The discovery of the Zohr natural gas field off Egypt will not undermine private-sector negotiations about buying gas from Israel, Egypt’s petroleum minister said, playing down fears that potential deals could be under threat.
Italian energy company Eni announced on Sunday that it had found an estimated 30 trillion cubic feet (tcf) of gas in the Zohr field, making it the biggest discovery in the Mediterranean and the world’s 20th largest.
The find raised concerns in Israel’s gas industry that its Leviathan field would lose a deal to supply gas to a liquefied natural gas (LNG) plant in Egypt.
“Any negotiations between private companies in Egypt and in the eastern Mediterranean, and by this I mean Israel and Cyprus, will not stop,” Petroleum Minister Sherif Ismail told Reuters in an interview.
“These negotiations and initial agreements are ongoing.”
Ismail’s comments may improve sentiment on the Israeli stock market where leading energy companies on Monday suffered losses of more than 4.5 billion shekels ($1.1 billion) after news of the Zohr discovery.
Despite the minister’s comments, Western oil companies operating in Egypt negotiating gas import deals with Israeli counterparts will have to decide for themselves whether recent finds in Egypt alter the equation.
“We do not object to the plans of private companies operating in Egypt and looking to import natural gas from eastern Mediterranean countries,” the minister said.
For Egypt, the Zohr field offers hope in the country’s battle with chronic, politically sensitive energy shortages.
State-owned EGAS has been forced to ration gas supplies to industry, crippling production and hampering Egypt’s economic recovery. Blackouts deepened discontent with Islamist President Mohamed Mursi before the army toppled him in 2013.
Eni will hold a 35 percent share of Zohr’s reserves, with the rest claimed by the state, the Ministry of Petroleum said this week.
“The priority is for the domestic market,” Ismail said.
Once developed, it is expected to produce between 2.5 and 3 billion cubic feet of gas per day, Ismail said.
Eni is expected to deliver a development plan by the end of October detailing the number of wells it will dig, and production will likely begin at the start of 2018, the minister said.
Analysts say this time-line is ambitious and that at least in the short run Egypt may still look to Israel’s Leviathan to fill its natural gas needs.
The petroleum minister said previously that Egypt is looking to be energy self sufficient by 2020. The newest discovery does not mean this will be achieved any sooner, he said.
When asked about the prospect of exporting gas in the future, the minister said: “We have to be realistic … we need to cover the needs of the domestic market in full.”