Egypt halts new gas contracts

In a move considered as a victory for opposition, Minister of Petroleum Eng. Sameh Fahmy announced last month that the government will revise its natural gas export prices and will not sign new exportation contracts until the end of 2010

The gas exportation has been facing oppositional reactions which have begun to come out to compel the government not to export the domestic natural gas in those low prices, especially to Israel; nine years after of taking the decision of exporting the Egyptian Natural Gas to this latter. However, despite the public refusal, and the hot interrogation sessions at the Egyptian Parliament, the Egyptian natural gas has started to flow into Israel for the first time on May 1st. According to Israel’s Ministry of Foreign Affairs, the decision of gas exporting is nine years old as in 1999 former Israeli Prime Minister Ehud Barak praised the Egyptian government’s decision to export natural gas to his country.
Nevertheless, the deal comes in accordance with a memorandum of understanding between Cairo and Tel Aviv signed in mid-2005. Through this agreement, the Cairo-based East Mediterranean Gas (EMG) has been allowed to sell 1.7 billion cubic metres of Egyptian natural gas annually to the Israeli state-run Israel Electric Corporation for a period of 20 years. EMG is a private energy consortium jointly owned by Egyptian businessman Hussein Salem and the Israeli Merhav Group.
As a result, civil rights activists and members of People Assembly initiated a popular campaign to stop natural gas export to Israel under the slogan of “No to the Gas Setback”.  The one-million-signature campaign pointed out that its activities are represented in increasing people’s awareness toward this issue for the prevention of gas exports in light of increased world prices stating that the local economy needs Egypt’s natural gas, especially as the price of the exported gas is not appropriate compared to current world prices in light of the contracts being signed in the past.
In addition, owing to the latest energy price hikes kicked-in this year, experts and opposition members have been calling on Fahmy to alter the prices on all existing gas contracts, saying Egypt’s rate is below the current international market prices. The recent decision of freezing the new gas and reviewing all the existing contracts came as a result of the public storm.
“We will review prices of natural gas in all agreements without any exception,” Fahmy declared.
Fahmi also declared in the last edition of the Mediterranean Offshore Conference and Exhibition (MOC) that Egypt will earn 18 billion dollars as a result of reviewing all the exportation contracts and altering the prices. In addition, Shamil Hamdi, First Undersecretary at the Ministry of Petroleum, told a parliamentary committee that the ban on new contracts would not affect the share of the Egyptian natural gas due to foreign companies working in the country.
“We are suspending new contracts until world prices stabilize and we have a clear picture of the future of the markets,” Hamdi explained. Negotiations on the terms of all existing contracts continue, the official added.
Although in his statements, the minister did not specifically focus on the gas agreement with Israel, government-run newspapers reported that the People’s Assembly (PA) session was devoted to debating this specific deal.
Esmat El Sadat, Spokesman of the public campaign to prevent Egyptian gas exports said that Fahmy’s announcement tackled the issue with more ambiguity rather than presenting the necessary clarifications. He stated that MPs presented a list of questions that remained unanswered by Fahmy.
One of those questions was the real figures of Egypt’s gas reserves, which, according to some officials from the ministry, stand at the range of 72 to 74 billion cubic meters. However, Ibrahim Zahran, Petroleum International Expert, said that these figures are ‘haphazard’; the international estimations range between 28 and 36 trillion cubic meters.
According to Abdallah Helmi, Coordinator of the public campaign to prevent Egyptian gas exports, who was present at the session, the government has reached an agreement that “we don’t have enough gas to sign any new export deals.”
Helmi called on members of the People’s Assembly’s energy and industry committee to form an international committee that would announce the exact figures of gas reserves, prices and revenues, since international and Egyptian figures do not match.

By Ahmed Morsy


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