Egypt finalizes settlement with Israel on USD 1.76 bn int’l arbitration ruling: The Madbouly government has finalized a settlement to reduce a USD 1.76 bn award Israeli Electric Company won in 2012 against EGAS, EGPC and East Mediterranean Gas (EMG), unnamed government sources told the domestic press. The settlement, awarded for the cut-off of natural gas exports to our eastern neighbors, will be reduced and amortized over a period of time, one source said. Egypt will begin paying the fine as soon as Israel begins selling natural gas to Egypt sometime in 1H2019, allowing the government to pay off the fine using a portion of revenues from transporting the gas from Israeli fields through its pipeline network. Sources had told Bloomberg in August that the Egyptian government has reached an agreement to reduce the arbitration award to USD 470 mn payable over a period of about 15 years. Egypt is believed to be lining up a facility from banks to cover the sum.

Background: The Egyptian government made settling the USD 1.76 bn award a condition for allowing any multi-bn agreement to buy gas from Israel. Word of a settlement in the offing emerged when Alaa Arafa’s Dolphinus Holdings announced a USD 15 bn agreement with operators of the Tamar and Leviathan fields, Delek and Noble Energy, to buy gas, which could be processed at Egyptian liquefaction plants and exported. The agreement paved the way for Noble Energy and Delek, along with their Egyptian partner East Gas, to acquire a 39% stake in pipeline operator East Mediterranean Gas (EMG) — a crucial milestone in Egypt becoming the regional export hub for the East Mediterranean gas fields.

EMG pipeline sidelined until the end of the year? Israel will export natural gas from its Tamar and Leviathan fields to Egypt through its domestic network and not the Sinai pipeline, which will be “used at a later stage,” Delek Drilling CEO Yossi Abu said, according to Haaretz. Initially, gas will be delivered from Israel through the Arab Gas Pipeline (which the Israeli’s fondly refer to as the Pan-Arab pipeline) connecting Jordan and Egypt. Israel’s gas network will be connected to the Arab Gas pipeline in May 2019, Abu said. The EMG pipeline would be used to send gas to Egypt by December 2019, he added. The decision comes amid concerns that the EMG pipeline would not be enough to meet the contracted delivery of 7 bcf per year, especially when the Leviathan field comes online.