The developers behind Israel’s Leviathan gas field have signed a letter of intent with Egypt’s Dolphinus Holdings, agreeing to supply up to 4 billion cubic metres of gas a year for between 10 and 15 years.

The preliminary deal was announced on 25 November by the field’s developers, which include Texas-based Noble Energy and Delek Group.

Dolphinus Holdings represents non-governmental, industrial and commercial consumers in Egypt.

The two sides are yet to agree on terms for a final deal but have said that the price paid for the gas will be similar to other contracts and linked to the cost of Brent oil.

The letter of intent does not put a value on the deal, but Israel’s IBI investment house has estimated the total value of the gas sold to Egypt could be $10bn.

The gas will be imported into Egypt through an underwater pipeline built nearly a decade ago by East Mediterranean Gas (EMG). It was originally constructed to export gas from Egypt to Israel.

Over recent years Egypt has suffered from an acute gas shortage due to surging demand and declining domestic production.

Domestic production has declined because of large debts to international oil companies and the low price of gas paid to producers by the government, both of which have discouraged investment in upstream gas.

Production surged through the 1990s and early 2000s, and reached a peak of 62.7 billion cubic metres (bcm) in 2009. It then started to decline, falling particularly sharply in the second half of 2013 and over 2014.

According to BP Egypt’s average daily production of natural gas over 2014 was 48.7 billion cm/d in 2014.

Though the latest announcement from the developers behind the Leviathan gas field shows there has been progress in negotiations about future gas exports from Israel to Egypt remains uncertain.

The talks between Egypt and Israel are politically difficult as many Egyptians do not support Israel’s occupation of Palestinain territories.

Analysts have said that the discovery of the Mediterranean’s biggest gas reservoir, Zohr, which was announced by Eni in August 2015, means that Egypt is likely to be able to meet domand with domestic production and will not have to resort to imports from Israel.

Speaking at the Apicorp Energy Forum in Bahrain in mid-December, Tarek el-Molla, Egypt’s Petroleum & Mineral Resources Minister, said gas from Zohr and BP’s North Alexandra field will be used locally, due to shortages in suppply for industry and electriocity generation, but that the country would still need to import LNG “perhaps up to the year 2022”. Egypt’s long-term plan is to become a regional hub for Mediterranean gas. By 2025, Egypt wants to be in a position to export gas to Europe, he added.  

Leviathan was discovered in December 2010 and is expected to come online in 2019. It has estimated reserves of 16 trillion cubic feet (cf).

Zohr is expected to come online in 2017 and has estimated gas reserves of 30 trillion cf.