Egypt’s Parliament has been the scene of a recent confrontation between the government and opposition MPs who demanded an explanation for allegations circulating in the press that Egypt was selling Egyptian natural gas to Israel for $1.5/million BTU (British Thermal Unit). According to the press this is below the international price and even lower than the cost, which is said to amount to $2.65. Mufid Shehab, Minister of State for legal and parliamentary affairs who spoke for the government, refused to disclose the real price of Egyptian gas to Israel, referring to a clause in the Egyptian Israeli agreement that imposes secrecy of information on both sides.
Secret price
Many MPs reject this argument. “It is inappropriate, under any condition, to conceal the natural gas export price from Parliament,” commented Mahmoud Abaza, head of the Wafd liberal political party.
Mr Shehab would only say that the price is more than the $1.5/million BTU cited by the press. He added that global natural gas prices were unstable. “Until six months ago the price was $3.5/million BTU, but then it jumped to $10/million BTU, so the Egyptian oil sector is revising all gas exportation contracts,” he said.
The agreement for Egyptian gas export to Israel was signed in 2005. According to Egyptian officials, an Egyptian Israeli consortium, ‘East Mediterranean Gas’ will annually export 1.7 billion cu.m of natural gas to the Israeli electricity company for 15 years at a total price of $2.5 billion. The consortium includes The Egyptian National Petroleum Company, The Natural Gas Company as well as Egyptian and Israeli businessmen.
A disgrace
Ahmed al-Naggar, an economic expert in al-Ahram Centre for Strategic Studies, described this Egyptian Israeli contract as “a political and economic disgrace”. He said that there was no clause in the contract stipulating the annual adjustment of prices, as in other gas exportation contracts. Dr Al-Naggar says the Oil Ministry sells the gas to the consortium for $1.5/million BTU, which then exports it to Israel for $2.8/million BTU, meaning that the consortium is actually the biggest winner. “If we consider global gas prices, Egypt stands to incur some $7.3 billion in losses through this contract,” Mr Naggar says.
According to Mr Shehab, the State does not export gas to Israel, the exportation contracts are signed with private sector companies each with a different price, since there is no internationally agreed price for gas. Mr Shehab said that the State only set up the pipeline to carry the gas from Arish in Egypt to Ashkelon in Israel.
No straight answer
Confronted with the allegation that Parliament had been left in the dark regarding the Egyptian-Israeli agreement, Mr Shehab said the gas contract was not an agreement between two governments, or between a government and a private company: it was between two investment companies. “Under this deal the investment company has a concession to buy natural gas from the Egyptian General Petroleum Company (EGPC) Mr Shehab said. He added that such deals did not fall under the mandate of the assembly. A number of MPs rejected Mr Shehab’s reply and said they disapproved of the gas exports to Israel through a pipeline paid for by Egyptians.
MP Ragab al-Qalla also denounced gas exports to Israel on the grounds that there was barely enough gas for local needs, let alone export.
The Shura Council meanwhile addressed the issue when Sameh Fahmy was asked about the price of gas exports to Israel. Mr Fahmy did not give a straight answer, which caused one of the members to comment that this was a case of national security.
Indirect support
The gas deal with Israel aroused political and public fury, first and foremost because the gas supply to Egyptians is reportedly inadequate, with several factories complaining they cannot obtain their requirements of natural gas or that they get it at elevated prices. There is also public anger that the government is supplying Israelis with gas, thus indirectly supporting them to attack Palestinians. Leftist MP Gamal Zahran commented that instead of supplying Egyptians with sufficient subsidised bread the government was supplying Israelis with subsidised fuel.
The price factor indicates that there was political influence on the deal. Two lawyers recently took their case to court against the Oil Minister on grounds that Egypt’s strategic stock of natural gas would not meet Egyptian needs over the next 20 years, nevertheless a long-term gas export agreement was signed with Israel. The Egyptian gas deal involved Hussein Salem, who is among President Mubarak’s closest advisers and who owns 65 per cent of East Mediterranean Gas.
Egypt’s natural gas production in 2007 amounted to 62 billion cu.m., of which 28.8 percent was exported.