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Egypt buys Israel's gas and raises electricity prices

February 18, 2015 at 10:07 am

An Egyptian government company signed a contract to import gas from the American company Noble Energy, which contributes about 40 per cent of the gas in the Israeli Leviathan field off the coast of occupied Palestine. Meanwhile, a senior official in the Egyptian Ministry of Petroleum revealed that the price of gas from the US company is higher than the price agreed on with Sonatrach, the government gas company in Algeria.

Until early 2011, Egypt was exporting natural gas to Israel in accordance with an agreement signed in 2005 that provides for the export of 1.7 billion cubic metres a year for 20 years.

Last December, Egypt signed an agreement to import six shipments of liquefied natural gas from Algeria between April and September 2015.

In addition to this, Egypt agreed in principle, in April 2014, with Russia’s Gazprom to supply seven shipments of liquefied natural gas, but they still have not signed the final contracts.

The Egyptian Ministry of Petroleum has not revealed which fields the gas will be imported from or the prices agreed upon in the contract with the American company. However, analysts in the energy sector have said that the imported gas will come from Israel, as Noble Energy owns approximately 40 per cent of the gas in Israel’s Leviathan field off the coast of occupied Palestine.

A senior official in the Egyptian Ministry of Petroleum, who asked to remain anonymous, told Al-Araby Al-Jadeed that the value of the American company’s shipments is higher than the shipments imported from Sonatrach in Algeria, a deal which some analysts have described as the extortionate American deal.

Egypt is suffering from a decline in gas production, dipping so low that it no longer covers domestic use. Ousted Egyptian President Hosni Mubarak, who was toppled in the January 25 Revolution in 2011, has been the target of prosecutions after the outbreak of the revolution on charges of wasting public funds by exporting gas for low prices, but he has recently been acquitted.

Egypt relies heavily on gas in order to fuel power generation plants used for homes and factories; the country is now suffering frequent power outages both in the summer and the winter.

According to Mohamed Shaker, Egypt’s minister of electricity and renewable energy, the government will increase electricity prices next July, in accordance with a five-year plan to lift the subsidisation of electricity.

The Ministry of Electricity and Renewable Energy started to raise the price of electricity in July 2014 by rates ranging from 10 to 50 per cent.

During a conference on energy held yesterday, Shaker said that the government would decrease its subsidy of electricity, amounting to $3.59 billion during the current fiscal year (2014/2015) which will end in June, to $2.65 billion in the next fiscal year.

He added that the average cost price to produce one kilowatt of electricity is $0.06, while the average sale price now is $0.02.

According to the minister, the electricity plants’ use of natural gas increased from 64 per cent to 70 per cent, while their use of petroleum products such as diesel and oil reached 30 per cent. He pointed out that the plants would use approximately $12 billion worth of fuel during the next fiscal year.

The government’s announcement of the new increase in electricity prices comes at a time when the country is witnessing regular power outages. Citizens say that the outages began early this year, as the outages rarely occur in the winter but intensify in the summer when the load becomes heavier.