Egypt’s President Abdel Fattah El-Sisi could not hide his delight when informed of a deal by Israel to sell $15 billion worth of gas supplies to his country.

“We have scored a goal!” Sisi said to loud applause from the audience during a televised speech in Cairo on 19 February.

“I’ve been dreaming about it for four years, that we become a regional hub for energy.”

Imports from Israel’s showcase Leviathan and Tamar offshore fields could indeed help transform Egypt into a regional energy hub on the back of rising discoveries from the East Mediterranean that is emerging as a new global gas basin.

In return, Israel will be able sell its gas to international markets thanks to existing liquefied natural gas plants in Egypt, operated by leading European companies.

The LNG facilities, which have been idle since the 2011 revolution amid domestic supply shortages, will save the Israeli side billions of dollars in building similar liquefaction facilities to export their gas.

Diplomacy

The diplomatic and strategic aspect of the deal are also paramount, solidifying relations between two former enemies who have been warming to each other since Sisi took over in 2013.

Egypt and Israel signed a peace deal in 1979 that changed the face of the Middle East. However, while bilateral ties have improved in recent years for security reasons, the Egyptian public remains highly distrustful of Israel.

That may explain why Egypt is portraying the planned gas imports as a deal between private parties rather than a government initiative.

Israel’s Delek Drilling and Noble Energy plan to supply more than 2 trillion cubic feet of gas over 10 years to Egypt's privately-owned Dolphinus Holdings.

Egypt expects to sign up similar deals with other countries in the region, such as Cyprus, which has two significant gas discoveries.

Lebanon is also a potential supplier if its planned exploration efforts in the Mediterranean result in discoveries. “All the gas coming from around the region will come to us,” Sisi says. “It’s either re-exported to other countries or we use it locally.”

“Egypt is becoming a real gas hub,” agrees Delek Drilling chief executive Yossi Abu. “This deal is the first of potentially more to come.”

Israeli imports will augment increasing gas production in Egypt thanks to the completion of the flagship Zohr and West Nile Delta fields, being developed respectively by Italy’s Eni and UK supermajor BP.

Leviathan, discovered in December 2010, is scheduled to start producing by the end of 2019.

Exports from Tamar, which began production in 2013, are expected to start under the deal sometime between the second half of 2020 and the end of 2021.

Israel has been very keen to make full commercial use of its resources while Egypt has amended laws to allow the private sector to import Israeli gas.

Sales volumes

Noble says supplies will be sold to domestic users in Egypt, including the industrial and power generation sectors.

"Sales volumes under the agreement associated with the Leviathan field are anticipated to begin at a firm rate of approximately 350 million cubic feet of natural gas per day at the start-up of the Leviathan project at the end of 2019," Noble says.

"For the Tamar agreement, sales volumes are anticipated to begin at an interruptible rate of up to 350 MMcfd, dependent upon gas availability beyond existing customer obligations in Israel and Jordan," the company adds.

Israel will be providing both Egypt and Jordan with natural gas, cementing ties with its two Arab neighbours.

Israeli Prime Minister Benjamin Netanyahu described the export deal as a joyous day.

“Many did not believe in the gas outline,” said Netanyahu. “We led it forward with the knowledge that it would strengthen our security, strengthen our economy, strengthen regional relations, and above all, it would strengthen the citizens of Israel.”

To transfer the gas, Israel is looking at various pipeline options, including the existing East Mediterranean Gas link, which runs parallel to the Gazan shore.

Israeli exports and rising gas production in Egypt are likely to free up supplies for exports through the Idku and Damietta LNG plants along Egypt’s Mediterranean coast.

The LNG plants, controlled respectively by Anglo-Dutch supermajor Shell and Spain’s Union Fenosa, were forced to halt exports after the revolution.

The promise of Israeli gas and rising Egyptian domestic supplies open up the prospect of generating billions of dollars in revenues both for Egypt and owners of the LNG facilities.

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Egypt transformed into gas powerhouse