Israel considering new pipeline to boost gas exports to Egypt

1CM

21/10/2021 10:39

* Israel, Egypt holding talks on new onshore pipeline
-ministry
    * New pipeline expected to cost $200 mln -industry sources
    * Pipeline will boost exports by 3 to 5 bcm/year -industry
sources

    By Ron Bousso and Ari Rabinovitch
    LONDON, Oct 21 (Reuters) - Israel is considering the
construction of a new onshore pipeline to Egypt in order to
quickly boost natural gas exports to its neighbour in the wake
of the recent tightening of global supplies, the Israeli energy
ministry said.
    The pipeline, which will connect the Israeli and Egyptian
natural gas grids through the north of the Sinai peninsula, is
estimated to cost around $200 million and could be operational
within 24 months, according to industry sources who are close to
the discussions told Reuters.
    A new onshore pipeline, coupled with plans to construct a
second subsea pipeline to Egypt within a few years, will further
cement Israel's position as a key energy hub in the eastern
Mediterranean which has upended diplomatic relations with
countries in recent years.
    Israel became a key supplier of natural gas to
energy-thirsty Egypt https://www.reuters.com/article/israel-egypt-natgas-idUSL8N29K1R8
 in January 2020 after starting production from its Tamar and
Leviathan offshore gas fields. Around 5 billion cubic metres
(bcm) per year of gas is being supplied via a subsea pipeline
connecting Israel and the Egyptian Sinai peninsula.
    "Israel and Egypt are holding talks on possible cooperation
in the supply of natural gas. One of the options being studied,
following a request by Egypt for further natural gas supplies,
is an onshore gas pipeline," Israel's energy ministry said in a
statement to Reuters.
    The pipeline will be owned by Israeli national distribution
company Israel Natural Gas Lines and its route is in the process
of getting approvals from local authorities, it added.
    The Egyptian energy ministry could not be reached for
comment. 
    Gas markets in Europe and Asia sky rocketed this year
 TRNLTTFMc1  due to tighter supplies and strong economic
activity around the world. Israel's 15-year supply contract with
Egypt shields Egypt from much of the price fluctuations.
    The new pipeline will allow to increase supplies into Egypt
by an additional 3 to 5 bcm per year, the sources said. They
will supply Egypt's power grid and also go towards boosting
liquefied natural gas (LNG) exports from Egypt to Europe and
Asia.
    "There is no doubt Egypt has all the qualities and
conditions to become global hub which will concentrate
additional volumes of gas from Israel, Cyprus and surrounding
regions and be a focal point of gas trade both regionally and
globally," Delek Drilling CEO Yossi Abu told Reuters.
    An onshore pipeline however risks being attacked by Islamist
militants in Sinai who have attempted several times https://www.reuters.com/article/egypt-security-gas-idUSL8N2A3371
 in recent years to target gas infrastructure in the peninsula.
    
    OUTPUT EXPANSION
    Israel's ability to boost gas exports to its neighbours
depends however on companies' ability to expand output. 
    Israel's export capacity is expected to increase to 8 bcm
per year by 2023 from the current 5 bcm per year due to the
de-bottlenecking of existing infrastructure and the expansion of
the giant Leviathan field which is operated by Chevron Corp.
 CVX.N  and where Delek Drilling  DEDRp.TA , part of
conglomerate Delek Group  DLEKG.TA , holds a 45% stake. 
    A Chevron spokesperson declined to comment.
    Output will rise further when Energean  ENOG.L  starts
production from the Karish/Tanin gas field, which is planned for
the middle of 2022. Energean also plans to begin in February
drilling five new wells that could further boost output in the
coming years, the company told Reuters.
    "Energean welcomes any new infrastructure that connects the
Eastern Mediterranean with Europe," it said in a statement.
    The onshore pipeline would not impact Israel and Egypt's
plan to construct a second subsea pipeline https://www.reuters.com/article/us-israel-egypt-energy-idUSKBN2B12GC
 to supply Egypt's LNG plants of Idku and Damietta from where
fuel can be re-exported to Europe and Asia, the sources said.
   

 (Reporting by Ron Bousso; editing by David Evans)
 ((ron.bousso@thomsonreuters.com; +44 (0) 2075422161; Reuters
Messaging: ron.bousso.reuters.com@reuters.net))