Egyptians protest sale of natural gas to Israel

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Aug. 14 -- The Egyptian-Israeli consortium Egyptian Mediterranean Gas (EMG) has finalized terms of an agreement to supply natural gas to Israel’s Dorad Energy, revising an agreement initially struck in 2007.

Under terms of the revised agreement, EMG will supply 12.5–16 billion cu m (bcm) of gas to Dorad Energy over 17–22 years at a reported cost of $2.1–3.3 billion.

But opposition has mounted to the new agreement in Egypt, with critics saying that the gas is being sold to Israel at prices considerably lower than those found on the international market.

Indeed, Ibrahim Zahran, a member of a coordinated campaign against exports of Egyptian gas to Israel, said the gas is almost as greatly underpriced in the new agreement as it was in the first one.

Zahran said the first agreement called for a price of $1.25/MMbtu, saying it was about one tenth of the international market price of $15/MMbtu.

Zaharan said the second agreement is not much better even with the price at $1.75/MMbtu since international rates remain at $15/MMbtu. In Zahran’s view, such vastly reduced prices mean that Egypt is subsidizing Israeli gas purchases.

Zahran’s statements came in response to earlier remarks by Egyptian President Hosni Mubarak, who said after the signing of the new agreement: “Egypt is not selling gas to Israel at reduced prices, as some are claiming.”

According to Mubarak, the government “made revisions and amendments of current gas contracts with all countries in order to maximize profit for Egypt.”

Other critics are not concerned about the price of the gas, saying on political grounds that Egypt should not be selling anything at all to Israel.

“It is absolutely forbidden that we support a country currently at war with Islam and Muslims, and which occupies the land of Palestine,” said Nasr Farid Wassil, former Grand Mufti of Egypt, who added, “All economic relations with such a country should be severed.”

Meanwhile, reports of opposition to the new agreement coincide with word that the joint tenders committee of Israel's National Infrastructure and Finance ministries has issued a prequalifying tender for an offshore LNG receiving terminal at a location yet to be determined.

The committee has set a target date of October 2013 for the start-up of the new terminal, which will have a receiving capacity of 4 bcm/year and will be operated under a 20-30 year build, operate and transfer contract.

The tender specifies that the winning bidder operate and maintain the receiving terminal, as well as provide storage and regasification facilities.

After advancing the startup date of the proposed terminal due to concerns that Israel may soon face a shortfall in gas supplies, the joint tenders committee plans to announce the winning bidder by yearend 2010.

Contact Eric Watkins at hippalus@yahoo.com.

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