Follow-up to Ratio: The Egypt Contract Versus the Real Export Bottlenecks
By January 2026, Leviathan had both the Phase 1 expansion FID and the satisfied conditions precedent for the Egypt contract amendment. But the signed volumes still run several years ahead of the production and transport system meant to carry them, while exports remain subordinate to both domestic-market priority and transport routes that are still partly interruptible.
The main article argued that Leviathan's expansion already narrows Ratio's margin of safety. This follow-up isolates one narrower layer of that story, the Egypt contract, and asks a tighter question: has the signed demand actually become export capacity that can be relied on.
The short answer is that the contract is already there, but the pipe is not. On January 15, 2026, two material things happened on the same day: the conditions precedent for the Blue Ocean amendment were satisfied, and the Leviathan partners took final investment decision on Phase 1 of the expansion. That looked like a gap being closed. In practice, it mostly shifted the bottleneck from whether demand exists to whether the gas can be moved on time, in volume, and under a regulatory framework that still gives the domestic market priority.
The Egypt Contract Is Already Bigger Than The System Operating Today
The amendment with Blue Ocean adds about 131 BCM in two tranches. The first tranche is about 20 BCM. The second is about 111 BCM. After both tranches, the supply term stretches to December 31, 2040, and the committed daily quantity can rise to roughly 1,150 to 1,250 MMSCF per day, or about 11.9 to 12.9 BCM per year.
That number is misleading if it is read without the timetable. The first tranche does not open just because the amendment was signed. It depends on completion of the Ashdod-Ashkelon offshore segment and completion of the third-pipeline project. The second tranche depends on both the Phase 1 expansion FID and a transport agreement for the Nitzana line. As of the report date, both commercial conditions for the second tranche had already been met. That still does not mean the larger volumes can flow immediately. The mechanism for the actual increase is tied mainly to progress on Phase 1 and completion of Nitzana, and the partners themselves estimate those projects for the second half of 2029.
That is the point the market can easily miss. The new contract reduces commercial risk, but it does not remove the production and transport gap. Economically, Ratio now has a larger order book. It still needs the production and midstream system that can actually deliver it.
The Third Pipeline Matters, But It Does Not Solve Egypt
The third pipeline has already been completed and connected to the platform. That matters because it adds redundancy and lifts production capability to around 14 BCM per year. But that is not the expansion itself, and it is certainly not a full solution to the Egypt amendment.
Phase 1 of the expansion is supposed to take Leviathan to about 21 BCM per year and allow first gas in the second half of 2029. Phase 2 is supposed to move capacity to about 23 BCM per year, but it already requires further approvals, additional investment, and a fourth pipeline between the field and the platform. So even on the production side, the Egypt amendment rests on a sequence of steps rather than a single leap.
The mistake is to read the third pipeline as if it were the expansion. It is not. It solves part of the immediate bottleneck, mainly redundancy and the move from roughly 12 to roughly 14 BCM per year. It does not remove the need for Phase 1, and it certainly does not remove the need for Nitzana.
Nitzana Is A Shared Export Chokepoint, Not Leviathan's Private Route
If there is one place where the real bottleneck of the Egypt amendment sits, it is Nitzana. This is not a side engineering detail. It is the project that connects the contract to a new overland export route from Israel into Egypt.
Nitzana includes a pipeline and a compressor station in the Ramat Hovav area. The Gas Authority estimates project capacity at about 6 BCM per year. But that capacity does not belong entirely to Leviathan. Leviathan's allocation in the line stands at 41.8%, the same as Tamar's, while Energean received 16.4%. In addition, only 70% of each exporter's allocated capacity is reserved for firm transport, while the remainder is reserved for interruptible transport.
That is the heart of the issue. Even after the transport agreement with Nativay Gaz entered into force in October 2025, Leviathan did not receive a clean dedicated route for the entire increase to Egypt. It received part of a shared line, inside a regime where some capacity is firm and some is not, and inside a system where other exporters sit on the same asset.
The timetable is not short either. The estimated construction budget for Nitzana is about $612 million on a 100% basis, and within that a separate EPC contract was signed for the compressor station at a fixed sum of about $285 million. The operator's estimate is that completion of the line and start of gas flow are expected in the fourth quarter of 2028. The presentation places Nitzana inside a broader regional transport buildout together with the EMG expansion and FAJR+. This is not one pipe waiting to be turned on. It is an entire chain that has to work together.
| Layer | What is already closed | What is still missing | Why it matters |
|---|---|---|---|
| Third pipeline | Completed and connected to the platform | On its own it does not take Leviathan above roughly 14 BCM per year | It only opens the first part of the bottleneck |
| Ashdod-Ashkelon offshore segment | Marked in the presentation for Q2-Q3 2026 | It still has to enter service to support the first tranche | Without it, even the first Egypt step does not sit on a full physical path |
| FAJR+ | Marked in the presentation for H2 2026 | Regional transport capacity still needs to be expanded | It shows that the Egyptian-Jordanian route itself is still being built out |
| Nitzana | Transport agreement is in force and allocation has been set | Flow is expected only in 2028 | This is the new overland route meant to carry the larger jump |
| Phase 1 expansion | FID was taken on January 15, 2026 | First gas is only in H2 2029 | Without higher production, there is no full base for the second tranche |
That table explains why the Egypt amendment is first and foremost a synchronization story. If one link slips, the pace of monetization for the whole contract slips with it.
Even After Export Approval, The Regulator Still Keeps A Hand On The Valve
There is one more reason not to read 130.9 BCM as if it were guaranteed to flow on a straight line. The new export approval already builds in its own steps and constraints.
The approval allows up to about 20.7 BCM at the first step, up to about 95.6 BCM when daily production capability reaches 1,850 MMSCF, and up to about 130.9 BCM only after the second expansion threshold of 2,100 MMSCF per day. Beyond that, every supply to the buyer remains subject to the condition that all ordered domestic-market volumes are supplied first, on both a daily and annual basis.
That is the real yellow flag. From January 1, 2036, the Commissioner may, by reasoned decision, reduce the maximum export quantities by as much as 60% if a gap opens between local demand and supply. In addition, if total gas supply to the domestic market from all producing reservoirs stays below required levels for more than 28 consecutive days, there is authority to cut maximum export quantities even earlier. At the same time, Ratio itself states that as of the report date there is no certainty that the full daily quantity committed to Blue Ocean can be transported every day, because the current transport agreements used through Egypt and Jordan are interruptible.
So even after the contract was signed, even after export approval was granted, and even after the FID was taken, exports remain the layer that sits under a clear hierarchy: first the domestic market, then whatever the system can physically carry.
Bottom Line
The right way to read the Egypt amendment is not by asking how many BCM have already been signed, but by asking how many BCM will become transportable and deliverable on firm terms. In that sense, January 2026 did not finish the story. It only finished its commercial chapter.
What exists now is a larger contract, a Phase 1 FID, and a pipeline of projects starting to line up behind them. What still does not exist is an operating system that justifies reading the entire Egypt increase as if it were already embedded in cash flow. Until Nitzana is completed, until Phase 1 actually produces gas, and until exports move at least partly from interruptible routes to more stable ones, the signed volume remains demand waiting for infrastructure, not infrastructure that has already turned into cash.
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