The Egyptian interim government is drafting a new contract for the export of natural gas to Israel, with Egyptian Petroleum Minister Abdullah Ghorab quoted by the state-owned Al-Ahram newspaper saying the new contract will be available soon and include a “big increase” in prices.
The country is also hoping to renegotiate its gas export contract with Jordan.
The current gas export contract to Israel is a politically toxic remnant of the regime of deposed dictator Hosni Mubarak. Many in Egypt believe that under the confidential deal the country’s gas is being sold at giveaway prices to a neighbour with whom Egypt and its ally Turkey are experiencing rapidly deteriorating relations.
With the Egyptian economy deeply troubled by inflation, halted investment, 12% unemployment, poverty and ongoing unrest, the government is keen to boost its coffers using gas exports. A new deal may also halt further disruption to revenues from the repeated sabotage of the East Mediterranean Gas Company’s pipeline which brings gas to Israel and Jordan.
While Israel – which relies on Egypt for 43% of its total gas supplies – is likely to accept a reasonable hike to the import price, the increasing instability of delivery may spur the country’s development of Mediterranean offshore gas fields. The Levant Basin is estimated by the latest US Geological Survey (pdf) to hold around 122 trillion cu ft of gas, and Israel’s Leviathan 125 field has been hailed domestically has sufficiently large to make Israel a net gas exporter.
Israel and Jordan are locked in an ongoing dispute – recently referred to the UN – over territorial rights to the Mediterranean after Israel began pursuing its offshore field development program more aggressively after the outbreak of the Arab Spring earlier this year.Â
The wider power politics in the region are increasingly focused on gas, with Turkish Prime Minister Recep Tayyip Erdogan proposing Egypt exports its gas to Europe as part of the stalled Nabucco project.
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