Egypt turns to Israel to light up Cairo

Israel and Egypt are suspected of agreeing to a gas deal which will see the North African state receive gas from Tel Aviv through US-company Noble Energy.

Although Egyptian General Petroleum Corporation (EGPC) have not disclosed the names of the fields that will extract the gas, or the price, it is widely believed that Egypt’s energy will come from Israel.

Cut price gas

The prime cost of gas at the time was $2.65, and Israel got a bargain.

The US-based energy giant has a 40 percent stake in the Israeli Leviathan off-shore gas field.

This huge gas field looks set to make Israel a major player in the energy sector, although there have been disputes about the rights to the gas, which is off the coast of Israel, but also Gaza, Lebanon and Cyprus.

A senior official at EGPC has revealed that the gas price offered by the US-company is higher than the $12 per million thermal unit price agreed with state-owned Algerian company Sonatrach. 

Between 2005 and 2011, Egypt exported natural gas to Israel at a cut price. The agreement would see Egypt export 1.7 billion cubic meters every year, for 20 years, at a price between $1.5 to 70 cents per million thermal units.

The prime cost at the time was $2.65, and Israel got a bargain.

The gas was extracted from the Sinai to Israel until militant attacks on the pipeline put a halt to the export to Israel.

Egypt is Africa's largest consumer of gas and oil, and looking to meet growing energy demands. Electricity generation plants operate on gas, and shortages have led to frequent power cuts in Egypt.

In December 2014 Cairo signed an agreement with Algeria to import six shipments of Liquefied Natural Gas (LNG) between April and September 2015.  

Egypt is also in the stages of agreeing to import seven shipments of LNG from Russia's Gazprom.

Speaking to Al-Araby al-Jadeed on condition of anonymity, a prominent EGPC official said that the shipments by Noble Energy are more expensive than the one signed with Algeria, where it was agreed that that the price of gas would be $12 per million thermal units.

Growing demand

Egypt is suffering from a slump in gas production, which no longer meets local needs. Deposed president, Hosni Mubarak faced prosecution for squandering public funds connected to the export of gas at bargain prices. He was later acquitted of corruption charges.

According to Egyptian Electricity Minister Mohamed Shaker, the government will raise the price of electricity in July.

This is according to austerity measures that include the ending electricity subsidies within five years. Egyptians have seen tariffs increase between 10 to 50 percent.

Speaking at an energy conference in Cairo yesterday, Shaker said that the government planned to reduce electricity subsidies from $3.59 billion in 2014/2015 fiscal year, to $2.65 billion in the next fiscal year. 

This is due to the prime cost of producing one kilowatt of electricity is six cents, and is sold at two cents. 

Despite the rise in prices, Egyptians say that power cuts are becoming an increasingly routine part of daily life.

This article is an edited translation from our Arabic edition.