From Ahram Online

Partners in the Tamar gas field offshore Israel have signed a preliminary non-binding agreement with Union Fenosa Gas SA (UFG) to supply gas to its liquefaction facility in Egypt to produce liquefied natural gas (LNG) for export.

The letter of intent (LOI) contemplates a contract term of 15 years and a total gross sales quantity of up to 2.5 trillion cubic feet (Tcf) of natural gas, or approximately 440 million cubic feet per day over the period, according to Tuesday’s press release from Texas-based Noble Energy Inc., which operates Tamar with a 36 percent working interest.

Egypt, which owns 20 percent of UFG’s LNG plant in Damietta, has been unable to honour its contractual obligations to provide the facility with natural gas for liquefaction and export, as fuel shortages have forced it to divert its resources for domestic consumption.

“This is especially damaging as LNG plants are by nature highly capital-intensive, compared to, say, a pipeline,” explains Mohamed Abu Basha, chief economist at Cairo-based investment house EFG-Hermes.

Last April, UFG – a joint venture between Spain’s Gas Natural and Italy’s Eni – filed a complaint against the Egyptian Natural Gas Holding Company (EGAS) with the International Chamber of Commerce’s (ICC) International Court of Arbitration, alleging that EGAS had failed to keep up its contracted payments – regardless of production – needed to cover operating expenses, investments and debt servicing, Reuters reported at the time.

One of the two largest gas fields in Israel, Tamar was discovered in the eastern Mediterranean in 2009 and holds an estimated 10 Tcf of gas.

All parties are hoping for a binding agreement to be finalised within six months, subject to regulatory approvals from Israel and Egypt.

Read more at Ahram Online