Egypt's New Law May Enable Israeli Imports

Egyptian President Abdel Fattah el-Sisi this week signed a new law changing the country's natural gas regime and allowing private firms to import gas.

The measure rekindles hopes among Israel's Tamar and Leviathan gas production partnerships of a valuable nearby new sales outlet.

Until now, Egypt's state-owned Egas has been the monopoly gas importer. Following the signing of the new law, news agency Bloomberg reported that the Leviathan partnership had entered into negotiations with the Egyptian business group Dolphinus Holdings to sign a binding agreement for the sale of gas; a memorandum of understanding between the two parties was already signed in 2015.

Dolphinus, a little-known firm headed by businessman Alaa Arafa, has already signed a gas sales agreement (GSA) with Tamar. However, the contract never entered into force because of various difficulties in its implementation. At first, the owners of the EMG pipeline, from Ashkelon in Israel to El-Arish in Egypt's northeast Sinai, refused to allow their pipeline to be used for transporting the gas. Then, an International Arbitration court ruled that Egypt has to pay state-owned Israel Electric Corporation some $2bn in compensation for having cut off the generator's gas supply to Israel in 2012; that dispute has yet to be resolved by inter-governmental negotiations.

However, following the new legislation in Egypt, Dolphinus and Leviathan Partnership renewed their negotiations and a proposed new route emerged. This would see Israeli gas transported to Jordan, and then from Jordan to Sinai and onward to key Egyptian consumption centres -- a much longer and more dangerous route with many more geopolitical obstacles.

Alaa Arafa told Bloomberg that the talks with Leviathan Partnership are for a GSA of about a 3bn m3 annual sales volume.

The new proposed pipeline via Jordan will be just as risky as the EMG pipeline as it will pass hundreds of kilometers in Jordan and Sinai. The transmission costs are likely to be more expensive too, because of the longer distance required to avoid directly flowing gas to Israel.  


Ya'acov Zalel


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