Eni said on Monday that Zohr is the largest known gas field in the Mediterranean.
Zohr’s discovery potentially jeopardises lucrative deals being negotiated between Israeli companies and their Western counterparts operating in Egypt, which may now no longer need to import.
Partners Noble Energy of the US and Delek Group of Israel, who in recent years discovered two sizeable fields in Israeli waters, have been negotiating long-term contracts to sell gas to customers in Egypt, but the deals have been held up by regulatory uncertainty in Israel.
“The giant gas field discovery in Egypt is a painful reminder that while Israel has been ‘sleep walking’ and delaying the final approval of the gas outline and holding up further exploration, the world is changing in front of our eyes, including the implications on export possibilities,” Israel’s energy minister Yuval Steinitz said in a statement on Sunday.
Noble and Delek recently hammered out a deal with the Israeli government to develop the massive Leviathan field.
The field’s development would bring “hundreds of billions of shekels” to the country’s coffers from exports, Prime Minister Benjamin Netanyahu said earlier this summer.
But some fear the Zohr discovery could derail those hopes.
“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, according to a Reuters report.
Zohr reserves will be direct competitors to the Israeli projects, potentially driving down prices along with profit margins, the news wire quoted him as saying.
However,some analysts took the view that the discovery would have little effect on Israel’s developments.
Charles Robertson, an analyst with Cowen & Company, said he expects a dip in Noble’s stock even though Zohr does not “materially impact” Leviathan.
“Noble still sees Egyptian export potential even with Eni’s discovery,” he said in a research note on Monday.
“Noble views the region as substantially undersupplied natural gas. We would expect most of Eni’s discovery to be used domestically at first.”
He added that the Eni discovery is a carbonate reservoir and therefore “more challenging to determine amount of recoverable resource” than the Leviathan reservoir, which is sandstone.
Meanwhile, Israel’s Delek 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.
Zohr accounts for around 40% of Egypt’s proven gas reserves and could prove to be far larger, according to Reuters.