Egyptian Gas Exporter Given Israeli Tax Exemption in $6 Billion Deal

suez canal egyptEgypt’s oil and gas refineries on the Suez Canal.

The Egypt based East Mediterranean Gas Company (EMG) which exports natural gas from Egypt to Israel has been granted a 20 year tax exemption by the Israeli government, according the to Israeli business daily Globes. Apparently EMG was give the highly unusual exemption as part of its deal to supply natural gas to the Israeli Electric Company, Israel’s public power company, for 15 years, with an option for an extra five years. The deal is reported to be worth $6 billion.When the deal was signed in 2005, article six states that “”EMG, whose place of residence is Egypt, will be exempt from taxes in Israel on income from the sale and supply of gas from Egypt to Israel and from the distribution of gas at the Ashkelon terminal.”

The single largest owner in EMG is Egyptian businessman Hussain Salem with 28%, followed by the Thai energy giant PTT with 25%, and Israeli businessman Yossi Melman controls 20% through Ampal-American Israel Corporation.

A controversial deal

The deal has faces considerable resistance in Egypt as some Egyptians oppose any form of ties with Israel and in April 2009 the Cairo Court for Urgent Cases, after government intervention overturned a decision from a lower court to halt the export. There has also been widespread criticism off the price of gas agreed upon as some Egyptian estimations claims that the country is losing $9 million per day due to the under market price set.

What about the future?

The Egyptian natural gas together with imported coal used to be the backbone of Israeli power production. But that all changed with the discovery of the Leviathan gas well, sometimes refered to as Tamar, a natural gas stock located some 100 nautical miles outside Israel.

“This discovery may provide Israel with security in terms of its supply of electricity, turn it into an important natural gas exporter and provide a shot in the arm of some $300 billion over the life of the field – one-and-a-half times the national GDP – to the Israeli economy, already one of the most resilient in the world,” Gal Luft the executive director of the Institute for the Analysis of Global Security wrote in June.

The Tamer gas field is estimated to contain 6 trillion cubic meters of gas but according to a survey by a team from the US Geological Survey an even bigger gas field containing a massive 12 trillion cubic meters of gas may be located outside the Israeli coast.

Mine or yours?

While there is joy in Israel over the discovery, Lebanon is not going to still idle by and at the month its looks like Beirut is gearing up for a legal battle with Israel over who owns the rights of the gas.


Read more on gas deals in the region:
A War Between Israel and Lebanon Over Natural Gas?
Discovery of Natural Gas in Israel is a Game-Changer
Israeli Oil Tycoons Seek Higher Ground

Image via argenberg

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One thought on “Egyptian Gas Exporter Given Israeli Tax Exemption in $6 Billion Deal”

  1. Marcello Sordo says:

    what you say about gas located out side israeli cost I knew to be located out side GAza cost.

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