Egypt-Is­rael: New mar­itime bor­ders and Is­raeli gas im­ports for a re­duced gas fine

Financial Mirror (Cyprus) - - FRONT PAGE -

Egypt has reached pre­lim­i­nary agree­ments with Is­rael to re­solve an in­ter­na­tional ar­bi­tra­tion case, in which Egypt is re­quired to pay a $1.76 bln fine for sus­pend­ing gas ex­ports to Is­rael in 2012, ac­cord­ing to pri­vate and pub­lic sec­tor sources. Four sources close to the ne­go­ti­a­tions were quoted by the Egyp­tian web­site Mada Masr that the Is­raeli gov­ern­ment has agreed “in prin­ci­ple” to re­duc­ing the fine in ex­change for al­low­ing the pri­vate sec­tor to im­port gas from Is­rael, and open­ing the door for the de­mar­ca­tion of mar­itime bor­ders be­tween the two coun­tries.

Ac­cord­ing to an Egyp­tian of­fi­cial, the de­mar­ca­tion of mar­itime bor­ders was on the ta­ble dur­ing a closed-door meet­ing be­tween Pres­i­dent Ab­del Fat­tah al-Sisi and Is­raeli Prime Min­is­ter Ben­jamin Ne­tanyahu on the side­lines of the United Na­tions Gen­eral Assem­bly in Septem­ber, 2016. Del­e­ga­tions from both coun­tries con­tin­ued the ne­go­ti­a­tions, with Is­rael re­quest­ing that Egypt ac­cept a pro­posed draft of the de­mar­ca­tion, the de­tails of which will be ne­go­ti­ated at a later date.

The fine stems from a 2015 rul­ing is­sued by the In­ter­na­tional Cham­ber of Com­merce in Geneva that re­quired the state-owned Egyp­tian Nat­u­ral Gas Hold­ing Com­pany (EGAS) and Egypt’s Gen­eral Pe­tro­leum Cor­po­ra­tion (EGCP) to pay a $1.76 bln fine to the Is­raeli Elec­tric­ity Com­pany (IEC), as well as $288 mln to East Mediter­ranean Gas (EMG) for halt­ing gas sup­plies.

EGAS de­cided to ter­mi­nate the con­tract with the Is­raeli gov­ern­ment in April 2012, jus­ti­fy­ing the de­ci­sion by ac­cus­ing EMG, owned by Egyp­tian and Is­raeli busi­ness­men, of breach of con­tract for de­layed gas pay­ments.

Mean­while, Royal Dutch Shell is seek­ing cre­ative so­lu­tions to bring gas from Is­rael and Cyprus to mar­ket, a step that could help turn the Mediter­ranean re­gion into a ma­jor gas-pro­duc­ing hub, ac­cord­ing to Bloomberg.

Shell is in talks to buy nat­u­ral gas from Is­rael’s Le­viathan field, com­bine it with out­put from Cyprus’s Aphrodite field, in which it owns a 35% stake, and pump it to a liq­ue­fied nat­u­ral gas plant in Egypt. Talks are at an early stage and some of Aphrodite’s gas could be sold lo­cally.

Com­bin­ing out­put from the fields, which share some ma­jor in­vestors, could po­ten­tially im­prove the eco­nomics of the projects. Le­viathan’s part­ners, led by Noble En­ergy Inc. and Delek Drilling LP, are look­ing at var­i­ous ship­ment op­tions as they face an es­ti­mated devel­op­ment cost of $3.75 bln.

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