To export or not to export…

Currently, there is no voice louder in the Ministry of Petroleum than amending the gas contracts with other countries. The people’s revolution came to make the voice of the people heard and sometimes a strong factor in changing political scenes. Hence, will all Egyptian gas contracts be reviewed?

The petroleum sector has been hearing the sounds of the streets demanding to terminate the gas contract between Egypt and Israel. Exporting gas to Israel has always been a critical matter, but the Ministry of Petroleum knows too well that in such issues the sound of the mind is higher than the sound of the emotions, “Away from the negative emotions towards any of the countries, Egypt already signed an agreement so it is better to make the best of it and make amends to it if it is already signed,” said Eng. Abdallah Ghorab, Egyptian Petroleum Minister in an interview with Al-Masry Al-Youm Newspaper.

Recently, the Ministry announced that it is reviewing the natural gas contracts with Israel, Jordan, and most of the contracts with other countries. The Ministry highlighted that it is targeting the raise of gas prices exported to Israel to reach $200 million, in accordance to the international gas prices.

The East Mediterranean Gas Co. (EMG), owner and operator of the Arish–Ashkelon pipeline and the company that exports Egyptian gas to Israel, refused previously to engage in any negotiations to amend the gas contract. “EMG finally approved to revise the gas contract, but the insistence of the Egyptian side force them to agree. It will only take awhile to get an answer back from them,” said a source at the Ministry of Petroleum.

Moreover, the Jordanian Minister of Energy and Mineral Resources Khaled Toukan revealed that he expects Jordan and Egypt to reach a new agreement on gas exports by the end of April. “The gas Egypt delivers to Jordan does not exceed 70 percent of the amount stipulated in the original contract,” Toukan added.

Most of the experts find that the Israeli contract is the most controversial. “Why are we wasting time in reviewing the contract with Israel or any other country? Egypt needs every cubic feet of gas for the domestic demands. The Jan 25th revolution came to secure the people’s wealth and the Egyptian natural gas is a major asset,” Ibrahim Zahran, former chairman of Khalda Petroleum Company and oil expert, told Egypt Oil and Gas Newspaper (EOG).

“Changing or amending the contracts will not have a big effect. Egypt needs its own natural gas to meet its local need; especially that gas is used as a source of power for mostly everything in Egypt,” he added.

“The proven gas reserve is 23 trillion cubic feet of gas and Egypt already signed to export 18 trillion, there will nota be enough gas to survive in the coming years. Are we going to import gas with the high international prices when we are already selling ours with much less prices?” Zahran wondered.

The petroleum expert added that Egypt must stop exporting gas very soon, “There is no threat from calling off the contracts and let them go to any international committee. The law is with Egypt in all cases because we had a Force Majeure situation, the revolution happened and already the prices were lower than any other international prices and we can follow Algeria in the same subject.”

On the other hand, Eng. Ahmed El Gedawy, Assistant General Director for Crude Oil Production at the General Petroleum Company (GPC), shed light that Egypt sold gas to Israel with much less prices than international prices, but still it is not time to cancel any contracts, “Egypt just went through a lot and it has just started to rebuild its shape after the revolution. It is not time to cancel any agreements, especially with Israel. Egypt needs to honor its contracts in the meanwhile.”

“In the right time, the Ministry should review the local demands and if we can meet those demands then we continue exporting but only in accordance with the international prices.”
“If we cannot meet our local gas demand, and 15% of Egyptian people are not connected to the national natural gas grid until now, then we should consider shutting down gas exports. Buying Solar and Fuel oil are also two important factors because both factories and power stations need gas. If Solar and Fuel oil prices are higher than gas, hence we should keep our own gas,” added El Gedawy.

Lotfi Ramadan, General Manager for Oil production at Egyptian General Petroleum Corporation (EGPC), also agrees with El Gedawy that it is not time to cancel any contracts, “We are going through critical times so it is better to just amend prices for now.”

Amr Kamal Hamouda, Head of the Fustat Centre for Studies and an oil expert, said that it is excellent that Egypt is reviewing the gas contracts especially to Israel, “We lost a lot of money because of the deformed gas contract with Israel and we need get some of our money back.”

“But the Ministry is now obligated to be clear with the Egyptian people. The people need to know the mount of gas exported to Israel and a deadline for those negotiations. Also about the negotiations team, we are being told that it is the same previous team that once negotiated to sell our gas to Israel with the most unbelievable price,” added Hamouda.
On the same matter, Ghorab told Al-Masry Al-Youm Newspaper that the sector has well trained negotiations team that know how to work for Egypt’s best interest, “We do not need independent negotiators. Our team of negotiators is the best and there is no need for the talk of having outsider negotiators.”

Hamouda pointed to the announcement by the Ministry of Finance that it does not have enough foreign currency to buy Fuel oil to supply the power stations, “If we do not have enough money to buy Fuel oil for the power stations, especially that Fuel oil price is much higher than gas, then we should stop exporting at once.”
“If it is going to cost us to pay the penalty clause or head to an international committee. We will not buy Fuel oil when we already have our own natural gas.”

“Our fortune of natural gas needs to be estimated. We need a committee of national experts, independent petroleum experts, and national supervisors to estimate our natural gas wealth and then decide if we have enough to meet our local demand or we should stop exporting,” Hamouda elaborated.

“Not only the gas contract with Israel that needs to be amended, the contracts of the drilling in the deep water of the Mediterranean Sea should be reviewed as well. The contracts should include terms of best national interest. The BP contract with Israel to drill in the deep water and the way Israel is negotiating with BP side should teach us a lesson in negotiating,” Hamouda advised.

Lotfi Ramadan also advised that the coming stage will witness more exploration operations, more bid rounds and new locations are to be explored.
As for El Gedawy, he advised, “We should look for the best method for production, use the most excellent tools in order to have the finest results, and to use the top drilling rigs that will not wear away after short time of drilling.”

All the thinking now is going towards listening to the people’s voice. The petroleum sector is a major partner in the Egyptian community and it listens well to its own people, but also placing bad history aside and only listening to the mind sound in the matter of Egypt’s best interest in the upcoming rise of Egypt as a leader country.

By Sama Ezz El-Din


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