Egypt has leverage over Israel, being the bottleneck to Tel Aviv’s gas: Official

Mohamed Adel
4 Min Read
EGAS and the General Petroleum Authority signed an initial agreement with Rosneft to supply LNG shipments as well as the main oil products AFP Photo

A senior official in the Egyptian government said they did not intend to announce the court ruling in favour of the Israel Electric Corporation (IEC), and had hoped to settle the conflict through negotiations.

The IEC’s decision to leak the information to the media forced them to announce the details of the verdict, continued the official, who requested to remain anonymous.

The arbitration will be complete through negotiations between Egyptian sovereign bodies and Israel in exchange for allowing them to export their natural gas production through Egyptian territory, which is the only outlet.

“Egypt stands on solid ground, being the only way out for Israeli gas,” the official said.

Shearman & Sterling law firm informed the Egyptian General Petroleum Corporation (EGPC) Saturday that the International Chamber of Commerce (ICC) ruled in favour of East Mediterranean Gas (EMG) and the IEC, obliging Egypt to pay a compensation of $2.048bn.

The source said however that consultation with the international legal adviser found that the Egyptian Natural Gas Holding Company (EGAS) has the right to appeal and annul the ruling, according to Swiss law.

Israel faces a major challenge implementing the development processes for its Mediterranean fields, whereby it does not have the infrastructure to produce gas from concession areas and export it.

Egypt has been clear on importing gas from Israel. “However, Tel Aviv equivocated and exploited media to claim that Egypt will import Israeli gas through Dolphins Holding,” the source said.

The official explained that Israel attempted to import gas through Jordanian pipelines, but did not follow through after the public’s rejection. Transferring gas through Turkey requires establishing pipelines through Syria and Lebanon, which is unsafe in light of the current circumstances in the region.

Egypt has the largest terminal for gas in the Mediterranean that can receive up to 9bn cubic feet of natural gas per day, in addition to a liquefaction plant that can export 1,880m cubic feet per day.

The Egyptian government froze negotiations carried out by Egyptian companies to import Israeli gas last week. The government said no approvals will be granted until the arbitration is successfully appealed.

Former minister of petroleum Osama Kamal said the IEC is not a party in any contracts with EGAS or EGPC, and only EMG has the right to sue.

He explained that the contract with EMG provides for the conduction of arbitration in Cairo, hinting at Egypt’s right to stop exporting gas to Israel due to failure to meet payments.

EMG stopped paying for gas for 10 months and ignored all warnings issued by Egypt. “Contracts provide for Egypt’s right to stop pumping gas,” Kamal said.

Meanwhile, Israeli Prime Minister Benjamin Netanyahu announced that he will send a delegation to Cairo to discuss the issues that arose following the ICC’s ruling, though he did not specify the date.

Israel produces gas from eight fields, in addition to the newly discovered Ishai field in the Israeli and Cypriot territorial waters.

The official said resolving the arbitration with Israel will enable it to export its gas through the liquefaction factories in Idku and Damietta and use the national gas pipelines in Egypt. In exchange, this will resolve four petroleum arbitration cases against Egypt, including cases brought forth by the IEC, EMG, and Unión Fenosa, which owns the Damietta liquefaction plant.

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