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Israel signs up for Egyptian gas imports and starts drilling

Egyptian gas looks set to start flowing to Israel in a sign that the Middle East peace process is making progress. As Petroleum Economist went to press, the countries were expected to sign a 15-year gas-supply contract worth $2.5bn, four years after the deal was first agreed. Under the deal, Egypt will sell Israel 1.7bn cubic metres a year of gas (cm/y) from October 2006, amounting to 25bn cm in total, but there will be an option to extend the deal for a further five years.

The Israeli infrastructure ministry says a commercial contract between the customer, state-run Israel Electric (IEC), and the supplier, Eastern Mediterranean Gas, would follow within days of the political accord. IEC fuels most of its power plants with coal or oil, but wants to convert some plants to cleaner-burning gas.

Meanwhile, as Egyptian imports come a step closer, Israeli drillers are busy searching for any trace of domestic reserves. Although the country produces almost no oil – imports amount to about 280,000 barrels a day (b/d) – it attracts a steady stream of enthusiasts ready to try to reverse the trend.

Privately owned US firm Zion Oil and Gas is the latest to commence drilling, with the Ma'anit 1 well on its onshore north central concession. Drilling contractor Lapidoth Israel Oil Prospectors is expected to take around two months to reach target depth. The well has been described by Zion as a "high risk" prospect. Other dedicated firms are making headway. Also of the US, Ness Energy, through its Modi'in local affiliate, is planning to shoot seismic on the Zohar exploration permit, following reprocessing work last year.

In a bid to inject momentum into the upstream sector, the infrastructure ministry has also revealed it is to grant licences for oil and gas exploration blocks covering an area of around 25,000 square km off the country's Mediterranean coast. The area was closed off to exploration in 2000 amid rising security fears. The ministry also decided at the time that it wanted work to concentrate on acreage already under licence.

Among the major players in the offshore segment is the UK's BG Group, although it is looking to surrender its licences for Gal A and B off the Haifa coast. A local joint venture comprising Delek Drilling and Avner Oil is said to be considering buying BG's licence. BG, meanwhile, is more interested in its Gaza Marine gasfield off the coast of the Palestinian Authority.  

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