Egypt, Israel amend $15 billion gas deal to avoid supply disruption

By Mirette Magdy and Yaacov Benmeleh on 7/24/2019

CAIRO and TEL AVIV - The parties to a $15 billion deal to export Israeli natural gas to Egypt are considering changing the landmark agreement to allow a gradual ramp up in supplies, reducing the risk of disruptions, according to people familiar with the matter.

The companies developing Israel’s two biggest gas finds, led by Noble Energy and Delek Drilling, are working on changes to their contract with Egypt’s Dolphinus Holdings that would see peak supply reached over three years, while trying to avoid interruptions in the flows, the people said, asking not to be identified because the matter is private.

The current contract calls for 7 Bcmg per year. Half of that is on a so-called interruptible basis, meaning supply can vary during peak hours or adverse conditions. The firms are seeking to make the entire supply non-interruptible, while taking longer to reach the target, the people said.

The gas deal will strengthen economic ties between the two countries and give Israel’s gas finds in the eastern Mediterranean a new export market. The two governments have touted this pact as a harbinger of bigger export deals to come, and the companies are trying to ensure a smooth start.

The partners in Israel’s Tamar and Leviathan gas discoveries would supply about 4.5 Bcmg next year, 5.5 billion in 2021, and then reach 7 billion by the following year, the people said.

The Leviathan partners are examining ways to increase the platform’s annual capacity to provide larger amounts to Egypt, but for now need to ensure they’ll be able to service the existing contract with Dolphinus. Both Tamar and Leviathan are almost fully booked, though their owners expect to have more room to send to Egypt by early 2021, when Greece’s Energean Oil & Gas is expected to start piping gas from two smaller Israeli offshore fields to the local market.

Still, Delek and Noble have been steadily eliminating obstacles to the deal. Their last milestone came a few weeks ago, when the companies successfully tested the pipeline between Israel and Egypt that had sat idle for years and was repeatedly attacked by Islamist militants earlier this decade.

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