In this January 20, 2015 file photo, Italian energy giant Eni CEO Claudio Descalzi poses for a photo prior to the start of a conference in Rome. The Italian energy company Eni says it has discovered a "supergiant" natural gas field off Egypt. A company statement on August 30, 2015 is calling it the "largest-ever" found in the Mediterranean Sea. (AP Photo/Andrew Medichini, File)
Jerusalem and Cairo, Reuters—Egypt’s historic gas discovery threatens to sink Israel’s fledgling gas export bonanza, which was counting on deals with Cairo to get it off the ground.
Italian oil company Eni stunned markets on Sunday after declaring the Mediterranean’s biggest-ever and the world’s 20th-largest gas discovery off Egyptian waters, in the Zohr field holding an estimated 30 trillion cubic feet (tcf) of gas.
Zohr jeopardizes lucrative deals being negotiated between Israeli companies and their Western counterparts operating in Egypt, which may now no longer need to import.
Shares in US based Noble Energy, which is developing Israel’s biggest gas field Leviathan with Israeli energy companies, fell 7.1 percent at 32.08 US dollars in New York.
Israel’s top energy firms, including Delek Group, Avner Oil and Ratio, saw 4.5 billion Israeli shekels (1.14 billion dollars) wiped off their market capitalization on Monday.
“It’s a bit early to assess the quality of the data and their significance, but if they are accurate, the discovery off Egypt’s coast is bad news for the Israeli economy and the companies holding the [gas] assets in particular,” said Eldad Tamir, chief executive of Israel investment house Tamir Fishman.
Zohr reserves will be direct competitors to the Israeli projects, potentially driving down prices along with profit margins, he said.
Delek Group, a partner in Israel’s largest gas field Leviathan, sought to reassure investors by saying foreign firms in Egypt will still need Israeli supplies.
“For Israel, this closes the option of exports to Egypt but the real motherload for Israel was the domestic market,” said Brenda Shaffer, energy specialist at the University of Haifa.
Accounting for around 40 percent of Egypt’s proven gas reserves, Zohr, which analysts say could prove to be far larger, will reduce the country’s dependence on seaborne gas imports and revive industrial capacity idled due to gas shortfalls.
“Accordingly, we expect significant capacity expansion plans to be revived over the coming 6–12 months and expect foreign direct investment to recover sharply in sync,” Cairo-based Pharos Research said in a note on Monday.
After four years of turmoil, rising gas demand turned Egypt from net exporter to importer, luring Israeli resource firms looking for export markets to justify developing their own sizable gas deposits, previously the Mediterranean’s biggest.
Explorers lured by rising earnings on oil and gas production set by the Egyptian state are seeing the country in a new light even though they are collectively still owed billions, unlocking major new investments and boosting reserves.
“This is important geopolitically for Egypt, it’s a sign of confidence in [President Abdel-Fattah] El-Sisi’s economic policies,” Shaffer said.