The owners of an Israeli gas field have reached an agreement to export natural gas through Egypt, an economically lucrative deal that could also cool off any anti-Israeli sentiments in the Middle East.
Houston-based Noble Energy, the largest owner of Israel’s Tamar gas field, signed a non-binding letter of intent on 5 May to ship up to 4.5 billion cubic metres of gas a year to Spain’s Union Fenosa, which operates Egypt’s natural gas export facility at Damietta. Egypt would then liquefy the gas, preparing it for export. The deal could be worth as much as $1.3 billion per year.
Fadel Gheit, a senior oil and gas analyst at Oppenheimer in New York, pointed out on 8 May that selling gas from Israel’s Tamar field to Europe via Egypt is a lot cheaper than building a liquefied natural gas (LNG) facility in Israel for export.
“The more the gas is kept locally, the cheaper the development is going to be. The most expensive option will be export LNG that would require huge upfront investment in the tens of billions of dollars that nobody seems to be willing to make so the best options right now is selling gas to Jordan, to the Palestinian Authority and to Egypt,” Gheit told New Europe.
Egypt used to be a net exporter of gas and sold gas to Israel until three years ago. “Now the shoe is on the other foot and things have changed 180 degrees. Now Egypt is running out of gas and Israel will be a supplier gas to Egypt,” he said.
Gheit said the best option is that both Israel and Egypt will collaborate on monetising the Israeli gas by actually utilising Egypt’s liquefaction facilities that are right now operating at very small capacity.
“That makes a lot of sense since you have existing assets that are not utilised. The Israelis can give gas to Egypt in exchange for allowing the Israeli gas to be converted into LNG and be sold to Europe so it’s really win-win situation,” Gheit said.
Meanwhile, officials in Cyprus, which is also exploring its own offshore reserves for export to Europe, have said that the search for additional sources of gas must move quickly since the amount of the fuel inside Cyprus’ single proven field off its south coast isn’t enough to secure the billions of euros needed from investors to finance construction of a land-based LNG facility.
Gheit said Cyprus may need to follow Israel’s example. Egypt is a huge market but the Israeli gas could well exceed the local demand for gas and therefore the Egyptians and the Israelis could take a big portion of this gas and convert it to LNG for exports to Europe. “The biggest risk is the upfront investment.
But the LNG facility is already in Egypt,” Gheit said, predicting that a pipeline could be built in less than a year that will take the gas two ways: to the local Egyptian market and to the Egyptian LNG liquefaction facilities for export to Europe.
The added advantage, Gheit said, is that selling gas to Egypt, Jordan and Palestine “will cool off any anti-Israeli sentiments in the Middle East because it will be economic benefit for both”.
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