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Israeli gas imports stir up row in the Egyptian government

May 14, 2014 at 2:23 pm

The Egyptian government has been asked by economic experts to approve gas imports from Israel in order to fulfil the needs of the local market. The experts demanded that issues of politics and economics be separated, specifically as Egypt used to export gas to Israel. At the time, they argue, the Tel Aviv government were not embarrassed, and in fact, benefited from the Egyptian gas for several years in meeting the needs of its own electricity sector.

The minister of petroleum has said that the matter has not yet been discussed at cabinet level and that the announcement is simply a letter of intent between British Gas and Noble Americas Energy.

Midhat Yousef, the former deputy head of the General Petroleum Corporation said that the government was dealing with the issue as if it were shameful and the cause of political embarrassment. He called for the matter to be dealt with, without the involvement of politics, on the basis that it is in the economic interest of Egypt.

Yousef said that Israel had discovered huge quantities of gas at the Tamar and Leviathan fields and that it would be possible for Egypt to import it via the Arab gas pipeline. The pipeline had exported gas to Israel for many years for the benefit of the Tel Aviv government which managed, by virtue of the pipeline, to fulfil the needs of its electricity sector. Exports only stopped after the 25 January revolution.

He added: “Israel used to obtain Egyptian gas at $3 per million thermal units. Egypt may import (the gas from Israel) at the cost of no more than $7 or $8 (per million thermal units). Despite the huge difference (between the two prices) Israeli gas remains cheaper than the gas from Russian and French companies that government is currently buying at a cost of $15 per million thermal units. In the latter case there is also a need to purchase a compound to change the gas in excess of $600 million. In the case of Israel, its gas can be imported in its gaseous form via the Arab gas pipeline without the need for liquefaction.”

He also explained that once the government approves the gas imports from Israel that would kill two birds with one stone as the deal would allow Union Finosa, the partner in the Gas Liquefaction Facilities at Dumyat, to import gas from Israel and re-operate the plant which has been idle for years. In exchange the arbitration lawsuit lodged by the company against the Egyptian government would then be dropped. The Israeli gas will, in that case, be imported via the Arab gas pipeline which belongs to the East Mediterranean Gas Company and that too would be in exchange for dropping its own arbitration lawsuit against Egypt in protest at the withdrawal of its licence when the exportation of Egyptian gas to Israel came to a halt.

Yousef also said: “Union Finosa did indeed make that offer to the Egyptian government. Yet, the government has not yet decided what to do. The offer entails importing the gas via a third party, such as British Gas. The imported gas would be purchased by the liquefaction plant at Dumyat which is owned by Spain’s Union Finosa and the Italian INI with a 20 per cent government shareholding divided equally between the Gas Holding Company (EGAS) and the General Petroleum Corporation.”

Petroleum and mining expert Dr Ramadan Abulula has demanded that the government form a legal team whose task would be to lodge an international lawsuit similar to that of the Taba case in order to prove Egypt’s right in the Israeli gas fields. He explained that Egypt has not demarcated its borders with Israel yet. He disclosed that he intended to meet Prime Minister Ibrahim Mahlab to show him a number of maps that prove Egypt’s rights over the Israeli fields. These rights, according to him, were squandered because of the negligence of former governments regarding the demarcation of maritime borders with Israel. He pointed out that Cyprus has demarcated its maritime borders with Israel in order to prove its right in the Mediterranean gas fields.

Abulula said: “The government signed an agreement after the revolution with Cyprus on 12 December 2013 that did away with Egypt’s rights in the oil and gas fields discovered in the Mediterranean because that agreement gives Cyprus the right to sign contracts with a third party, which is Israel, without going back to Egypt. The agreement also reduced the maritime borders between Egypt and Cyprus in favour of the latter, and this has denied Egypt large areas that contain oil and gas reserves.”

The Minister of Petroleum and Minerals, Sharif Ismail, has said that the importation of gas from Israel was not discussed at cabinet level. He explained that he has asked to meet the president of Union Finosa to enquire about the letter of intent signed by American Noble Energy, one of the investing companies in the Israeli gas field. Ismail stressed that the importation of Israeli gas will not take place without the approval of the Egyptian government.

A statement issued by the Israeli side recently disclosed that a letter of intent was signed between the Noble Americas Energy and British Gas which stated that Spanish company Union Finosa would import gas for use at the liquefaction plant at Dumyat.

Noble Energy has said that the memorandum includes an agreement to supply the Spanish company’s plant in Egypt with around 2.5 trillion cubic meters from Tamar gas field over fifteen years, at a rate of 440 million cubic meters per day.

Keith Elliot, Middle East vice chairman of the American company said: “This agreement with Union Finosa constitutes a major step along the path of developing the Tamar field and providing the rising demand for natural gas in the region.”

Translated from Al Masry Al Youm, 9 May, 2014

 

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.