After two Egyptian companies are ordered to compensate Israel for gas deal collapse in 2012, Cairo says it will appeal, freezes talks on gas imports from Israel • Freeze may hit preliminary deal, signed Nov. 25, to pump gas from Leviathan field to Egypt.
Reuters and Israel Hayom Staff
The Israel-Egypt gas line has been targeted by terrorists multiple times
Egypt said on Sunday it will appeal an order by international arbitrators to pay $1.76 billion in compensation to the Israel Electric Corporation for halting gas supplies three years ago, and that it is freezing gas import talks until the dispute is resolved.
Egypt had been selling natural gas to Israel under a 20-year agreement until the deal collapsed in 2012 following months of attacks on the pipeline by terrorists in Egypt’s Sinai Peninsula, which borders Israel and the Gaza Strip.
The state-owned IEC was forced to turn to more expensive fuels to generate electricity.
The company took the issue to arbitrators at the International Chamber of Commerce, demanding $4 billion from the suppliers, the Egyptian Natural Gas Holding Company (EGAS) and the Egyptian General Petroleum Corporation, and from the firm operating the pipeline, Eastern Mediterranean Gas.
The IEC said on Sunday that arbitrators had ordered the two Egyptian suppliers to pay compensation of $1.76 billion plus interest and legal expenses. The IEC “will act toward the implementation of the arbitration ruling through dialogue with the gas companies,” the company said in a statement.
EGAS and EGPC said in a statement that the arbitrator had also ordered them to pay $288 million to Eastern Mediterranean Gas, and that they would appeal both awards.
They said the compensation awarded to EMG amounted to about 19% of the $1.5 billion it had sued for, while the award to the Israel Electric Corporation amounted to under 40% of the total it was seeking.
Egyptian Prime Minister Sherif Ismail said on Sunday an appeal would be filed within six weeks.
The companies said they had “received instructions from the Egyptian government to freeze negotiations between companies to import gas from Israeli fields or to award import approvals until the legal position regarding the arbitration ruling and the results of the appeal are clear.”
The ruling looks likely to sour recent talks by private companies to import Israeli gas via the existing subsea pipeline. On Nov. 25, developers of Israel’s Leviathan offshore gas field announced a preliminary deal to pump natural gas to Egypt for up to 15 years.
Plans call for Leviathan, which is expected to begin production in 2019 or 2020, to supply Egypt’s Dolphinus Holdings with up to 4 billion cubic meters of gas a year for 10 to 15 years.
Dolphinus is a company that represents non-governmental, industrial and commercial consumers in Egypt.
The gas would pass through an underwater pipeline built nearly a decade ago by EMG.
Egypt has said it still wants to import Israeli gas despite Italy’s ENI discovering the large Zohr gas field off Egypt’s coast in August.
This year Dolphinus also agreed to a seven-year deal to buy at least $1.2 billion of gas from Israel’s Tamar field, near Leviathan.
Leviathan, discovered in 2010 some 130 kilometers (81 miles) west of Haifa, holds an estimated 22 trillion cubic feet of natural gas. The field was the world’s largest offshore discovery in the past decade. Tamar, discovered some 80 kilometers (50 miles) west of Haifa in 2009, is believed to have reserves of up to 8.4 trillion cubic feet.
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