U.S. Markets open in 1 hr 52 mins

Israeli Gas Finally Reaches Egypt as Mega Deal Bears Fruit

Salma El Wardany
1 / 2

Israeli Gas Finally Reaches Egypt as Mega Deal Bears Fruit

(Bloomberg) -- Egypt began receiving natural gas from Israel, enacting a deal initially worth $15 billion that’s part of the North African country’s plan to become an energy re-export hub on Europe’s doorstep. Israeli gas stocks rose.

The step “represents an important development that serves the economic interests for both countries,” Egypt’s Oil Ministry said early Wednesday in a statement announcing the first transfer.

Under the pact, Israeli gas will be processed at Egyptian liquefied natural gas factories before being exported to Europe.

Israel’s Delek Drilling LP, Noble Energy Inc. and Egyptian East Gas Co. signed a deal in 2018 to buy control of the East Mediterranean Gas Co. pipeline, which connects southern Israel to Egypt’s Sinai peninsula and was initially built to export Egyptian gas to Israel. In October, they agreed to increase gas flows by almost 35% more than the figure set in 2018, when they inked a 10-year deal valued at $15 billion.

The link had been idle for about six years due to a domestic gas shortage and repeated militant attacks on an overland stretch of Sinai pipeline.

The energy deal adds an economic factor to a relationship that’s been focused on security since the two countries signed a peace treaty that changed the face of the Middle East four decades ago. Egypt also plans to use its own giant Zohr field to supply gas-hungry Europe.

In Tel Aviv, stocks in Ratio Oil Exploration 1992 LP, which has a 15% stake in Israel’s biggest gas field, were up 2.7% by 1:14 p.m. Delek Drilling, a partner in the country’s two largest reservoirs, climbed 2.4%.

The pact “is the result of strenuous work, and a lot of determination and courage on the part of leaders on both sides,” said Delek Drilling’s chief executive officer, Yossi Abu. “The gas agreement will strengthen the economy in Israel and in Egypt and strengthen the position of Israel and Egypt in the regional and global energy markets.”

Egypt will initially receive about 200 million standard cubic feet per day of the gas, with supplies rising eventually to a daily 500 million sometime in 2020, Oil Minister Tarek El-Molla said in an interview in September.

(Updates with comment from Delek Drilling in penultimate paragraph)

--With assistance from Yaacov Benmeleh and Mirette Magdy.

To contact the reporter on this story: Salma El Wardany in Cairo at selwardany@bloomberg.net

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Michael Gunn, Amy Teibel

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.