CAIRO: The Ministry of Petroleum has conducted a study that shows the reasons behind Egypt's decision to export gas to Israel. The study showed that Israel imported gas from Egypt since 1979 in accordance with the Camp David convention. Before Camp David, the oil wells were under Israel's control during occupation. Late President Anwar Sadat agreed with Israel that while he would reclaim the oil wells, he would make sure to sell Israel the surplus oil. When the wells dried up, former Minister of Petroleum Sameh Fahmy replaced oil exports with gas exports in 2008 after long negotiations between many former ministers. The study confirmed that the oil was not used to fuel planes that launched air strikes on the Palestinians, but was used instead in operating Israeli power plants to provide the Palestinians with electricity. Regarding gas prices, an anonymous official of the Ministry said former Prime Minister Atef Ebeid sent a letter to the Ministry to price the Million British Thermal Unit (MBTU) for the gas at U.S. $0.75. The contract was signed under Fahmy. The process, however, started in 2008. The Egyptian government later asked to change the price to $4 per MBTU. The government started negotiations in 2010 to increase the price to $5 in 2011. The gas would be sold by the East Mediterranean Gas Company (EMG) for $8. It was agreed that the petroleum sector would get about 80 percent of the $4 as commission. The EMG is an owner and operator of the Arish–Ashkelon pipeline. It is a joint company between the Mediterranean Gas Pipeline (28%), the Israeli company Merhav (25%), PTT (25%), EMI-EGI LP (12%), and the Egyptian General Petroleum Corporation (10%). The study showed that negotiations with Israel started in 1998 under Minister of Petroleum Hamdy al-Banby but failed. Fahmy resumed negotiations in October 1999 until February 2011. The study noted that the Egyptian geological survey estimated Egypt's gas reserves to be at 223 trillion cubic feet while the international Wood Mackenzie Company estimated it to be at 27 trillion cubic feet. According to the study, large amounts of gas were discovered in Egypt during the 1990s. Foreign companies had the right to search for oil wells but when they came across the gas wells, they filled them with dust or set fire to them. The companies justified the action by saying there was no equipment to transfer and export the gas. It should be noted that if gas wells are discovered, they should be immediately used and developed and not stored like crude oil. In scientific terms, the study showed that natural gas should be sold before extraction. The gas should be transferred by liquidating pipelines or plants. The study also showed that short term gas exporting contracts last from 6 to 12 months. As for crude oil, it is first stored then sold, and its contract lasts for 15 to 35 years. There should be markets near Egypt to decrease production costs. Given that Israel is close by, importing from Egypt is beneficial to it. The study showed that Egypt only has two liquidation plants, worth $2-3 billion, and that there should be companies to transfer the gas instead of the EMG. In the past, Egypt did not have governmental transportation companies, so it turned to private companies. The study showed certain factors that determine gas prices including production and transportation costs, exporting it as liquid through pipelines and the distance between the exporter and the importer. The factor of demand and supply cannot be ignored. For example, Qatar, the sixth gas exporting country in the world, set very low gas prices because of an increase in demand and supply, which in turn made Egypt decrease its gas prices. Although Qatar offered to help Israel after the explosion of the Egyptian-Israeli pipeline in Sinai last month, it cannot do so because it doesn't have liquidation plants or other required means of transportation. This means Qatar will have similar gas prices to Egypt. Gas from Qatar must first pass through Saudi Arabia or Syria, and both countries will refuse to help Israel in this matter. Gas prices are set according to the three stages of extraction, recycling and transportation to Arish and then to Ashkelon. European gas, however, is more expensive as it goes through seven stages. Egypt signs contracts with foreign gas companies given that it lacks liquidation plants, cannot afford underground pipelines and doesn't have experience in international gas markets.
