Heightened natural gas sector activity witnessed in the east Mediterranean region over the past few days, combined with various other moves, including changing regional market conditions, to a certain degree, suggest gas exports to more distant markets beyond the east Mediterranean are possible.
Developments in recent days have included the establishment of an agreement for Israeli gas supply to Egypt, which coincides with an increased drive by Greece’s Energean to finance an ambitious investment plan.
The Israeli firms Delek Drilling and Noble Energy have just signed two binding agreements to export gas to Egyptian company Dolphinius Holdings Ltd. The energy companies will supply 64 billion cubic meters (bcm) of natural gas from the Tamar and Leviathan gas fields over ten years.
The two sides will, as a first objective, seek to transport the gas via the existing EMG pipeline, which previously transported gas in the opposite direction, from Egypt to Israel.
If this is not possible, other options include exporting the gas via pipeline to Jordan and then to Egypt or via a new pipeline linking Israel to Egypt.
The Israeli gas will be directly aimed at the Egyptian market, not Egypt’s two LNG terminals for liquefaction, meaning the agreement does not represent an additional step for Delek Drilling and Noble Energy. For the time being, both firms are continuing to eye regional markets ahead of more distant ones.
This agreement, in an indirect way, should facilitate the export of Cypriot gas for liquefaction at the Egyptian plants, as it leaves unutilized larger production capacities at the terminals.
A recent move by Greece’s Energean into the Israeli gas market with gas sales and purchase agreements for natural gas supply from its Karish and Tanin fields, offshore Israel, at price levels 33 percent less than those paid by Israel’s power utility for supply from the Tamar gas field, has prompted the utility to react and request a price reevaluation from its suppliers. They have remained adamant, noting no changes will be made until at least 2021, based on supply contracts already signed.
Energean’s entry into the Israeli market has certainly not gone by unnoticed. The increased level of competitiveness resulting from this entry vindicates Israeli government and market officials who, in the past, had backed competition and the division of gas fields so as to enable the entry of new players.
The maintenance of low prices in Israel could eventually make exports to more distant markets, such as European markets, more viable.