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Tuesday, 19 June 2018

Delek, Noble, Egyptian partner in talks to acquire stake in EMG

Delek, Noble, Egyptian partner in talks to acquire stake in EMG, which could quash outstanding arbitration ruling: The stars appear to be aligning in favor of an agreement that could see Egypt become a hub for East Mediterranean gas and end a long-standing arbitration case. Israel’s Delek, its Texas-based partner on the Leviathan gas field in Israel Noble Energy, and an unnamed Egyptian partner are in advanced talks to close on the acquisition of a 37% stake in the East Mediterranean Gas Company (EMG), which owns a pipeline that had once been used to transport Egyptian LNG to Israel, people familiar with the matter tell Bloomberg.

Clearing the way for gas imports from Israel: The stakes under discussion include those currently owned by businessmen Sam Zell and Yossi Maiman, who along with Israel Electric Corporation, successfully won arbitration cases against Egypt for cutting off natural gas exports to Israel in favor of domestic consumption back in 2012. If completed, the transaction would make the consortium the largest voting bloc in EGM, and potentially clearing the biggest legal hurdle standing against Egypt importing gas from Israel. As we noted last week, Delek shareholders will meet on 1 July to vote on investing USD 200 mn to buy EMG.

What’s at stake? A 10-year, USD 15 bn agreement signed in February to export gas from Israel’s Tamar and Leviathan fields to Egypt via Alaa Arafa’s Dolphinus Holdings. While the then-Ismail Cabinet had signed off on the agreement, it had for years held up plans to import gas from Israel on account of the USD 1.76 bn international arbitration ruling. Prime Minister Sherif Ismail had hinted at the time of the signing that there was some compromise in the works, which the Israeli government denied. February’s agreement is the first of many that Egypt is hoping to sign as it presses ahead with plans to turn the country into a regional energy export hub.

On a related note, production at the Zohr gas field will reach 1.75 bcf/d by August following the completion of the third unit of the field’s gas treatment plant, Oil Minister Tarek Molla said in a statement on Thursday. He added that recent production increases have pushed Egypt’s total natural gas production to about 6 bcf/d.

Which is good news as we’re relying more on cheaper gas and less on expensive oil: This comes as BP says Egypt grew its market share of global gas consumption by 4.4% y-o-y in 2017, according to a breakdown of the report on Bloomberg. Egypt’s reliance oil as a market share of global consumption fell by almost similar 4.3% y-o-y.

This came as EGAS purchased an unspecified quantity of LNG in a tender yesterday at reportedly more than USD 11 per MMBTU, traders tell Reuters’ Arabic service. The shipment is scheduled for a July-August delivery.

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