, and the export strategy of the countries involved, the politician added.

Cyprus has seen a renewed interest in its gas in recent times. Earlier this month, Italy’s ENI announced it was renewing its presence in Cyprus through the extension of its exploration agreement with the Government of Cyprus. Cypriot Minister of Energy Yiorgos Lakkotrypis said the agreement allows ENI and its South Korean partner KOGAS to explore Blocks 2, 3 and 9 of the island’s EEZ until 2018, with drilling expected to commence in 2017.

The renewal comes on the back of ENI’s giant find in Egyptian waters, the Zohr field, discovered in August 2015 and estimated to hold up to 30 trillion ft3 of natural gas. ENI is currently gathering geological data to assess the likely presence of recoverable amounts of natural gas in the three blocks.

France’s Total also renewed its exploration agreement for a licence offshore Cyprus for another two years in December 2015.

Israel

The partners in Israel’s Leviathan offshore field--Noble Energy, Delek Drilling, Avner, and Isramco Negev--said January 7 that they were engaged in talks to supply natural gas from the field to a number of Israeli companies, including electricity producers and industrial companies. Production from the Leviathan, Israel's largest offshore field, is expected to begin sometime between 2018 and 2020.

The way has been cleared for Israeli exports in the political sphere: After months of domestic political debates, Israeli Prime Minister Benjamin Netanyahu last month approved the natural gas framework that would pave the way for the development of the giant field. The plan is controversial and was approved via the application of Clause 52 of the Antitrust Law, stripping the competition regulator of its overseeing authority over the sector and granting the economy minister the exclusive power to override decisions by the Antitrust Authority chief on issues with sensitive strategic or diplomatic implications.

Israel is eyeing the Jordanian and Egyptian markets as first destinations for its natural gas. Gas could reach distant markets via Egypt’s underused export facilities at Idku and Damietta. Recent tensions between the two countries following an arbitration ruling by the International Chamber of Commerce. As a result of the ruling, the Egyptian companies Egyptian Natural Gas Holding Company (Egas) and Egyptian General Petroleum Corporation (EGPC) must compensate Israeli Electric Corporation (IEC) and Eastern Mediterranean Gas (EMG) $1.7 bn and $288 mn respectively. The resultant tensions have halted gas talks between Israel and Egypt. A diplomatic effort is now being implemented by Israel to resolve the dispute. The Egyptian companies have said they will appeal the arbitration decision.

Egypt

The situation remains the same in Egypt this week in relation to natural gas.

Eni’s giant discovery of the Zohr field offshore Egypt brought the promise of the end of the country’s energy troubles. Egypt has been struggling to meet the natural gas domestic demand and eyeing the regional market for relief. Once a net exporter of natural gas, namely to Jordan and Israel, Egypt’s growing domestic consumption and its flat production has put a strain on the country’s ability to meet its needs. Eni is committed to fast track the development of Zohr. Appraisal drilling will confirm the quantities and first gas is expected in 2018.

Egypt is expected to play a crucial role in the region in 2016, as a route for neighbouring gas and as an important natural gas producer. The country is aiming to achieve self-sufficiency by 2020 and re-enter the LNG export market by 2022. In the meantime, Egypt will still be looking to import gas from Cyprus, and possibly Israel, if the relationship between the two countries normalises.

Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Karen is also a co-founder of the Lebanese Oil and Gas Initiative (LOGI). She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat
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