Egypt to appeal $1.76b. award to Israel in gas dispute, freeze gas import talks

Arbitrators had ordered Egyptian national gas companies to pay IEC $1.76b. in damages caused by 2012 cessation in gas supply.

DATE IMPORTED: February 05, 2012 A fire burns on a gas pipeline in the Massaeed area west of the Mediterranean coastal town of al-Arish, North of Sinai, February 5, 2012. (photo credit: REUTERS)
DATE IMPORTED: February 05, 2012 A fire burns on a gas pipeline in the Massaeed area west of the Mediterranean coastal town of al-Arish, North of Sinai, February 5, 2012.
(photo credit: REUTERS)
The Israel Electric Corporation will receive $1.76 billion from two Egyptian national hydrocarbon firms to compensate for “severe damage” incurred when the two ceased supplying natural gas in 2012, the IEC said on Sunday.
The Egyptian Natural Gas Holding Company (EGAS) and the Egyptian General Petroleum Corporation (EGPC) will make the payment following two months of closed-door arbitrations conducted by the International Chamber of Commerce, according to a report filed to the Israel Securities Authority on Sunday.
In addition, the Egyptian companies will pay interest, as well as partially reimburse the IEC’s legal expenses, according to the report filed by IEC CEO Ofer Bloch and vice president and legal consultant Yael Nevo.
Egypt said on Sunday it would appeal the order and freeze gas import talks until the dispute was resolved.
The arbitration followed an initial $4b. lawsuit filed by the IEC against the two Egyptian companies and the East Mediterranean Gas Company (EMG), the multinational firm responsible for operating the defunct pipeline that transported gas from Egypt to Israel.
EGPC, the national oil company of Egypt, was established in 1956 and operates under the Egyptian Petroleum Ministry. EGAS was founded by the country’s Petroleum Ministry in 2001.
From 2008 through 2012, the EMG pipeline carried gas to Israel, sold by EGPC and EGAS to the IEC.
The pipeline was supplying Israel with about 40 percent of its natural gas provisions, until saboteurs began thwarting the flow through Sinai pipeline explosions in 2011.
Following 14 months of such attacks, the Egyptian government formally terminated the agreement between EMG and Israel in April 2012.
“The company will collect the sums to which it is entitled according to the arbitration award,” the IEC reported to the Israel Securities Authority on Sunday.
Due to the closed-door nature of the arbitrations at the International Chamber of Commerce, The Jerusalem Post was unable to acquire the actual arbitration documents.
A spokesman for EMG confirmed the pipeline company’s lack of involvement in the arbitration settlement, referring to the IEC’s announcement “expressly stating that the arbitration decision binds the Egyptian national gas companies (EGPC and EGAS) only to pay the amounts determined.”
Numerous lawsuits and arbitration requests have been filed by all sides since the saboteurs began attacking the EMG pipeline.
In October 2011, Ampal-American Israel Corporation, which owns a 12.5-percent stake in EMG, submitted a request for arbitration with the International Chamber of Commerce, due to EGPC and EGAS’s prolonged interruption of gas supply.
The corporation, at the time chaired by Israeli businessman Yossi Maiman, included the IEC in the arbitration request due to its participation in the tripartite gas-supply agreement with EMG and the Egyptian companies, a 2011 TASE report on the matter said.
About six months later, EGPC and EGAS filed requests for arbitration against EMG for breaching terms of contract by delaying payments for gas, according to Bloomberg.
Aiming to once again make use of the same EMG pipeline, but in the reverse direction, Israel’s Leviathan gas partners signed a letter of intent with the Egyptian company Dolphinus Holdings two weeks ago to negotiate the export of as much as 4 billion cubic meters of gas annually to the latter.
This step followed a similar letter of intent signed between Israel’s Tamar reservoir partners and the same Egyptian firm in March, also for the supply of gas through the pipeline.
After each letter of intent announcement, representatives of EMG denied such deals were being negotiated.
“EMG is not a party to and has no knowledge of the reported deal between the Leviathan partners and Dolphinus or any third party, and was not included in such negotiations,” a statement from EMG said last week.
“To avoid any doubt, there are no discussions held between EMG and Dolphinus on such a transaction and there have been no negotiations in the past. EMG strongly protests the repeated unauthorized use of its name, targeted, so it seems, to serve third parties.