Egypt-Israel: New maritime borders and Israeli gas imports for a reduced gas fine
Egypt has reached preliminary agreements with Israel to resolve an international arbitration case, in which Egypt is required to pay a $1.76 bln fine for suspending gas exports to Israel in 2012, according to private and public sector sources. Four sources close to the negotiations were quoted by the Egyptian website Mada Masr that the Israeli government has agreed “in principle” to reducing the fine in exchange for allowing the private sector to import gas from Israel, and opening the door for the demarcation of maritime borders between the two countries.
According to an Egyptian official, the demarcation of maritime borders was on the table during a closed-door meeting between President Abdel Fattah al-Sisi and Israeli Prime Minister Benjamin Netanyahu on the sidelines of the United Nations General Assembly in September, 2016. Delegations from both countries continued the negotiations, with Israel requesting that Egypt accept a proposed draft of the demarcation, the details of which will be negotiated at a later date.
The fine stems from a 2015 ruling issued by the International Chamber of Commerce in Geneva that required the state-owned Egyptian Natural Gas Holding Company (EGAS) and Egypt’s General Petroleum Corporation (EGCP) to pay a $1.76 bln fine to the Israeli Electricity Company (IEC), as well as $288 mln to East Mediterranean Gas (EMG) for halting gas supplies.
EGAS decided to terminate the contract with the Israeli government in April 2012, justifying the decision by accusing EMG, owned by Egyptian and Israeli businessmen, of breach of contract for delayed gas payments.
Meanwhile, Royal Dutch Shell is seeking creative solutions to bring gas from Israel and Cyprus to market, a step that could help turn the Mediterranean region into a major gas-producing hub, according to Bloomberg.
Shell is in talks to buy natural gas from Israel’s Leviathan field, combine it with output from Cyprus’s Aphrodite field, in which it owns a 35% stake, and pump it to a liquefied natural gas plant in Egypt. Talks are at an early stage and some of Aphrodite’s gas could be sold locally.
Combining output from the fields, which share some major investors, could potentially improve the economics of the projects. Leviathan’s partners, led by Noble Energy Inc. and Delek Drilling LP, are looking at various shipment options as they face an estimated development cost of $3.75 bln.