Israel has begun pumping natural gas to its neighbour Egypt in a landmark deal that has been heralded as a major economic boost for the country.

Dolphinus Holdings, which is backed by Egyptian businessmen, signed a $15 billion deal to purchase Israeli natural gas in February 2018. The gas is being provided by Delek Drilling and its Texas-based partner, Noble Energy, from their Tamar and Leviathan offshore fields. Small quantities of gas have been flowing via the EMG pipeline to Egypt for several weeks and commercial exports are now ramping up, according to recent statements by the companies involved.

Prime Minister Benjamin Netanyahu said that the $15 billion deal, which will last about 10 years, would “put billions into the state treasury to benefit the education, health and social welfare of Israel’s citizens… This is a joyous day.”

Although the export deal has been struck between private companies, its architect was Sherif Ismail, who was Prime Minister of Egypt between 2015 and 2018. According to a report by Arab News, Sherif Ismail had discussed the idea in 2013 shortly after he was appointed Minister of Petroleum.

Ismail wanted to reverse the direction of an old pipeline that had previously been used to export Egyptian gas to Israel. That deal collapsed in 2012 after repeated terrorist attacks against the pipeline, leading to a $1.8 billion arbitration claim against Egypt by the Israel Electricity Corporation.

With gas now flowing the other way, questions have been raised in Egypt as to why this deal was necessary given the discovery of the vast Zohr gas field in the Mediterranean, which is expected to make Egypt self-sufficient in natural gas.

There are also concerns that Egypt is paying too much for the Tamar and Leviathan gas. A recent investigation by Mada Masr found that estimates produced by CI Capital, an investment bank in Egypt, put the cost of the Israeli gas at $7.50 to $8/mmBtu (an industry measure). By comparison, CI Capital said that Egyptian domestic production cost from $1.75 to $3.50/mmBtu and Europe typically bought natural gas at a price of $5.80/mmBtu. “The deal does not appear to be in Egypt’s economic interest, with the cost to Egypt of imported Israeli gas significantly higher than locally produced gas,” said Mada Masr.

Sherif Ismail justified the deal while he was still PM by claiming that it was part of efforts to resolve the arbitration dispute with Israel. “We reached an agreement to receive part of the gas in Egypt via its pipelines and this is part of the resolution to the arbitration,” he said. The arbitration dispute was settled in June with Egypt agreeing to pay Israel Electricity Corporation $500 million – a substantial reduction on the $1.8 billion claim. Ismail has also
claimed that the Israel deal will help Egypt develop its petrochemicals industry.

Sherif Ismail stepped down as prime minister last June and he is now a “top aide” to President Abdel Fattah el-Sisi. He is the President’s assistant for National and Strategic Projects and also heads Egypt’s Land Reclamation Commission.

Sherif Ismail’s unofficial role is reportedly as President Sisi’s gatekeeper and an influential power-broker in Egyptian politics.

(YWN World Headquarters – NYC)