The partners in Israel's offshore Tamar gas field said on Sunday they are negotiating the sale of at least 5 billion cubic metres (bcm) of gas over three years to private customers in Egypt via an old pipeline built to send gas in the other direction.
The supplies would pass through an underwater pipeline constructed nearly a decade ago by East Mediterranean Gas (EMG), the company that oversaw a now-defunct Egyptian-Israeli natural gas deal.
Egypt had been selling gas to Israel in a 20-year agreement, but the deal collapsed in 2012 after months of attacks on the pipeline by militants in Egypt's lawless Sinai peninsula. It has since been out of commission and EMG is suing the government of Egypt for damages.
Recent offshore discoveries such as Tamar, with an estimated 280 bcm of gas, and Leviathan, which is more than twice as big, have turned previously import-dependent Israel into a potential energy exporter. Egypt has been slow in developing its own sizable gas resources and now faces an energy crisis.
The Tamar consortium, led by Texas-based Noble Energy and Israel's Delek Group, said in a statement they signed a letter of intent to negotiate with Dolphinus Holdings, a firm that represents non-governmental, industrial and commercial consumers in Egypt.
Any deal would be subject to various approvals in Israel, Egypt and from EMG.
The gas to be sent through the pipeline would be "interruptible", meaning it would only come from excess reserves. It would be sold at a price comparable to other export agreements from Israel and based mainly on a linkage to Brent oil prices.
Tamar began production last year and output is mostly earmarked for the Israeli market. In addition, the Tamar partners are already in talks to provide an annual 4.5 bcm of gas for 15 years to Union Fenosa Gas for its liquefied natural gas (LNG) plant in Egypt and a total of 1.8 bcm over 15 years to Jordan. Union Fenosa Gas is a joint venture between Spain's Gas Natural and Italy's Eni.
Noble and Delek are also developing the Leviathan field and are working on a major deal with BG Group to export 7 bcm of gas a year over 15 years for their LNG plant in Egypt.
"The memorandum of understanding with Dolphinus is another important link in the series of agreements that will allow the supply of natural gas to the domestic market in Egypt," said Gideon Tadmor, chief executive of Delek subsidiary Avner Oil Exploration
"I have no doubt these agreements will lead to a strengthening of ties between Israel and its neighbors."
