Talks on price of gas exported to Israel to begin this month

Official negotiations between the Egyptian government and the Eastern Mediterranean Gas Company (EMG) will begin later this month to review the price of natural gas exported to Israel in accordance with the global changes in gas prices. Official sources said the negotiations aim to double Egypt’s proceeds from exported gas to Israel.

Official sources at the Petroleum Ministry told Al-Masry Al-Youm that EMG had formally agreed to begin a new round of negotiations to review gas prices based on the 2009 agreement, which stipulates price increases on gas exports to Israel in accordance with an agreed upon percentage.

The sources said the negotiations are expected to include the price increases proposed by the Egyptian Natural Gas Holding Company (EGAS), the Petroleum Ministry and EMG so as to achieve a balance between the concerned parties with regards to prices and to ensure fair gas prices in accordance with global price increases.

Egypt supplies Israel with gas through EMG, an Egyptian-Israeli consortium. According to an amended agreement signed in 2009, EMG pays EGAS US$3.6 million per million British thermal units (BTU) of gas. EMG, however, gets US$1.5 per million cubic meters of gas transported to Israel, as it owns the infrastructure, including the pipelines, filtering plants, and compressors, which were built at a total cost of US$550 million.

The sources, who requested anonymity, said that Egypt will insist on doubling its revenues from its exported gas to Israel during the price revision based on global gas prices for gas exported through pipelines to the European market, which do not fall below US$5 per million BTUs after deducting transport costs and distribution and marketing commissions.

The Egyptian General Petroleum Corporation’s (EGPC) net revenues from exported gas through the Egypt-Israel gas pipeline for the fiscal year 2009-2010 ranged between US$225 and 250 million for nearly 2.1 billion cubic meters.

Ramadan Abu al-Ela, a petroleum professor at the Suez Canal University, said it is necessary for Egypt to raise its gas export prices in accordance with the maximum possible revenues, despite his many reservations on the choice of this particular company to begin the export operations.

Abu al-Ela went on to say that EMG claims that Egypt’s net revenues from gas exported to Israel exceed those registered by Russia from the sale of Russian gas to Germany and Italy, noting that the company had not disclosed the amount it actually pays Egypt and that therefore no comparisons could be made. He added that the net return cannot be determined until the difference between total cost and selling price is calculated.

Abu al-Ela said that based on scientific and technical data, Egypt’s export of some 1.7 billion cubic meters of gas to Israel is equivalent to nearly 62 billion BTUs. He added that after excluding sketchy commissions and deals, the net revenue from the gas sales could be as high as US$9 million per million BTUs.

Abu el-Ela explained that Egypt’s annual losses reached up to US$558 million (LE3469 million), which is equivalent to LE9.5 million per day. Egyptian natural gas provides 40 percent of Israel’s total daily needs of energy. Most of the gas is provided to the Israel Electric Corporation Limited company, which depends on it for electricity generation.

Translated from the Arabic Edition

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