Cairo to raise price of natural gas sold to Israel

Egyptian petroleum company reaches deal to change price retroactively to 2008; still requires approval by Egypt's Supreme Court.

Egypt gas pipeline blast 311 (photo credit: REUTERS)
Egypt gas pipeline blast 311
(photo credit: REUTERS)
Egypt will review natural gas contracts with other states, including Israel and Jordan, which could boost its income from the sales by $3-4 billion, Prime Minister Essam Sharaf said on Wednesday.
Israel gets 40 percent of its natural gas from Egypt under an arrangement put in place after their landmark 1979 peace accord.
RELATED:Natural gas to reach Haifa today Knesset approves Sheshinski bill on oil and gas taxation Bombing attempt on Egypt-Israel gas pipeline fails
State news agency MENA said Sharaf would meet Jordan’s Energy Minister Khaled Toukan on Thursday to discuss gas deals and broader energy cooperation.
Opposition groups have long complained Egyptian gas was being sold to Israel at preferential prices and that the contract with East Mediterranean Gas (EMG), which supplies Egyptian gas to Israel violated bureaucratic regulations.
The government had insisted the deals were done on commercial terms but this review may be a sign it is giving in to public demands for a study of the deals.
On Wednesday, Egypt General Petroleum Corp. Vice President Toni El- Wardani said that he had reached understandings with the EMG to raise the price of natural gas sold to Israel in line with world prices.
Israeli businessman Yosef Maiman owns 20.6% of EMG through Ampal- American Israel Corporation and his private company Merhav MNF Ltd., and Israeli institutional investors own 4.4%.
The agreement involves changing the price retroactively to 2008 and therefore requires approval by the Egyptian Supreme Court. In February 2010 the Egyptian Supreme Court annulled a previous ruling banning the export of Egyptian natural gas to Israel, saying it has no jurisdiction over cases of this kind which involve state sovereignty.
However, the court still demanded that the government set a mechanism to determine the amount and price of natural gas it plans to send abroad after national market needs have been met.
On Tuesday, Egypt’s Minister of Oil Abdullah Ghorab was said in an interview that Israel was paying $3 per BTU, which is “a price adjusted to average world prices.”
Egypt’s military-backed interim government slashed its forecasts for economic growth and investment after a popular uprising toppled its president, disrupted industry and scared away foreign tourists.
Foreign reserves tumbled by almost $5 billion over two months to $30.1 billion at the end of March and the government is searching for ways to bolster foreign currency earnings.
Egypt has been boosting gas production but most of the increase covers increased domestic demand as electricity consumption surges in the country of 80 million people.
Petroleum Minister Abdullah Ghorab said last month that Egypt was trying to amend gas export deals with a number of countries, particularly Israel.
He said media campaigns and public disapproval of gas exports were sufficient basis for negotiating greater benefits for Egypt.
Egypt is a modest gas exporter, using pipelines to export to Israel, Jordan and other regional states. It also exports via liquefied natural gas facilities on its north coast, but those are not in the Sinai region.
Egyptian gas started flowing to Israel through a pipeline for the first time in May 2008 under an agreement signed in 2005 for the supply of 1.7 billion cubic meters a year over 20 years.
Reuters contributed to this report.