Egypt: EGAS suspends deal to export gas to Israel

After 14 explosions on the pipeline, and the trials of those accused of selling the country short over the deal, EGAS has suspended its deal to export gas to Israel. The company cited contractual differences. It said that East Mediterranean Gas, founded by Hussein Salem and Israeli partners, “was not fulfilling its side of the deal”.

Muhammad Shu'aib , chairman of EGAS, said the decision was taken by the Egyptian General Petroleum Corporation (EGPC) and EGAS. “This is a commercial agreement between EGPC and EGAS on one side and the EMG, which is an Egyptian company specialised in exporting gas, on the other side. A trade agreement has conditions, duties and rights for each side. When one party does not fulfil its side of the deal, the agreement dictates what the other side is to do.” Abdallah Ghorab, Egyptian oil minister, said the termination was “a contractual matter and we are exercising our rights under the contract.”

International Co-operation Minister Fayza Aboul Naga said Israel had been notified five times that it was not meeting its financial obligations under the old contract. Egypt's Electricity Minister Hassan Yunis said earlier that the natural gas being exported to Israel under the controversial deal would be used domestically.

The reaction from Israel and the Israeli partners was markedly different. Yigal Palmor, an Israeli foreign ministry spokesman, denied that Israel had not been paying for the gas. Israel's finance ministry said it viewed the cancellation with “great concern”. They said it was “a government-backed contract sealed by a memorandum of understanding between Egypt and Israel that specifically refers to the (1979) peace treaty".

Egypt had been trying to raise the price of the gas sold through negotiation but there are many in Egypt who always opposed the deal as it was seen to be a way of channelling revenue into the pockets of members of the former regime. President Mubarak's sons have been tried for corruption over the deal.

According to Al Masry Al Youm, Fayza Aboul Naga told the Shura Council's Finance and Economic Affairs Committee on Monday that she expects foreign reserves to rise in May with the stabilisation of political and economic conditions. She added that foreign reserves went down by US$3 billion a month at the beginning of last year and then the rate of decline reduced to US$600 million in the past months.

For more news and expert analysis about Egypt, please see Egypt Politics & Security.

© 2012 Menas Associates

Part of Sinai pipeline sabotaged again

For the third time since the fall of Hosni Mubarak in February, on 4th July saboteurs blew up part of the gas pipeline in northern Sinai which takes gas from Egypt to Jordan and Israel.

The pipeline feeds into two export pipelines which bifurcate at el-Arish. One goes to Ashkelon and delivers up 2.4 billion cubic metres a year of gas to Israel. The other, the Arab Gas Pipeline, goes south and delivers up to 4.5 bcm a year to Lebanon, Jordan and Syria.

The explosion was at a pumping station at Nagah in Bir Abdu, 60km east of Suez. According to security sources quoted in the media, a group of armed men forced the staff at the station to leave before blowing it up. Ampal-American Israel Corporation, which has a 12.5 per cent stake in East Mediterranean Gas (EMG), operator of the Arish-Ashkelon pipeline, said the explosion occurred at the point where the two pipelines diverge.

The damage was quickly repaired and gas supplies resumed to Israel within two days, albeit at a reduced rate, according to Ampal. After the previous explosion on 27th April, gas flows did not resume until early June. Not so, according to Egypt. Al Masry Al Youm quoted an official from the Egyptian Natural Gas Company (GASCO), the company responsible for exporting natural gas to Israel, as denying that gas exports to Israel had resumed.

GASCO chief Magdy Tawfiq said that repair work was still underway. He explained that the company shut off valves to stop the flow of gas while residual gas was drawn out of the pipe to empty it. He expected the repairs to be completed shortly as damage was limited.

For more news and expert analysis about Egypt, please see Egypt Politics & Security.

© 2011 Menas Associates