Busted pipe and court order keep Cairo from supplying Israel with 20% of its natural gas needs

Tani Goldstein
Published: 02.16.11, 12:16 / Israel Business

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Cairo has postponed once again the renewal of gas supply to Israel, due to an explosion that occurred in the pipe leading from Egypt to Jordan.

Busted Pipe
Egyptian official says blast caused by gas leak / Ynet and agencies
(Video) Israel Radio says Egypt-Israel pipeline not damaged, but gas supply stopped as precaution. PMO: We’re prepared for such situations
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Eleven days have passed since supplies were halted due to damages that occurred in the system. Earlier this week Egypt announced that it would renew the flow on Thursday.

But the Israeli partner of EMG, the Egyptian gas company, announced Wednesday morning that the delay would last until an undisclosed date “sometime this month”.

In addition, and Egyptian court order against transfer of gas to Israel still stands, though it had been ignored by President Hosni Mubarak’s government, which has since been overthrown. Jordan’s gas supply has not been renewed either.

Egypt has been Israel’s main gas supplier since 2007, accounting for 20% of the total electricity production in the state. Due to an agreement signed in 2005, Egypt has been supplying the gas at much lower rates than those of the global market.

But an Egyptian court ruled recently that the agreement must be reworked to allow for steeper costs. Following the overturning of the Mubarak government and his resignation, opposition forces have called on the new regime to honor the decision.

It remains unclear how the interim military regime will react to the calls, or if the ongoing halt in supply is really due to systematic malfunctions.

The rest of Israel’s natural gas supply comes from Yam Tethys, a reservoir expected to last until 2013. If Egypt continues to withhold supplies, however, expectancy will be shortened to 2012. Tamar, another reservoir, may be able to replace it, but is only expected to be operational in 2014.

Thus, 2013 may be a problematic year for gas consumers such as the electric company and privately-owned power plants, which may have to use diesel oil. An additional problem may occur if the Israeli Delek Fuel and American Novel Energy companies become the sole suppliers of natural gas, monopolizing the market.

In order to prevent this from occurring, Infrastructure Minister Uzi Landau has decided to spur the foundation of a liquefied natural gas (LNG) plant, and the government has already approved its construction in Hadera. If all goes as planned, the plant will be ready in 2012.