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Delek, Noble and Egypt sign US$518m EMG pipeline deal
[CAIRO] The companies developing Israel's largest natural gas fields and their Egyptian partner have bought control of a pipeline to Egypt, clearing legal obstacles to a US$15 billion deal to export gas from the Jewish state to its former enemy. Shares of Israeli gas stocks rose.
Israel's Delek Drilling LP, Noble Energy Inc and Egyptian East Gas Co signed a deal to buy a 39 per cent stake in Eastern Mediterranean Gas Co, according to a statement released to the Tel Aviv bourse on Thursday. The buyers will pay US$518 million, with Delek and Noble contributing US$185 million each and the remainder being paid by East Gas.
The agreement gives the buyers exclusive rights to lease and operate the subsea gas pipeline owned by EMG, which connects southern Israel to Egypt's Sinai peninsula. The partners in Israeli reservoirs Tamar and Leviathan will use the EMG pipeline to implement a deal signed in February to export 64 million cubic meters of gas to Egypt over 10 years.
Thursday's agreement eliminates legal obstacles that were impeding the export of gas from Israel to the most populous Arab country. It adds an economic dimension to a relationship dominated by security since the two countries signed a peace treaty that changed the face of the Middle East four decades ago. Delek expects gas to start flowing in "early 2019," the statement said.
Ratio Oil Exploration 1992 LP and Delek, shareholders in the Leviathan field, led the gains on Israel's main energy index. The shares climbed 4.6 per cent and 3.8 per cent, respectively, at 10.09 am in Tel Aviv.
The deal also advances Egypt's plan to capitalize on its own giant Zohr gas field and position itself as an energy re-export hub on the doorstep of gas-hungry Europe. Egypt has idle liquefaction plants that would make it suitable for a regional hub.
The deal could place Egypt on par with "significant global energy centers," Delek Chief Executive Officer Yossi Abu said in an emailed statement.
Delek and its partners will begin working on reversing the flow of the EMG pipeline, which used to carry Egyptian gas to Israel. The companies still need to test the state of the pipeline, which has been idle for years after Egypt halted exports in 2012 due to a domestic energy shortage and repeated attacks by Islamist militants on a connecting overland stretch of pipeline in the Sinai.
The deal is subject to that due diligence, as well as regulatory approvals in Israel and Egypt, and the restructuring of EMG's existing debt to Egyptian banks, the statement said.