BG's Plant in Talks with Israel to Import Natural Gas

Source: Ahram Online 6/29/2014, Location: Africa

Egypt's government won't import natural gas from Israel until it's certain that the deals will add high value to the country's economy, the Egyptian news website Youm7 reported, citing the petroleum minister.

Sherif Ismail's quotes came as a reaction to a preliminary agreement between Israel's giant Leviathan natural gas field and British oil and gas company BG Group to negotiate a deal to export gas to BG's liquefied natural gas (LNG) plant in Idku, Egypt.

No officials from the petroleum ministry were available for comment, despite repeated attempts from Ahram Online to contact them.

According to Reuters, the $30 billion deal under discussion would see Leviathan – located off Israel's Mediterranean coast - supplying 7 billion cubic metres (bcm) annually for 15 years via an underwater pipeline, the partners said in a statement.

BG said the Leviathan talks are one of several options it is considering to increase the supply of gas to its Egyptian plant. "While this non-binding letter of intent with the Leviathan partners is a first step, it is very early," said a spokesman.

BG's first-quarter exploration and production volumes fell 4 percent, hit by output problems in Egypt where the company's LNG project failed to deliver any cargoes in the quarter.

Egypt has been unable to honour its contractual obligations to provide the facility with natural gas for liquefaction export, and has also been forced by fuel shortages to divert its resources for domestic consumption – problems that mean BG is not the first company to deal with Israel for natural gas.

In May, partners in the Tamar gas field offshore Israel signed a preliminary non-binding agreement with Union Fenosa Gas SA (UFG) – a joint venture between Spain's Gas Natural and Italy's Eni – to supply gas to its liquefaction facility in Egypt to produce liquefied natural gas (LNG) for export.

Egypt will pay $1.5 billion of the money it owes to foreign energy companies by the end of 2014, its oil minister said on Thursday, as the government aims to lure back wary investors to tap its reserves and boost production to meet soaring demand.

The government has pledged to repay $3 billion of the more than $6 billion it owes to companies including BG Group and BP by 2017 to encourage companies to increase exploration and production.

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