Delek Drilling has finalized a deal to sell its 22% stake in the east Mediterranean Tamar gas field to Abu Dhabi's Mubadala Petroleum for about $1 billion, the Israeli company said on Thursday.

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Delek said it is the biggest commercial deal to be signed between Israeli and Emirati groups since Israel and the United Arab Emirates normalized ties last year. A preliminary agreement was reached in April but it required government approval.

The Tamar field is one of Israel's primary energy sources and can produce 11 billion cubic meters of gas a year – enough to cover much of the Israeli market as well as exports to Egypt and Jordan.

Delek Drilling, a unit of conglomerate Delek Group, holds a 22% stake in the field, which is operated by Chevron.

Mubadala Petroleum, a unit of Abu Dhabi government-owned Mubadala Investment Company, said the acquisition "will complement Mubadala Petroleum's gas-based portfolio strategy in line with its energy transition goals".

Delek also holds a significant stake in the even larger Leviathan gas field nearby and is selling its Tamar holdings to comply with government moves to open the market to more competition.

"A huge deal with a company from the United Arab Emirates, alongside exporting gas to Eygpt and Jordan, are actions on the ground and exactly how to build a new Middle East," said Delek Drilling CEO Yossi Abu.

‏"This transaction marks a milestone in the alignment between Israel and the UAE following the Abraham Accords Peace Agreement signed between the two countries in 2020," said Abu.

‏"On completion, the deal will represent one of the largest transactions between an Israeli entity and an Arab entity, which shows how Israel's natural gas resources can be a source of collaboration between nations. This is yet another pivotal brick to the wall of friendship and collaboration Delek Drilling has been building in the region.

"Our focus right now in Delek Drilling is on the expansion of our mega Leviathan reservoir and on creating new markets in the region and beyond for our produced natural gas," he added.

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Under the landmark deal, a private firm in Egypt, Dolphinus Holdings, will purchase 85 billion cubic meters (bcm) of gas, worth an estimated $19.5 billion, from Israel's Leviathan and Tamar offshore fields over 15 years.

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In Cairo on Wednesday morning, Energy Minister Yuval Steinitz and his Egyptian counterpart, Tarek El-Molla, announced the commencement of the gas flow.

In a joint statement, the two energy ministers said the step was an "important development" and added that it would "serve the interests of both sides."

Israel and Egypt signed the permit to export natural gas to Egypt in December 2019. At the time, Steinitz called the permit a "historic landmark" for Israel. The deal also enables Israel to transport its natural gas to Europe through Egyptian liquefied natural gas factories.

Yossi Abu, CEO of Israel's Delek Drilling, one of the partners in Leviathan and Tamar, said the arrangement "marks a new era in the Middle East energy sector."

The gas is being supplied via a sub-sea pipeline connecting Israel and Egypt's Sinai Peninsula.

Israeli officials have called the export of gas the most significant deal to emerge since the countries signed a historic peace treaty in 1979.

In early January, Texas-based Noble Energy began pumping the first supplies of Israeli gas to Jordan for an experimental three-month period.

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