With unrest in Egypt, Israel faces blackouts

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By Ari Rabinovitch / Reuters

TEL AVIV: Israel may be facing a summer of power outages as the country scrambles to replace gas supplies lost because of sabotage attacks on a pipeline in Egypt’s Sinai peninsula.

The pipeline that feeds gas to Israel, an easy target for anti-Israel Islamists, was one of the first victims of the revolution that erupted in Egypt in January last year.

“Israel is facing a serious risk of blackouts. We may not be able to keep the power switch on,” said Energy Minister Uzi Landau on Feb. 15 as his office provided a million and a half energy-efficient lightbulbs to electronics stores nationwide.

It was the latest attempt at lowering energy consumption before the peak demands of summer, part of a long-term efficiency plan that has taken on new urgency.

Landau’s ministry has already offered 50,000 new refrigerators at a discount. Next month it will be 10,000 air conditioners, and after that, energy-saving washing machines and hot water heaters.

Israelis watched anxiously as popular revolts swept the Middle East, toppling a number of veteran Arab leaders. Perhaps the most rattling development was the ousting of Egyptian President Hosni Mubarak, who supported the 1979 peace deal with Israel that has been a cornerstone of Israeli diplomacy.

The most significant economic project to emerge from the pact was a 2005 gas deal, which secured a reliable energy source and underpinned the regional relationship. Israeli leaders have made clear that ensuring the pact endures is a policy priority.

The Arish-Ashkelon pipeline, a mostly underwater, 100-km (60-mile) duct that connects the Egyptian city of al-Arish to the coastal terminal at Ashkelon in Israel, has been hit by about a dozen bombings since the unrest in Egypt began.

Natural gas from the pipeline represents 40 percent of Israel’s gas supplies. With the stoppages the country has had to turn back to less clean and more expensive fossil fuels like diesel and fuel oil, and has precipitously exhausted its sole working gas field.

Companies invested in the Israeli-Egyptian venture have taken a hit and are seeking compensation from the Egyptian government for billions of dollars.

No respite

The first attack on the pipeline took place on Feb. 5, 2011, as authorities in Egypt were losing control of street protests and a week before Mubarak was forced from office.

For more than 200 days last year gas did not flow, costing Israel’s economy about $2.5 million a day in what was a relatively mild summer. The use of diesel jumped 200 percent and fuel oil more than 100 percent, the energy ministry said.

When gas did flow, it was usually at less than full capacity. The latest attack was on Feb. 5, 2012.

“We are certainly interested in upholding the agreement as much as possible. We want to buy gas from them, but whenever there are attempts to start it up anew, the pipeline is blown up again,” Landau, who as energy minister oversees the deal with Egypt, said in an interview.

The attacks have been carried out by Islamist militants who are against selling gas to Israel, local Egyptians and tribal leaders say, and since they enjoy popular support, they are likely to carry on with their sabotage attacks.

The militants target the pipeline near al-Arish on the north Sinai coast, often pulling up in trucks, planting explosives and detonating them remotely. They have been successful in part because security in Sinai loosened after Mubarak’s fall as the police presence thinned out across Egypt.

The government in Cairo says it is cracking down and recruiting security patrols from Bedouin tribes in the area. Fences, surveillance towers and reinforced iron barricades will all be erected along the pipeline, North Sinai Governor Abdel Wahab Mabrouk said.

“It all depends on the stability of rule in Egypt and how it controls what’s happening in Sinai. But who knows what will happen and which direction it will go? We all hope the trend in Egypt will be positive,” Landau said.

The pipeline was built and is operated by the Eastern Mediterranean Gas Co (EMG), whose shareholders include the Egypt Natural Gas Co, Thai energy giant PTT, U.S. businessman Sam Zell, Israel’s Merhav and Ampal-American Israel Corp .

In 2010, EMG provided 2.5 billion cubic meters (BCM) of gas to Israeli customers. But that number was expected to more than double throughout the 20-year deal. The precise value of Egyptian gas exports to Israel is unclear.

Ampal, together with PTT and Zell, have taken legal action against the Egyptian government, seeking $8 billion in damages for not safeguarding their investment.

Future energy policy

Israel made several huge offshore natural gas discoveries over the past three years that will ensure its energy independence for decades and even make it an exporter. But the first one will not be online until the second quarter of 2013.

To compensate during the energy crisis, production at the country’s only working field Yam Tethys, which is run by Texas-based Noble Energy, has been accelerated and the small reserves are nearly depleted.

It has in fact been so over-taxed that some of the gas may now prove irrecoverable, Yehuda Niv, commissioner of the Electricity Administration, told reporters at a briefing.

Israel is also implementing some radical stop-gap measures. It has signed a deal with Italian marine contractor Micoperi to rush construction of a 500-million-shekel ($135 million) liquefied natural gas terminal. Floating 10 km off its Mediterranean coast, the buoy will be able to receive about 2.5 billion cubic meters of gas each year.

It also plans to import a fleet of about 10 portable generators to be mounted on the backs of trucks or ships. Each produces 25 megawatts of electricity and in emergencies can be deployed to areas in need.

Looking to the future, now that the government has belatedly seen the risks of having small electricity reserves, just two or three percent of total production, it has chosen to invest heavily in infrastructure.

This is one of the reasons the Energy Ministry is pushing to build a €500-million ($660 million) underwater power cable connecting it with Cyprus, and from there, to the rest of Europe.

The Israel-Cyprus leg would stretch about 270 km, allowing 2,000 megawatts to flow in both directions. Israel would be able to sell electricity when production is high and have a back-up if reserves drop.

Though there are compelling reasons for Israel and Egypt to keep up with their gas trade, the outcome will ultimately depend on their broader relationship, said researcher Alexander Murinson in a recent paper for the Begin-Sadat Center for Strategic Studies near Tel Aviv.

The center is named after the two leaders – Israel’s Menachem Begin and Egypt’s Anwar Sadat – who signed the peace deal decades ago.

“In the long term, Israel must develop its domestic gas sources and move away from this unreliable provider,” Murinson said. –Additional reporting by Sherine El Madany, Yusri Mohamed and Tamim Elyan in Egypt



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