Egypt’s goal of becoming an Eastern Mediterranean gas hub is entering a defining phase as companies developing natural gas fields off Israel move closer to gaining control of a crucial export pipeline to Egypt.

Israeli Delek Drilling is pushing ahead with plans to buy rights to use the pipeline that once pumped Egyptian gas to Israel.

The reversal of the line will potentially see Egypt importing supplies from Israel’s Leviathan and Tamar fields.

Delek shareholders are meeting in early July to approve a $200 million spending allocation to purchase the rights from East Mediterranean Gas (EMG) that owns the now disused pipeline, which runs between Israel and Egypt’s Sinai Peninsula.

They will also be asked to approve suspension of dividend payments to cover the cost.

Delek said Texas-based Noble Energy, operator of the offshore Tamar and Leviathan fields, and privately held Egyptian company Dolphinus Holdings will also join the deal to give them a combined 37% stake in the export route to Egypt.

They will then use their massive voting powers so that other stakeholders fall behind the export plan.

The stakes under discussion include those owned by businessmen Sam Zell and Yossi Maiman, who had successfully filed arbitration cases against Egypt over a previous deal.

The buyout would remove a major hurdle to the use of EMG’s pipeline to export 64 billion cubic metres of natural gas from Tamar and Leviathan to Dolphinus over 10 years.

The preliminary gas export deal, announced in February, has been held up by a number of legal disputes.

State-owned Israel Electric Corporation has sued Egyptian state entities for damages arising from the loss of gas imports following the 2011 Egyptian revolution.

Some EMG shareholders, including Zell and Maiman, have filed separate suits.

Egypt, for its part, has been seeking an end to the legal cases before any gas deal is finalised.

The buyers, which started testing the state of the pipeline more than a month ago, will need to invest in the pipeline to reverse its direction.

Egypt President Abdel Fattah El-Sisi could not hide his delight when informed earlier this year of a deal that would enhance his nation's role as a significant regional energy player.

“We have scored a goal,” Sisi exclaimed in a 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 fields could help transform Egypt into a regional energy hub on the back of rising discoveries from the East Mediterranean, which is emerging as a major gas basin.

In return, Israel will be able sell its gas not only to consumers in Egypt but also potentially to international markets thanks to existing Egyptian liquefied natural gas plants, operated by leading European companies such as Anglo-Dutch supermajor Shell and Italy’s Eni.

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

The diplomatic and strategic aspect of the deal are also paramount, solidifying relations between two former enemies which 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.

Egypt expects to seal 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 current exploration efforts in the Mediterranean result in discoveries.

“All the gas coming from around the region will come to us,” Sisi said. “It’s either re-exported to other countries or we use it locally.”

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

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

Exports from the Tamar field, 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 its laws to allow the private sector to import Israeli gas.

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

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