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Shell Mulls 15-Year Deal for Israeli, Cypriot Gas, Partner Says

Yaacov Benmeleh: 21 March 2018: Updated 22 March 2018

(Bloomberg) — Royal Dutch Shell Plc is weighing a 15-year contract to buy natural gas for its liquefied natural gas plant in Egypt from offshore fields in Cyprus and Israel.

Shell is in talks to purchase 6 billion cubic meters of natural gas a year from the Aphrodite field, located in Cypriot waters, according to Delek Drilling LP’s annual report Wednesday. A potential deal also could include gas from the neighboring Leviathan reservoir, Israel’s largest pool, which is expected to start production by the end of 2019.

The Hague-based Shell would earmark the Israeli and Cypriot gas for its LNG plant in Idku, Egypt. The Egyptian facility has a maximum annual capacity of 12 billion cubic meters, Delek said. Representatives for Shell did not immediately respond to a request for comment.

A deal with Shell would bolster the case made by Israel and its neighbors that the eastern Mediterranean can be an energy hub. Partners in the Israeli fields Leviathan and Tamar have already signed export deals with Jordan and Egypt worth more than $25 billion.

The Tel Aviv Oil & Gas Index rose as much as 1.1 percent on the news. The gauge traded 0.8 percent higher to 1,012.13 at 2:52 p.m. local time.

Houston-based Noble Energy Inc. owns 35 percent of Aphrodite and Delek 30 percent; Shell owns the rest. The cost to develop the Aphrodite field will be $2.5 billion to $3.5 billion, though that doesn’t include the cost of building a pipeline to transport the gas, Delek said in the report.

Delek also holds a 45.3 percent stake in Leviathan, while Noble holds 39.7 percent. Ratio Oil Exploration 1992 LP owns the remainder. The two sites lie just 20 miles apart.

©2018 Bloomberg L.P.

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