Irony Alert: Egypt turns to Israel to address shortage of natural gas

Al Monitor:

According to Hafez El Salmawy, managing director of the Egyptian Electric Regulatory Agency, Egypt will lack at least 20% of the natural gas it needs to properly power its electricity plants this summer. As energy usage spikes in the heat, these outages will become longer and more frequent.

The new president, widely expected to be popular army chief Abdel Fattah al-Sisi, will take office as the worst months kick in. His toughest challenge will be dealing with disgruntled citizens as they struggle through blackouts and fuel shortages; these same problems contributed to the downfall of President Mohammed Morsi, the very man Sisi overthrew last July.

In desperation, the state-owned Egyptian Natural Gas Holding Company (EGAS) is turning to Israel, a former export destination of Egyptian gas. Egypt lost an estimated $10 billion selling underpriced natural gas to Israel, Jordan and Spain between 2005 and 2011, according to a new report by the Egyptian Initiative for Personal Rights. The sales to Israel alone cost the country over $1 billion, estimated Mika Minio-Paluello, an energy researcher and one of the report’s authors.

Corrupt businessmen, including convicted Egyptian tycoon Hussein Salem, colluded with the state under ousted autocrat Hosni Mubarak to bypass normal bidding processes and secure the lucrative contracts.

But just two years after Egypt canceled the unpopular 20-year export deal, the Egyptian government is looking to buy Israel’s newly discovered natural gas for at least four times the price. A drilling consortium led by Israeli company Delek Group Ltd. and Texas-based Noble Energy are currently in talks with companies in Egypt after signing a historic gas deal with Jordan that will provide it with 1.8 billion cubic meters (63.6 billion cubic feet) a year for 15 years.

But the Egyptian deal could be four times that, with as much as 8 billion cubic meters (282.5 billion cubic feet) a year piped to Egypt, both Egyptian and Israeli sources told Al-Monitor. The deal makes sense as the direction gas travels in the existing pipeline can be reversed, one official at Delek Group Ltd. said.

The prices are expected to match Jordan’s $6.60 per million British thermal unit (btu), four times what Egypt received for the gas it exported to Israel.

Read more: http://www.al-monitor.com/pulse/originals/2014/03/egypt-gas-israel-sisi-economy-shortage.html##ixzz2wtHeIpVJ