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Billionaire Tshuva May Herald Next Step in Israel-Egypt Ties

Yaacov Benmeleh
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Billionaire Tshuva May Herald Next Step in Israel-Egypt Ties

(Bloomberg) -- Delek Drilling LP, the Israeli energy explorer controlled by billionaire Yitzhak Tshuva, is considering buying a stake in an Egyptian liquefied natural gas plant to broaden its export footprint.

Acquiring a piece of either the Idku or Damietta facilities, operated by Royal Dutch Shell Plc and Spain’s Union Fenosa SA, respectively, is among the various routes possible for the Egyptian deal, the company said in its annual report on Sunday. Other options are buying capacity at the plants rather than equity stakes, or enrolling their gas liquefaction services.

Should Delek pull off the purchase, it would be the strongest signal yet that Israel and Egypt are moving beyond security cooperation and toward deeper economic ties. Though the neighbors signed a peace treaty 40 years ago, Israel remains unpopular to many Egyptians. President Abdel Fattah El-Sisi didn’t even mention Israel when he celebrated a $15 billion deal in 2018 between the nations.

A representative for Egypt’s Ministry of Petroleum didn’t immediately reply to a request for comment.

Becoming a part owner of one of the sites, both sitting largely idle since 2014 after Egypt halted exports to contend with domestic energy shortages, would allow Delek to sell to markets beyond its immediate region. While plans are afoot to sell gas via pipelines to Egypt and Jordan, Delek also wants to ship gas to far-off markets, for which it would need the LNG facilities.

Without its own LNG plant, Israel’s ability to access foreign markets to export gas from its major fields “remains limited,” said Richard Keenan, a Dubai-based partner at Covington & Burling LLP who specializes in project finance. The options Delek is weighing would open the possibility to exports in “markets in Europe and beyond,” he said.

Companies including Delek that are developing Israel’s largest gas field in Leviathan signed the February 2018 contract to power Egyptian homes. The sides are working to complete the deal, mainly by readying the pipeline that will transport the fuel into Egypt.

The Leviathan partners have completed about 80 percent of the field’s first phase of development, which includes the deal with Egypt along with contracts with Jordan and Israeli buyers. The companies are considering ways to increase the platform’s capacity to 24 billion cubic meters per year, compared to the current maximum 21 bcm -- a move that would allow for further export.

(Updates with commentary in sixth paragraph.)

--With assistance from Salma El Wardany.

To contact the reporter on this story: Yaacov Benmeleh in Tel Aviv at ybenmeleh@bloomberg.net

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Srinivasan Sivabalan, James Amott

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