Egypt aims to accelerate negotiations to secure better prices for its natural gas exports, reports Sherine Nasr Egypt is currently introducing price adjustments to its natural gas contracts with a number of clients including France, Spain and Israel. The adjustment clauses aim at claiming a fairer price for Egypt's natural gas exports to these states, particularly as oil prices have recently reached unprecedented heights. The Egyptian Ministry of Petroleum announced that the price adjustment mechanism, in place since 2006, has enabled the country to make some $18 billion over the past two years. According to first undersecretary to the Ministry of Petroleum Hamdi Shamel, negotiations are ongoing with Gas de France to increase the price of liquefied natural gas (LNG) to above $4 per million British thermal unit (Btu). Meanwhile, a fifth round of negotiations with the Spanish Union Fenosa is due to begin early next year. In the meantime, negotiations with Tel Aviv on the same issue have been conducted in absolute secrecy, especially on the part of Egyptian officials who have been subject to heavy criticism over allegations that they are selling gas to Israel at a marginal price. Although no concrete results have yet been achieved with the Israeli side, Egypt is determined to go on with its plans to raise the price of natural gas exports to Israel. This is perceived as the only means to silence angry opposition voices that have managed to embarrass Cairo over the past few months over the deal they describe as "unfair and corrupt". A memorandum of understanding between Cairo and Tel Aviv was signed in 2005 licensing the Cairo-based East Mediterranean Gas (EMG) to sell 1.7 billion cubic metres of Egyptian natural gas annually at a price of $1.5 per million Btu to the Israeli state-run Israel Electric Corporation (IEC) over a period of 15 years. EMG is a private energy consortium co-owned by the Egyptian businessman Hussein Salem and the Israeli Merhav Group. In May 2008, Egyptian gas started to flow to Israel through a 100 kilometre-long marine pipeline extending from Arish on the eastnorthern coast of Egypt to Ashkelon, southwest of Israel, overlooking the Mediterranean. To save itself a much-deserved embarrassment, the government justified the deal on economic grounds. "Egypt did not sell gas to Israel. It was not the state or the government that was supplying the gas, rather it was a deal concluded between two privately-owned entities," Moufid Shehab, minister of state for legal and parliamentary affairs was quoted as saying during a stormy People's Assembly session last June. Shehab added that the state's sole responsibility in this affair was to link the pipeline to the intended destination where gas was to be finally pumped. Analysts justified the sale as a political rather than an economic decision. The underlying message is to assure the US that Egypt enjoys a stable peace with Israel, and is ready for economic cooperation. Meanwhile, the Egyptian Minister of Petroleum Sameh Fahmi has repeatedly underlined that there will be no exceptions while concluding the adjustment clauses on export gas deals. Fahmi's statements have raised much concern in the Israeli arena. Israeli press quoted an IEC official as saying that the corporation is confident the Egyptians will honour the agreement, as they have honour other fuel-related agreements. IEC's main concern is that any adjustment in the gas prices will translate into significantly higher electricity bills. The Israeli press highlighted that this is why the corporation is now concerned with multiplying its supplies of energy, such as coal, to save itself an awkward situation by relying only on gas. For its part, the Egyptian Ministry of Petroleum issued a statement a couple of months ago, to indicate that natural gas export price in concluded deals ranges at $5 per million Btu, while the price of spot cargoes ranges between $8 and $11 per million Btu. The statement came in response to the sharp criticism lashed against the ministry under claims that gas exports to some countries are under- priced. According to Sherif Ismail, former chairman of EGAS, all natural gas export deals are subject to price adjustment. He added, "gas agreements are concluded in full secrecy and there is no such thing as a fixed price for selling gas because different factors and variables take place in the international market and bring forth necessary price adjustments." Egypt's proven natural gas reserves have reached 76 trillion cubic feet. Gas exports during 2007/08 have contributed some $3.3 billion. Thirty per cent of gas production is exported while the remaining 70 per cent is consumed domestically. Electricity production, industry and petrochemicals are the three sectors that receive the lion's share of almost 85 per cent of the locally consumed gas.
