Israeli gas exports to Egypt moved closer to reality after companies operating in both countries agreed to buy a 39% stake in a pipeline connecting the two neighbours.

US independent Noble Energy and Israel’s Delek Drilling — partners in Israel’s offshore Leviathan and Tamar fields — have teamed up with the Egyptian East Gas Company to pay $518 million for a stake in the Eastern Mediterranean Gas Company (EMGC), which operates the EMG pipeline.

It will enable a landmark $15 billion natural gas export deal to proceed next year, supplying 64 billion cubic metres of gas over 10 years from the twin Israeli fields.

The gas export deal was signed with privately-held Egyptian Dolphinus Holdings in February.

“This is a historic transaction, that renders Egypt a regional energy centre and positions it in line with significant global energy centres,” Delek chief executive Yossi Abu said.

Noble Energy said: "The announcements mark significant steps forward in supplying natural gas from the world-class Tamar and Leviathan fields to regional customers through existing infrastructure.

"They also represent another major milestone towards Egypt’s goal to become a regional energy hub, providing access to both growing domestic markets and existing (liquefied natural gas) export facilities.

"With these agreements, we are securing the capacity to deliver on our firm gas sales agreement with Dolphinus for Leviathan while also allowing for interruptible sales from Tamar into Egypt.

"This further solidifies the strong cash flow growth anticipated from our Eastern Mediterranean assets.”

The pipeline purchase comes against the backdrop of Egypt’s efforts to liberalise its gas market and open it up to trading by private companies.

The Egyptian government welcomed the deal.

“The ministry welcomes this new step by the private companies responsible for the commercial project’s implementation,” Ministry of Petroleum spokesman Hamdi Abdelaziz said.

The ministry is ready to consider permit requests from the private sector to help Egypt become a regional hub for gas trading.

Gas supplies from Israel will be crucial in restarting Egypt’s idle LNG facilities in the Mediterranean ports of Idku and Damietta.

To buy into EMG, which owns a 90 kilometre subsea pipeline between Ashkelon in Israel and El-Arish in Egypt, the three partners formed a joint company called EMED.

Egyptian East Gas also owns a pipeline between El-Arish and Aqaba, Jordan, which the EMED companies said could be used to transport additional gas supplies in the future.

The EMG pipeline originally carried gas supplies in the other direction, when Israel was buying gas from Egypt.

That deal collapsed in 2012 after militants in Egypt’s Sinai peninsula carried out repeated attacks on the pipeline and EMG sued the Egyptian government for damages.

The pipeline again became an export option after the Tamar and Leviathan discoveries. Tamar began production in 2013 and Leviathan is due to come online in late 2019.

Under the new deal, EMG agreed to end arbitration with Egypt and drop claims against Cairo, Delek said.

Other shareholders in EMG are Thai energy company PTT, state-owned Egyptian company EGPC and investment group MGPC. Egyptian East Gas holds a stake on its own.

Delek and Noble have also signed deals to export gas to Jordan.

Weekly

Pipeline deal boost for Israel-Egypt gas exports