Subsea pipeline still in play; $15 bln deal to boost diplomatic ties
The mega deal announced on Monday that Egypt would buy some $15 bln worth of future Israeli natural gas exports, is expected to break a deadlock in diplomatic ties between the two countries after an earlier contractual dispute, but also reinforces Egypt’s role in the processing and shipping of hydrocarbons, including those from Cyprus offshore prospects.
US Noble Energy and Israel’s Delek, both development partners in Cyprus’ block 12 Aphrodite gasfield, said they will supply the Egyptian Dolphinus Holdings with 64 bln cubic metres of gas over a decade – with half coming from each field in Israel’s Tamar and Leviathan offshore deposits.
As the two sides embark on agreeing methods of export of the natural gas, the deal could also speed up Cyprus’ decision to opt for natural gas discoveries to be exported to liquefaction plants in onshore Egypt, boosted by the colossal discoveries in the Zohr field and identical finds in the neighbouring Cyprus Exclusive Economic Zone (EZ).
Last week, energy consultant and director of the Greek IENE energy research institute, Costis Stambolis, suggested that the East Mediterranean’s hydrocarbon exploration axis was shifting to the West, especially after the latest drilling activity by Italy’s Eni at the Calypso location, within Block 6 of the Cyprus EEZ.
According to Dr. Charles Ellinas, a well known commentator on East Med hydrocarbon affairs, “the Zohr discovery has been a game changer for the region, creating massive international interest in Egypt and the East Med”.
“It is not an exaggeration to call the development of Egypt’s Zohr gas field one of the most remarkable and fastest major gas projects ever”, said Dr. Ellinas. “It was developed in the space of 27 months, as production commenced last December, a notable record by global standards. Eni achieved this by working in parallel on further exploration appraisal, following discovery, while also working on the engineering and procurement to develop the field, focusing on cost reduction. Apparently, Eni’s goal was time to market”, noted Ellinas.
Supportive of Zohr’s huge importance was Egypt’s Petroleum Minister Tarek El Molla, when he said that “as Zohr ramps-up production, Egypt will stop importing LNG in 2018 and by 2019 any surplus can be exported from its two existing liquefaction facilities at Idku and Damietta”.
Stambolis, a regular columnist in the Financial Mirror, said that Cyprus not only faces new challenges with the country now finding itself at the forefront of hydrocarbon activity in the East Mediterranean, but we clearly witness a shift of the axis of exploration activity away from the east part, (i.e. Israel), where the equally large Leviathan deposit (of some 650 bcm) still awaits to be developed, to the west side along the Egypt-Cyprus-Greece axis. This is where the action now lies and Cyprus is in the middle of it.
The emergence of this new energy resource-rich axis changes the geopolitical equation in the East Mediterranean.
Israel’s energy minister, Yuval Steinitz, called Monday’s deal the most significant export deal with Egypt since the neighbours signed their historic peace treaty in 1979.
“Egypt is becoming a real gas hub,” Yossi Abu, CEO of Delek subsidiary Delek Drilling Lp, was quoted by Reuters as saying. “This deal is the first deal of potentially more to come.”
Noble Energy, which plans to sell its U.S. Gulf offshore exploration business, said the prices under the agreements were linked to the Brent oil benchmark, and promised more details when it releases results this week.
Leviathan, located about 130 km west of Haifa, was discovered in December 2010 and 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.
Monday’s announcement comes a day after Steinitz met a senior US official in a bid to defuse an escalating oil and gas dispute with Lebanon, which also neighbours with the Cyprus EEZ, specifically the Soupia gasfield where Eni planned to start exploration work earlier this month before being interrupted by Turkish naval actions.
Meanwhile work began on February 7 in Germany on four advanced corvettes for the Israeli navy “that will protect gas rigs and economic enterprises in Israeli waters,” the Israeli military said.
It said that the “Saar 6” warships, to enter service between 2020 and 2022, would be equipped with helipads and advanced missiles.
“Protecting strategic economic assets in Israeli waters is a priority for the state of Israel,” the Israeli navy’s website announced last week.
In November, Israel installed a battery of its Iron Dome anti-missile system on a warship for the first time, calling it a valuable asset in protecting its offshore natural gas fields.
