Egypt has resumed its natural gas exports to Israel -- for now, reports Ahmed Morsy After a seven-week outage, Egypt recommenced pumping natural gas to Israel and Jordan at test levels this week. The outage had been caused by a sabotage attack on the Arab Gas Pipeline (AGP) in Egypt at the end of April. It was the second cut in supplies in the past five months following an explosion that damaged the pipeline in early February. "The gas was pumped again on Friday after repairs following the explosion that damaged the pipeline network carrying the natural gas," Enas El-Sheikh, the general manager of the information department at the Egyptian Natural Gas Holding Company (EGAS), told Al-Ahram Weekly. EGAS had led the consortium which was the winning bidder for the construction of AGP. The consortium also included Enppi, Petrojet and the Egyptian Natural Gas Company (GASCO). AGP, which routes the Egyptian gas to Syria, Jordan and Lebanon, supplied Israel with 2.5 billion cubic metres of gas in 2010 through the East Mediterranean Gas Company (EMG). "The gas began flowing towards the North Sinai city of Arish with small testing amounts towards Israel, estimated at 20 per cent of the contractual level. The delay in the recommencement was due to importing technical spare parts to replace the damaged ones, and meanwhile they are being tried out," El-Sheikh added. Regarding the procedures taken to avoid further attacks on AGP, Bloomberg mentioned that Abdel-Sattar El-Demerdash, general manager of gas network and engineering at the Egyptian Natural Gas Company (GASCO) said late last month that the Egyptian authorities were stepping up security measures along the 192km pipeline. According to the Israel Business Review website, the recent halt of gas cost the Israeli energy market millions of dollars every day as Egyptian natural gas covers nearly 40 per cent of Israel's natural gas consumption. Without Egyptian natural gas, Israel will need to use other energy sources including petroleum based oils, which are more expensive than natural gas. Egypt's Finance Minister Samir Radwan had recently announced that all the country's seven natural gas export contracts are currently being reviewed. Egypt exports natural gas to Israel, France, Italy, Spain, Jordan, Lebanon and Syria. The terms under which Egypt has been selling gas to Israel in particular have been under scrutiny by energy experts and activists for years. But since the revolution, and due to the slowdown in the economy and the need to boost revenues, the public has been calling for cancelling the agreement or altering the price to levels equivalent to those on the international market. Even though the Egyptian government has dealt with gas rates to Israel as confidential information, reports in the Israeli media have shown that the price of the contract ranges between $2.6 and $4.5 per British thermal unit (BTU). "Not only are we are exporting natural gas to Israel at a below-par price, these days we are also giving them the gas as a gift. We have not begun full commercial supply and it is known that the testing supply is free of charge," Ibrahim Zahran, a member of the National Specialised Councils and former chairman of Khalda Petroleum Company, told the Weekly. "Terminating the contract is far better than increasing the price since it is ridiculous to export natural gas at marginal prices and import other petroleum alternative products at international prices to fill the gap of domestic consumption," says Zahran. He pointed out that Egypt imports fuel oil and butane gas at $17 and $22 per million BTU from the international market respectively. "The gap between the marginal price of exporting gas and its alternative oil products which we import to meet the domestic need, is what makes the energy subsidies so high," according to Zahran. In the draft 2011/2012 budget, energy subsidies reached LE99 billion compared to LE67.68 billion last year. The delay in resuming the Egyptian natural gas led the US investors in EMG, Ampal-American Israel Corporation, to threaten to initiate legal steps against the Egyptian government to ensure gas supplies were resumed. Ampal said it was launching international arbitration proceedings against Egypt over the halt in gas supplies last month. EMG is owned by Egyptian fugitive businessman Hussein Salem, Egypt Natural Gas Company, Thailand's PTT, EGI (controlled by US businessman Sam Zell), Ampal, Israel's Merhav Group and Israeli institutional investors. Ampal said it had joined EGI-Fund, Thailand's PTT and other international shareholders in taking formal steps towards arbitration under a US-Egypt bilateral treaty for investment protection. But Ibrahim Eissawi, former first undersecretary of the Ministry of Petroleum for Natural Gas Affairs, believes "such announcements are merely an attempt at intimidation," indicating that they do not represent a threat to Egypt. "The gas deal is signed between the Egyptian side represented by EGAS, and EMG which is an Egyptian joint stock company. Thus, the deal is considered an internal affair and the international arbitration can do nothing about it," Eissawi emphasised to the Weekly. "The agreement is corrupt," Eissawi said, describing the exporting gas deal with Israel, questioning "how come the Egyptian interim government has the people responsible for signing the agreement on trial, while at the same time carries on pumping the gas?" Following the uncertainty over the supply of Egyptian gas, the Israeli government is trying its best to put the development of its offshore gas field, Tamar, into high gear. Once Tamar offshore field is brought on line, most likely beginning in 2013, Israel can look forward to over a decade of energy independence, according to the IsraeliJerusalem Post. US Geological Survey estimates that there are 122 trillion cubic feet (TCF) of gas in the whole Levant Basin, most of which is within Israel's jurisdiction. "After discovering Tamar field, Israel is going to be a natural gas exporter. The estimated proven reservoir of Tamar is about 120 trillion cubic feet of gas which is far more than what Egypt possesses," Eissawi stressed. According to the Israeli financial newspaper Globes, the Tamar partners agreed to lower the price of gas to $6 per BTU after reaching $7.50 per million BTU with the Israel Electric Corporation (IEC) in what could be the largest gas supply contract in Israeli history, exceeding $20 billion. For Globes, the price is higher than the original price 18 months ago, but lower than the price IEC is currently paying Delek and Noble Energy for gas from Yam Tethys under the 2009 gas supply contract. Furthermore, last month Delek Group Ltd. and Noble Energy signed a newer contract to supply Israel with gas from the Yam Tethys gas field at $8.50 per million BTU, 50 per cent above the 2009 prices and the highest price ever set in a natural gas contract with Israeli customers. According to data from BP Plc, Egypt holds Africa's third-biggest gas reserves, with 78 trillion cubic feet. "On the contrary, Egypt might be one of the gas importers if we did not reconsider our strategies and statistics regarding the volume of our reservoir and domestic consumption for the coming 20 and 30 years. Subsequently, we can decide whether to continue exporting or not after re-evaluating the current prices," Eissawi added. "As for Tamar field, it is located in the Mediterranean Sea off the coast of Israel, Gaza, Cyprus, Lebanon and Egypt. Thus, the governmental officials, water engineers and jurists must pay attention for the location and the coordinates of that field which Egypt might have a share in," he advised. In the meantime, El-Sheikh of EGAS said that an Egyptian delegation is scheduled to visit Jordan next week to sign a new contract modifying Egypt's gas exports. Egypt was previously selling gas to Jordan at $1 per Btu, according to Eisaw. Egypt provides Jordan with over 232 million cubic feet per day. Jordan relies on gas from Egypt for 80 per cent of its electricity generation needs through exporting the Egyptian gas via Al-Sharq Gas Company.
