Egyptian court to rule in November on gas to Israel

Egypt's State Council Administrative Court said it will issue a ruling Nov. 18 regarding a case lodged by a former ambassador and several lawyers against the export of Egyptian natural gas to Israel.

Oct 9th, 2008

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Oct. 9 -- Egypt's State Council Administrative Court said it will issue a ruling Nov. 18 regarding a case lodged by a former ambassador and several lawyers against the export of Egyptian natural gas to Israel.

According to former Ambassador Ibrahim Yussri, the decision to export Egyptian natural gas to Israel detracts from Egypt's sovereignty and harms national interests as it set a fixed price and quantity for the exports without any changes in price or quantities supplied for 15 years.

Yussri said the matter should have been referred to the Egyptian People's Assembly and that the agreement hampers Egypt's economic development because it prevents capitalizing on international price differences. As a result, he said, Egypt loses $9 million/day.

The agreement to supply Egyptian gas to Israel was signed in June 2005 by Egyptian oil minister Sameh Fahmi and Israeli infrastructure minister Binyamin Ben Eliezer.

Under the agreement, Egypt is committed to supplying Israel as much as 7 billion cu m/year of gas. Egyptian opposition to the agreement is centered on the fact that Israel is paying less than $3/MMbtu—well below current market rates.

Although there have long been expressions of discontent over various gas export terms secured by the Egyptian government, controversy flared with the start of pipeline gas sales to Israel in May of this year.

In June, barely a month after the start of exports, Fahmy—bowing to political pressure—said the government would review the price of its gas exports to Israel.

"We will review prices of natural gas in all agreements without any exception," Fahmy told parliament in a session specifically devoted to debate the agreement with Israel.

Fahmy's announcement met with satisfaction from the government's opponents, including Mohammed Anwar al Sadat, former MP and spokesman for the recently founded Popular Campaign against Gas Exports. "The government was finally embarrassed into partially addressing our concerns," Al Sadat said.

Since then, Israel has complained of various problems with gas from Egypt as in June when the state-owned Israel Electric Corp. (IEC) said the quality was substandard because the dew point deviated from agreed levels.

In late August gas supplies from Egypt to Israel were interrupted for technical reasons, according to the IEC. It marked the fourth time supplies had been interrupted since their start in May.

A certain level of animosity over the agreement comes from political concerns among Egyptians.

"Exporting this energy only strengthens their [Israel's] military machine," said Yehya Al Gamal, a campaigner against the agreement, saying that it "participates in suppressing the Palestinian people."

"It's not about the price of gas," said Al Gamal, "it's whether we should export it to them in the first place."

However, other Egyptians are more concerned about the need to preserve the nation's natural resources for domestic uses or to obtain market rates for it.

"Egyptian natural gas belongs to the Egyptian people, not the government," said Al Sadat. "If they're going to sell it, they should at least sell it at international prices."

Underlining that point, neighboring Lebanon—a fellow Arab nation—has also experienced delays and shortages in its Egyptian gas supplies.

In September, Egypt announced a delay in gas exports to Lebanon through the Arab Gas Pipeline until at least January 2009, after initially scheduling them to come on stream in July or August (OGJ Online, Oct. 4, 2008).

Contact Eric Watkins at hippalus@yahoo.com.

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