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Victory for opposition on gas export deals
Published in Daily News Egypt on 09 - 06 - 2008

CAIRO: Bowing to pressure from the opposition, Minister of Petroleum Sameh Fahmy announced Sunday that the government will revise its natural gas export prices and will not sign new exportation contracts until the end of 2010.
Since the latest energy price hikes kicked-in this year, experts and opposition members have been calling on Fahmy to amend the prices on all existing gas contracts, saying Egypt's rate is below the current international market prices.
Several opposition parties have also opposed the idea of exporting gas to Israel as a matter of principle.
"We will review prices of natural gas in all agreements without any exception, Fahmy said on Sunday.
Although in his statements the minister did not specifically focus on the gas agreement with Israel, government newspapers reported that Sunday's PA session was devoted to debating this specific deal.
According to Abdallah Helmy, coordinator of the popular campaign to prevent Egyptian gas exports, who was present at the session, the government has reached a consensus that "we don't have enough gas to sign any new export deals.
He called on members of the People's Assembly's energy and industry committee to form an international committee that would announce the exact figures of gas reserves, prices and revenues, since international and Egyptian figures do not match.
"We need an open session that includes opposition, government and international bodies to announce the correct figures and make calculated decisions regarding a new pricing scheme [for gas exports], Helmy told Daily News Egypt.
Regarding the Israeli-Egyptian gas deal, Helmy said that protests planned by the popular campaign to prevent Egyptian gas exports will be postponed until the minister reaches a decision vis-à-vis their demands on this subject.
"We want the minister to terminate the contract within a maximum of one year, or the necessary time for the second party to find an alternative, he said. If the contract stipulates a termination fee, Egypt should pay the penalty, he added.
"We will benefit much more if we divert this gas to domestic projects, he said.
If the minister refuses this proposal, the popular campaign to prevent Egyptian gas will continue to escalate the matter to the prime minister and the president. "If nothing works we will request that the People's Assembly vote on the matter, he said.
According to the deal signed in 2005 between Cairo and Jerusalem, the Egyptian company East Mediterranean Gas (EMG) is to pump 1.7 billion cubic meters of natural gas annually to the state-run Israel Electric Corporation for a period of 15 years.
In February, operations started and Egyptian natural gas was delivered to power plants in the Israeli cities of Tel Aviv and Ashdod in the first stage.
This influx of gas will enable Israel Electric Corporation to increase its production of electricity from natural gas, which stands at 20 percent.
EMG is a private energy consortium jointly owned by Egyptian businessman Hussein Salem and the Israeli Merhav Group.
The ministry's press office refused to comment on the minister's comments or on any details regarding the Egyptian-Israeli gas deal, saying that when a decision is made regarding the new pricing strategy it will be announced.
Egypt had already amended the price of natural gas exported to Spain and France, Prime Minister Ahmed Nazif had announced in May, after rife opposition erupted due to the increase in energy prices.
In June, Fahmy announced that the oil and gas sector has generated $18 billion in proceeds from the renegotiation of natural gas agreements with foreign partners, and negotiations during this fiscal year are expected to generate an additional $9 billion.
"The revenues we are making are minimal in comparison to what we could be making [if the prices are adjusted to international market measures]. We are losing around LE 200 billion, Helmy said.
Currently, only 30 percent of Egypt's gas production is exported, with the total production being 2135 trillion cubic feet, and the rest being used by the domestic market, stated the Chairman of the Holding Company for Natural Gas Mahmoud Abdel Latif. The average export price for Egypt reached $7/mBTU in April 2008, said the First Undersecretary of State at the Ministry of Petroleum Shamil Hamdy.
Helmy disagreed with these numbers, saying there was a huge discrepancy between what the ministry released and international figures. He said that the popular campaign to prevent Egyptian gas exports will continue to call for the investment in domestic projects that will consume local gas, hence "employing more people and benefiting from our resources.
"Our current policy to export 99 percent of our reserves is incorrect; we should invest in Egypt and its people, he said.
In its daily market report, Beltone Financial said, growth in domestic consumption of natural gas has been rising quickly, from 0 percent growth in fiscal year 2004/2005 to 8 percent in fiscal year 2006/2007 in tandem with growth in the private sector, especially industry. Approximately 60 percent of natural gas is used by electricity companies and 3 percent by the household sector.


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