Egypt resolving dispute, holding up $15-billion Israel gas deal

The gas deal announced this week had been held up by arbitration rulings ordering Egypt to pay Israel Electric Corp. and East Mediterranean Gas Co. (EMG), which operates a section of pipeline, compensation for canceling an earlier contract.

“We reached an agreement to receive part of the gas in Egypt via its pipelines and this is part of the resolution to the arbitration,” Prime Minister Sherif Ismail told reporters in Cairo when asked about the EMG case. He said an understanding had also been reached with the power company but declined to give more details.

Noble Energy and Delek Drilling-LP announced on Monday they had agreed to export 64 Bcm of natural gas over 10 years to Egyptian company Dolphinus Holdings Ltd. from Israel’s Tamar and Leviathan reservoirs.

The deal adds an economic dimension to a relationship dominated by security and clouded by mutual suspicion since the two countries signed a peace deal four decades ago. It also takes Egypt a step closer to its goal of becoming an energy hub for the East Mediterranean.

Outstanding cases?

Egypt used to export natural gas to Israel but the pipeline was sabotaged repeatedly by Islamist militants in northern Sinai. Egypt ultimately canceled the deal in 2012 as its supplies became depleted and were diverted for domestic use.

It froze talks on a new gas deal in 2015 after an international arbitration court in Geneva ruled that Egyptian state energy companies must compensate Israel Electric Corp. and EMG $1.7 billion over the cancellation.

EMG had also sought damages in a separate case. A Cairo arbitrator issued a ruling in that dispute at the end of January, saying the operator was owed $1.03 billion by Egypt.

It was not immediately clear if other financial disputes remained outstanding since the companies filed cases in several jurisdictions.

Israeli gas stocks jumped on Ismail’s comments. Delek Drilling rose 3.8% at 1:59 local time, leading gains on Tel Aviv Oil & Gas Index.

Egypt is trying to leverage the discovery of its own giant offshore Zohr field to attract investment. It has idle liquefaction plants on its northern coast that make it a suitable location for a regional hub. Cyprus’s energy minister said Tuesday the country was also close to an agreement to sell natural gas to Egypt.

“The goal is not the import of gas from Israel. We opened up the Egyptian market,” said Ismail. “We are strongly seeking to receive Cypriot gas, too.”