Egyptian Natural Gas Holding Company announced on Sunday that they have cancelled their agreement to sell natural gas to Israel following at least one dozen attacks on the pipeline linking the two countries. Israeli Finance Minister Yuval Steinitz said the move was of “great concern,” but Egypt insists that the decision was motivated purely by commercial reasons, not political.
Israel has received 40% of its natural gas supply from Egypt as part of a 1979 peace accord between the two countries that has been hugely unpopular among Egyptian citizens, who believe that Mubarak sold the gas too cheaply. Meanwhile, Egypt, population 81 million, has been suffering from crippling energy shortages over the last few months.
“Unlawful and in bad faith”
Ampal-American Israel Corporation, the company that purchases natural gas from Egypt to supply energy to Israel’s 7.6 million residents claims that terminating the Gas Supply and Purchase Agreement between the two parties is “unlawful and in bad faith” and they have vowed to pursue legal remedies.
Head of Egypt’s Natural Gas Holding Company, Mohamed Shoeb claims that Israel has failed to pay for energy supplies received over the last four months.
Money out of a stone
Ampal will be hard-pressed to get much out of Egypt, which at present only has enough money in its coffers for the next three months. Political instability generated by the upcoming presidential elections has diminished investor faith, and the interim government is waiting with bated breath for an IMF loan that could alleviate some of the country’s financial pressure.
Meanwhile, new gas and oil drilling explorations and concessions are popping up all over the Western Desert, Sinai, and the Gulf of Suez as Egypt is desperately seeking to provide enough energy for its own people.
To get a sense of how fragile Egypt’s own supply is, note that a recent fire at the Nasr Petroleum Company in the Gulf of Suez, which tragically killed one man and injured 70 more, left hundreds of Egyptians without fuel. One man reported visiting several stations to fuel up his vehicle without luck.
Financial losses of over $1.5 million have been reported as a result of the roiling fire, which took four days to extinguish.
The current proven energy reserves in Egypt are 3.7 billion barrels (bbl) of oil and around 66 trillion cubic feet (tcf) of natural gas, according to Dr. Tarek Selim, whose recent report On Efficient Utilization of Egypt’s Energy Resources: Oil and Natural Gas explores the future of Egypt’s energy supply.
Everybody’s running dry
“These quantities are not enough to generate this 3% growth rate or to generate energy sustainability on the long run,” he told Egypt Oil and Gas in a recent interview, adding “According to my analysis, in terms of oil, Egypt will be a net importer of oil by next year.”
Israel and the Palestinian territories have also been experiencing chronic energy shortages, but Israeli press have suggested (perhaps prematurely) that this recent move will not cause any further price hikes.
Image credit: Sinai Oil Drilling, Shutterstock
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