So long our beloved gas!

“We have to stop exporting Gas instantly,” replied an official petroleum source angrily when asked the late power cuts due to the shortage of gas supplies to the power stations, condemning the Israeli deal for this shortage!

Eng. Ibrahim Zahran, former chairman of Khalda Petroleum Company and member of the National Specialized Councils, agreed on the concept that exporting gas is strategically wrong.

“We are exporting 18 percent of the 27 percent that I have. They say the reserves may reach 78 percent, but these are not affirmed reserves yet,” said Zahran.
Zahran went on to show more agony, “Why would Egypt export natural gas? Saudi Arabia, which produces two fold Egypt, never exports natural gas. They liquefy it first then sell it abroad”.

Egypt’s role in the region forced it to take a leading decision of initiating a gas pipeline that runs through some of the Arabian countries; the Arab Gas Pipeline is a pipeline that exports Egyptian natural gas to the Middle East and possibly to Europe, with a further extension plan. When completed, its total length would reach up to 1,200 kilometers at a cost of $1.2 billion. The governmental source commented, “The idea of establishing this pipeline, came from exporting gas to the foreign partner, would require instigating this elongated pipeline through other Arabian countries. First, those countries said they would impose some specific fees to approve the passage of this pipeline through its land. Then they came with another demand, which is to take a share of the gas going through those lines.”

Similarly, Eng. Zahran added, “This pipeline was also made to have another parallel line that imports gas into Egypt, but it was not established because the nearest country would be Iraq, and we all know the current situation in there.”

Similar to that is the Nabucco pipeline (also referred as Turkey–Austria gas pipeline), which is a proposed natural gas pipeline from Erzurum in Turkey to Baumgarten ander March in Austria diversifying natural gas suppliers and delivery routes for Europe. The pipeline attempts to lessen European dependence on Russian energy. The project is backed by several European Union states and the United States and is seen as rival to the Gazprom-led South Stream pipeline project. At the same time, there are some doubts concerning viability of supplies. The main supplier is expected to be Azerbaijan in cooperation with Turkmenistan, Iraq and Egypt.

Preparations for the Nabucco project started in 2002. The intergovernmental agreement between Turkey, Romania, Bulgaria, Hungary and Austria was signed on 13 July 2009. The project is developed by the consortium of six companies. The final investment decision will be made at the end of 2010. If built, the pipeline is expected to be operational by 2015 and it will carry 31 billion cubic meters of natural gas per year.

“The Nabucco pipeline is considered a political demonstration, because none of those countries has that immense capacity to export from it. They would have to make it up with Iran so it would start working,” said Zahran.

The shortage of gas that caused the widely power cuts through the whole country do not only stand on those two pipelines. The experts considered the gas exports to Israel as the main reason behind it. “The contracts signed with Israel are with very low prices they would make you question the real reasons behind signing those deals,” added the governmental source.

The Arish–Ashkelon pipeline is a 100 kilometers submarine gas pipeline connecting the Arab Gas Pipeline with Israel. Although it is not officially a part of the Arab Gas Pipeline project, it branches off from the same pipeline in Egypt. The pipeline is built and operated by the East Mediterranean Gas Company (EMG), a joint company of Egyptian General Petroleum Corporation (EGPC – 68.4%), the Israeli company Merhav (25%) as well as Ampal-American Israel Corp. (6.6%). The pipeline became operational in February 2008. Initially, Egypt and Israel had agreed to supply through this pipeline 1.7 bcm of natural gas per year for use by the Israel Electric Corporation. Since then, the amount of exported gas has been raised to 2.1 bcm per year to be delivered through the year 2028. In addition, by late 2009, EMG signed contracts to supply through the pipeline additional 2 bcm per year to private electricity generators and various industrial concerns in Israel. The total capacity of the pipeline is 9 bcm/year. In 2010, the pipeline is supplying approximately half of the natural gas consumed in Israel, with the other half being supplied from domestic resources.

“To the contrary, Egypt loses a lot of money on its gas sales to Israel. Initially, the 2005 gas treaty between Egypt and Israel required Egypt to supply Israel with 200 million feet of gas daily for a 15 year period at a price that “ranges between 70 cents and $1.5 per BTU (British thermal unit),” to be fixed throughout the treaty’s lifetime. So we are selling this gas at a tiny fraction of its market price, which ranges between $8-$12 per BTU. To be exact, the government refuses to declare its selling prices to date,” wrote Mohamed Waked, an anthropologist and PhD candidate at the University of Amsterdam, in his article of “The Politics of Power Cuts in Egypt” published in the American political newsletter on the CounterPunch.

Waked also talked about how the ministry decreased the amount of gas exported to other countries as a momentary solution, “By reducing the quantities marked for the private sector and export to Jordan. Although Jordan pays much more for the gas, Israel remained untouchable.”

On the other hand, the government answered back on the Israeli low priced contracts as they elevated the prices lately. The governmental source fired back that “The only high prices in any Israeli deal are in the additional contracts, which are made from just a short time period and those are with the extra needed quantities of gas they want to add. This amount of gas is considered far less than the ones agreed on in the original contracts.”

Noteworthy, those power cuts caused by the shortage of gas forced the power stations to use Diesel, which caused a great damage to these stations. “It was shocking to hear that due to the shortage of gas needed to be exported, they withdrawn the gas from power stations and gave them Diesel instead. I blame both sides, especially the Electricity engineers, they knew the atrocious damage of using that as a fuel but still they used it,” Zahran added.

Waked also tackled in his article the same issue, “The ministry of petroleum gradually held back their gas until it dropped to 76%. This forced them to operate with the suboptimal diesel much more than they should, which reduced their generation efficiency below national demand. Using diesel also clogs their gas-based fuel injection system frequently, resulting in many breakdowns. It’s quite certain too that using diesel instead of gas has reduced the lifetime of their generation equipment; they probably destroyed a good part of their assets’ life and worth. While no one talks about this last point, the damage to the power generation machinery is probably to be measured in billions of dollars.”

Mohamed Awad, Head of the state-run Egyptian Electricity Holding Company (EEHC), clarified on the same issue in Al-Masry Al-Youm Newspaper, “Fuel oil has an effect on power stations. Twenty-two percent of the energy we produce comes from oil fuel-run units. We counter the problem by making chemical additions that diminish the negative impact of the fuel.”

Zahran continued on the issue of stopping gas exports that Algeria did it and stopped exporting gas to Spain till they agree on a higher price. “We will not even face any international sanctions, as we can resort to international arbitration and they would find how low our prices compared to the current market price. Russia stopped its gas to Europe back in 2008 till they change the sum of price paid.”

“We can also sign deal with foreign countries to build liquefy stations for us here if they want our gas, cause we should never export our natural gas without liquefying. Even the liquefied stations in Edko and Damietta, the foreign investor was more smart than us, as they built it then charged us for it!”

“They might talk about the lack of infrastructure to preserve our extracted gas, but it is totally a non scientific scheme. Because simply the gas is already reserved underground in the wells, so do not extract it unless you need it. Gauge the local need and extract it. Our natural gas is our future prosperity, we made it suffer for long and we should start treating it with respect,” Zahran persisted.

By Sama Ezz Eldin


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