Egypt hasn't ruled out importing gas from Israel

The Egyptian government says it has not received official requests to import gas from Israeli companies, but has received expressions of intent from various foreign companies operating in the country.

al-monitor Workers build a pipeline for transporting natural gas to Israel in the north Nile Delta, 300 kilometers (186 miles) north of Cairo, Nov. 23, 2008.  Photo by REUTERS/Nasser Nuri.
Ayah Aman

Ayah Aman

@ayahaman

Topics covered

natural gas, israel, imports, hosni mubarak, export, exploration, egypt, abdel fattah al-sisi

Jul 16, 2014

CAIRO — In light of the energy crisis in Egypt and the inefficiency of power plants due to a lack of natural gas since local production in Egypt decreased, the government and private companies in the sector have resorted to importing liquefied natural gas (LNG) to satisfy local demand.

Egypt was, until recently, a country that exported natural gas. Egyptian contracts limit importing natural gas from Arab countries, as mentioned in the agenda of President Abdel Fattah al-Sisi’s visit to Algeria. The British BG Group’s operation in Egypt started negotiating with Israel to supply Egypt with 7 billion cubic meters (247 billion cubic feet) of LNG annually for a period of 15 years.

The current gas production in Egypt is 0.13 billion cubic meters (4.8 billion cubic feet) daily with an estimated consumption of 6 billion cubic feet a day, according to the Egyptian Natural Gas Holding Company (EGAS).

An Egyptian government source who works in the petroleum industry told Al-Monitor, “There is a huge crisis in the natural gas sector in Egypt, and we cannot stop foreign companies operating in Egypt from importing gas from Israel.”

The source said, “The Egyptian government, represented by EGAS, has also started negotiating with foreign and Arab countries to import natural gas on a monthly basis, to satisfy internal needs. The Egyptian Ministry of Finance dedicated a special fund for this matter in the country's new budget.”

The source confirmed, “Importing natural gas from Israel through public companies is a sovereign and political decision, it is also premature and we should not put the government in a delicate situation yet.”

The Egyptian Minister of Petroleum and Mineral Resources, Sharif Ismail, told Al-Monitor, “Importing natural gas from Israel, or from companies that are exploring the Israeli regional waters, has to be preceded by getting the approval of the Egyptian government, achieving an economic value for Egypt and resolving the issues of the international arbitration.”

The minister did not mention the objection of the Egyptian government to importing gas from Israel. However, he said, “The Egyptian government is yet to receive a request from any company to import gas from companies that operate in Israel,” adding, “We cannot say yet whether the public objects or approves.”

Ismail continued, “The British and Spanish companies that want to import gas from Israel were only expressing their intentions, but no official procedures were taken to start bringing the gas to Egypt.”

The minister explained the reason behind Egypt resorting to importing natural gas: “This is due to the instability in research and exploration over the past three years and not pumping new investment into developing the fields and increasing productivity, in addition to the accumulation of the government’s debt to foreign companies that reached $5.9 billion.”

However, Ismail said, “Egypt has an important natural gas reserve and major opportunities for research and exploration in the Mediterranean, the Delta and the Western Sahara, in addition to new exploration that is expected to start producing by the end of this year.”

Retired ambassador Ibrahim Youssri, president of the Popular Campaign to Stop Gas Exports to Israel, said he could not see Egypt importing natural gas from Israeli companies since Egypt used to export gas to Israel at a low rate under former President Hosni Mubarak.

“I cannot imagine Egypt going back to importing natural gas from Israel after it used to be one of the biggest exporting countries. If this ever happens, it would be an act against the law,” Youssri told Al-Monitor. “The corruption in the petroleum industry in Egypt is the cause of this crisis. The foreign companies operating in the field of exploring natural gas are conspiring with Israel. The Egyptian government must set strict conditions for these companies to work in Egypt.”

Youssri, who fought a court battle against the Egyptian government after filing a number of lawsuits against the government's trying to sell Egyptian gas to Israel, said, “Egyptian law grants the government the right to its petroleum wealth as well as the right to control the Egyptian market. The law makes transactions of imports subject to the government’s decisions and not to those of the companies operating in the country.”

Former head of EGAS Muhammad Shoaib said in an interview with Al-Monitor that Egypt's importing gas from abroad should not be considered shameful, without directly referring to Israel. “Egypt is now in great need of importing natural gas, since it is the cheapest and most essential element in producing energy and electricity. It is not shameful that Egyptian production is not enough for internal needs,” Shoaib said.

He added, “The trade contracts are the ones that control the transactions of imports and are usually made between companies, not countries or governments. These contracts are subject to the international market and the laws of supply and demand.”

The government’s attempts to overcome the crisis of natural gas research in oil fields on land and in Egypt’s territorial waters depend on the financing capacities to cover the major debt of the petroleum industry. The Egyptian government must attract more investment, as the national budget of the country is facing a deficit that has led the government to gradually reduce the subsidies for petroleum products. This is what has largely opened the doors to potentially importing natural gas from Israel to satisfy growing local needs.

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