Energy Firms in Talks to Sell Israeli Gas to Egypt
Deal Would Involve Exporting 8 Billion Cubic Meters of Gas a Year
By JOSHUA MITNICK in Tel Aviv and SUMMER SAID in Dubai
Updated Feb. 19, 2014 5:24 p.m. ET
Israel's recently discovered offshore natural gas is generating momentum for politically
important supply deals that could alleviate energy shortages in Jordan and Egypt.
The drilling consortium led by Israel's Delek Group Ltd. and Texas-based Noble Energy
said Wednesday it signed a deal to supply gas to chemical companies in Jordan, marking
Israel's first energy export deal and bolstering ties between the neighboring countries.
The same offshore drilling group is holding initial talks on a much larger supply deal with
Egypt, people familiar with the matter said.
Drillers announced two Mediterranean finds in recent years with some 650 billion cubic
meters of gas. Flush with energy reserves that could last for decades, Israel has been
considering exports to several countries in the eastern Mediterranean including Cyprus
and Turkey.
Despite the modest size of the deal with Jordan, it has important geopolitical
implications. It was the focus of talks between King Abdullah and Prime Minister
Benjamin Netanyahu with U.S. involvement, analysts said. A spokesman for Mr.
Netanyahu decline to comment and Jordan's oil ministry couldn't immediately be
reached for comment.
Jordan and Egypt are strategically important Arab neighbors where governments are
eager for access to cheap sources of imported gas. But they must grapple with public
opinion that opposes normalizing relations with Israel.
For Israel, improving relations with Jordan will be important as the U.S. tries to advance
Israeli-Palestinian peace negotiations. Jordan will be directly affected by the deal: It
shares a border with the West Bank and is home to the largest population of Palestinian
refugees.
"Given the volatile political situation in the region, the very fact that two neighboring
states could enter into this sort of contract is important. It is a confidence-building
measure for both sides,'' said Oded Eran, a former Israeli ambassador to Jordan and a
fellow at the Institute for National Security Studies, an Israeli think tank. He said the gas
deal has no direct impact on the peace negotiations.
"But the very fact that it went through increases Israeli confidence that there is a
partner on the other side,'' he said.
The potential deal with Egypt would involve exporting up to eight billion cubic meters of
gas a year from the Leviathan field. It would go to liquefied natural gas facilities run by
the U.K.'s BG Group PLC in northern Egypt via an underwater pipeline or the existing
Ashkelon-el-Arish line in the Sinai Peninsula, according to two Egyptian officials.
Importing gas from Israel is a cheaper option for Egypt, which has been overwhelmed by
local demand and can't meet foreign export commitments.
"The talks have been going on since August and there are a number of options on the
table. But using BG's…plants is the best option at the moment and it would solve
everyone's problems," said an Egyptian official who asked not be named.
A person familiar with the Israeli gas drilling consortium said that an agreement with
Egypt is unlikely before the country's presidential elections later this year.
Such an agreement would be a reversal from previous years when Egypt exported gas to
Israel. But that deal prompted harsh public criticism in Egypt and was eventually
undermined by repeated attacks on the pipeline by militants in the restive Sinai
Peninsula.
The Jordanian deal, which could be worth as much as $500 million, calls for 1.8 billion
cubic meters of gas to be supplied to Jordan's Arab Potash Co. and Jordan Bromine Co.
over 15 years starting in 2016, according to Delek Drilling.
Jordan, which has been struggling economically with the fallout from unrest in the Arab
world, increasingly needs natural resources that neighboring Israel can provide. But the
monarchy has to contend with domestic pressure against normalization of ties. In recent
months, the two countries signed a deal for Israel to supply water to Jordan.
—Selina Williams and Sara Toth Stub contributed to this article.
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