Egyptian Gas Deal On Hold for Leviathan

YERUSHALAYIM -

A crucial deal with Egypt for a natural gas pipeline from the Leviathan offshore field has been on hold for months while the Israeli government tried to sort out its regulatory disputes with U.S. and Israeli energy companies.

A senior industry source told Globes that investors are wary of Israel’s unpredictable regulatory regime.

“The Leviathan-BG deal is not off the agenda,” an executive said. “We are in contact with them all the time and they are still interested in the Leviathan gas. They are even prepared to build the gas pipeline themselves from the field to the installation at a cost of $2 billion. However, they have a condition.

“They say that you are a crazy country and there is no chance that we’ll invest $2 billion if our signature has no value. The most important thing in the gas outline agreement that was approved is the stability clause.”

The deal approved by the cabinet this week commits the government to a fixed taxation rate on the energy companies and no further surprises on divestiture. But the Knesset has yet to sign on to any such stability clause.

“Every month that Leviathan gets delayed, the public loses 1 billion shekels. Divided by 1.5 million households, every family loses more than NIS 650 each month. I’m not only talking about families in Ramat Aviv Gimmel but also families of Ethiopian immigrants in Yerucham,” the executive said.

One of the biggest gas supply contracts slated for Leviathan was the contract to supply BG’s liquid gas installation in Egypt. As part of the letter of intent signed in June 2014 between the parties, Leviathan was meant to export about one- sixth of its reserves to the liquid gas installation. But due to the regulatory problems, no final agreement was signed and the entry of Shell into the picture, after it acquired BG, has raised questions as to whether the deal will ever go ahead.