Cairo optimistic about Israel gas deal but Egyptians wary

The Egyptian-Israeli deal is a small part of a tense struggle for resources and influence in the eastern Mediterranean.
Sunday 25/02/2018
A view of an Israeli gas platform in the Mediterranean sea, west of Israel’s port city of Ashdod.                                        (Reuters)
Lofty plans. A view of an Israeli gas platform in the Mediterranean sea. (Reuters)

CAIRO - Egypt officially expressed optimism about an agreement for importing natural gas from Israel, saying the deal advances its plan to become an energy hub in the eastern Mediterranean.

“This and similar deals will bring an added value to the economy,” said Hamdi Abdel Aziz, spokesman of the Ministry of Petroleum. “It will activate our huge gas liquefaction infrastructure, thus bringing the national economy a lot of money.”

The deal was announced by Israel on February 19, almost ten months after the start of negotiations.

Israel’s Delek Drilling and its US partner Noble Energy agreed to supply Egypt’s Dolphinus Holdings with 64 billion cubic metres of natural gas from Israel’s Tamar and Leviathan reservoirs. The $15 billion deal covers ten years starting in 2019 and is the largest between the Egyptian and Israeli private sectors.

Israeli Prime Minister Binyamin Netanyahu, in a televised address, said the agreement would bring in billions of dollars for the Israeli Treasury to be “spent on the education, the health and the welfare of Israeli citizens.”

Egyptian President Abdel-Fattah al-Sisi also welcomed the deal, comparing it to “scoring a goal.”

“I’ve been dreaming about it for four years, that we become a regional hub for energy,” Sisi said in televised remarks. “All the gas coming from around the region will come to us. It’s either re-exported to other countries or we use it locally.”

Some Egyptians, however, expressed anger at the deal, particularly as their government had pledged to move towards energy self-sufficiency after production at the off-shore Mediterranean Zohr gas field went online.

There was wariness about greater Egyptian-Israeli cooperation in a country that, despite having official and diplomatic relations with Tel Aviv for more than three decades, remains acutely suspicious of Israel, particularly on a social level.

“Why should we import natural gas from Israel?” asked MP Mohamed Badrawi, who submitted a request for clarification at the legislature. “The government should not overlook years of enmity with the self-proclaimed Jewish state and allow the execution of such deals.”

In 1979, Egypt became the first Arab country to sign a peace treaty with Israel after fighting three wars against it.

The Egyptian government has said was not part of the Delek Drilling-Dolphinus Holdings deal, although Natural Gas Law No 196/2017 makes it necessary for it to approve import deals signed by the private sector.

Egypt used to export gas to Israel through the EMG pipeline running from Port Said to Ashkelon across al-Arish in North Sinai. However, exports ended in 2012 due to security and political problems.

In 2016, a French court ordered an Egyptian company to pay almost $2 billion to the state-owned Israel Electric Corporation in compensation for the suspension of gas supplies. Egypt’s appeal of the ruling was rejected by a French court.

The Egyptian petroleum minister said the government’s approval of the $15 billion gas import deal would be conditional — among other points — on a settlement of the dispute.

Another issue remains concerning how the Israeli gas will reach Egypt. Delek said “various possibilities” exist, including using the EMG pipeline.

Cairo said it hopes the deal helps Egypt become a regional energy hub.

Egypt has two major gas liquefaction facilities and 11 large petrochemicals factories, making it more than capable of refining and liquefying massive amounts of oil and gas. This infrastructure, Abdel Aziz said, would be expanded as regional gas and oil arrive for processing before export.

“Successive governments in Egypt spent billions of dollars on preparing the infrastructure necessary for this,” said Ramadan Abul Ela, a professor of petroleum engineering at the Suez Canal University. “It is about time this infrastructure is used.”

Egypt has already hammered out deals with Iraq and Saudi Arabia for refining crude oil. It hopes to liquefy gas from Cyprus when wells discovered off its coast are developed.

The Egyptian-Israeli deal is a small part of a tense struggle for resources and influence in the eastern Mediterranean.

Egypt, which has started production from a huge gas field off its Mediterranean coast and plans to resume gas exports next year, aspires to overtake Turkey and Qatar in the regional and international gas markets.

Egypt plans to extend the EMG pipeline, which runs from its Mediterranean coast across the Sinai Peninsula to Israel, to Greece and further into Europe, marginalising Turkey, which has expressed concerns about developments in the eastern Mediterranean.

Egypt and Saudi Arabia are planning to build a bridge over the Red Sea to connect the Sinai Peninsula with the western part of the oil-rich kingdom. The Egyptians said they may consider using the bridge to extend a pipeline to the Gulf.

“This will beat Qatar, the main supplier of gas to these countries, out of the gas market, at least in this region,” said Gamal al-Qaluibi, a power engineering professor at Cairo University.

Political analysts warned that Egypt’s ambitious energy plans could face stern regional opposition.

“Turkey is already trying to hinder the implementation of maritime border demarcation agreements between Egypt, Greece and Cyprus,” said Hassan Nafaa, a political science professor at Cairo University. “The region is in for more confrontations as gas discoveries and deals create winners and losers.”