Egypt’s Zohr gas re-writes Israel’s happy ending

31 Aug 2015 | Author: | No comments yet »

A gigantic natural gas discovery in Egypt means Israel has to find another customer for its gas.

Barclays sees today’s sell-off of Israel energy stocks as overdone. “The sell-off seems overdone to us, for a two main reasons,” Barclays writes in a note to investors rleased this afternoon.

Egyptian stocks jumped the most in the world on Monday as investors speculated an offshore natural gas discovery would end a domestic supply shortage and earn the country billions of dollars in export revenues.A “supergiant” fuel subject holding the equal of 5.5bn barrels of oil has been found off the coast of Egypt, the most important ever discover within the Mediterranean. The first reason is that “the non-binding letter of intent signed between Leviathan Partners and BG International in June 2014 is for the supply of natural gas to the BG’s Liquefied Natural Gas (LNG) facility though a dedicated subsea pipeline. Companies drilling in Israel have planned to ship much of their product to Egypt, which, if its gas find is as large as thought, will not need the Israeli supplies.

Italian oil group Eni, which , stated the discover was sufficient to provide Egypt with fuel for many years, in a serious increase to the nation’s struggling financial system. The deepwater Zohr nicely, virtually 5,000 ft under the water’s floor and masking 100 sq. kilometres (40 sq. miles), might maintain 30 trillion cubic ft of fuel or extra. The second reason Barclays cites is that “Shares of Leviathan’s pure-play Ratio Oil are currently down about 20% and imply a field value of $4.4 billion.

Eni stated it might fast-track the event of the invention to start manufacturing as quickly as attainable. “This historic discovery will be capable of rework the power state of affairs of Egypt through which we now have been welcomed for over 60 years,” stated Claudio Descalzi, Eni’s chief government. If validated by further drilling, Zohr would overshadow Israel’s 3.9-billion-barrel Leviathan field, which until now has been the largest natural gas field discovery in the Mediterranean.

This morning Delek Group reported its second quarter 2015 results and on the analyst call management said that it is not concerned about the recent newsflow and, in general, all export options remain open.” Barclays notes that the Knesset summer recess ends on September 1st and says discussions regarding the regulatory framework will likely resume shortly given that it is a Cabinet priority. “Yesterday, in an interview to local paper Globes, the Minister of Energy said that the global energy industry is quickly evolving and Israel must approve the gas agreement and promote the gas sector. That’s 46 percent of the North African country’s current reserves and may translate into $48 billion of revenue for the government after Eni’s share is accounted for, according to a report by EFG-Hermes Holding SAE, Egypt’s biggest investment bank. Gas shortages have become more pronounced in the country since the 2011 Arab Spring, forcing the government to cut supplies to factories and implement rolling power outages. The gas find means “downside risks to the valuation of Egyptian equities have materially subsided,” Hany Genena, the chief economist and equity strategist at Cairo-based Pharos Holding, said in an e-mailed report. Industrial companies, which have suffered from gas supply shortages, will be prompted to revive expansion plans within the next year, and “we expect foreign direct investment, whether green field or acquisitions, to recover sharply in sync,” he said.

On the other hand, gas- and oil-producing countries often are reluctant to be transshipment points for neighboring nations, because the fuel competes with their own product. Now Noble and Delek must either hope for greater demand from Jordan and the Palestinian territories, or that they can resurrect longshot plans to ship the gas through Turkey or Greece. In a statement obtained by the Wall Street Journal, Steinitz said the Eni find “is a painful reminder that while Israel sleepwalks and dallies with the final approval for the gas road map, and delays further prospecting, the world is changing in front of us, including ramifications for export options.”

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