JUST as oil prices escalated this week to their highest point in 2010 at $100 per barrel, Egypt signed a long-term contract to sell gas to Israel at a price that has so far remained secret -- at least as far as Egyptian oil industry circles are concerned. The deal, concluded by the Egyptian supplier East Mediterranean Gas Company (EMG), involves the selling of 1.4 billion cubic metres (bcm) of natural gas annually to a number of private sector power plants in Israel, in order to accelerate the shift of a number of projects to an environmentally-friendly energy source. The value of the deal was said to range between $5-10 billion, with a possibility to increase the contracted amount to 2.9 bcm. Deliveries will start during the first quarter of 2011. Despite the publication of opinion articles in the Egyptian press strongly criticising the deal, no legal action has been taken in response, although the Egyptian "No to the Gas Setback" group announced that they are preparing to file a lawsuit as the latest gas export deal flagrantly violates a previous verdict by the Higher Administrative Court stopping Egyptian gas exports to Israel. Meanwhile, in June, amendments to two oil agreements for deepwater oil and gas exploration and production off the coast of Alexandria between British Petroleum (BP) and the Egyptian General Petroleum Corporation (EGPC) were approved by the People's Assembly. Although the amendments still require President Hosni Mubarak's signature before they become law, oil experts are concerned that these latest amendments act against Egypt's best interests. By virtue of the latest amendments, the much favoured production sharing model whereby EGPC obtained more than 60 per cent of production has been changed to grant BP the full yield of the primary reserve and 61 per cent of the supplementary reserves in exchange of $800 million it has invested and $9 billion it says it will spend during the contractual period. But, why change to less favourable terms to share production? Is there a timeframe for developing these oil reserves? How can it be guaranteed that the contractor will actually spend that much in developing these resources? These are all questions posed by opposition members of parliament. So far, these questions remain unanswered.
