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Tuesday, April 24, 2012
Egypt has terminated its natural gas supply to Israel in what it is being called a “business” dispute rather than a diplomatic dispute. The termination of the deal with Israel follows a series of attacks on the Arab Gas Pipeline, the latest taking place just a couple of weeks ago.
One of the companies believes the termination of the contract to be unlawful and in bad faith, that company is East Mediterranean Gas Co. (EMG). Ampal-American Israel Corp., which holds a 12.5% stake in EMG, said in a press release it had been advised by EMG that EGPC and EGAS notified EMG that they were terminating the Gas Supply and Purchase Agreement (GSPA) between the parties.
EMG considers the termination attempt unlawful and in bad faith, and consequently demanded its withdrawal. EMG, Ampal, and EMG's other international shareholders are considering their options and legal remedies as well as approaching the various governments.
As previously disclosed, EMG initiated arbitration against EGPC and EGAS in October 2011 due to EGPC and EGAS's long-standing failure to supply the gas quantities owed under the Source GSPA. EMG is seeking compensation from EGPC and EGAS for damages resulting from their contractual breaches. EMG already has further requested that an arbitral tribunal issue an order that EGPC/EGAS perform their obligations under the Source GSPA and rule that EGPC and EGAS are not entitled to terminate the agreement. The arbitration is ongoing.
In addition, as previously disclosed, Ampal and certain other international shareholders of EMG have initiated the process of submitting claims against the Government of Egypt under various bilateral treaties for the protection of investments.
Prior to the ousting of Hosni Mubarak, Egyptsupplied about 40% of Israel's natural gas, but attacks on the pipeline have reduced that supply tremendously.
While both sides, Egypt and Israel, are playing down any diplomatic reason for the termination the Egyptian government has been faced with a public outcry over its relationship with Israel. Officials in the North African country have said it was a trade issue.
In Israel the situation is being downplayed also with Israeli prime minister Benjamin Netanyahu saying the cancellation resulted from a business issue rather than a diplomatic dispute.
Despite the downplay of the situation on both sides Egypt has wanted to renegotiate the price that Israel pays for its gas ever since Mubarak left office and the cancellation of the contract could pave the way for a higher fee for Egyptian gas to Israel. Giving this some teeth is a statement from Egypt’s minister of international cooperation, Faiza Abu el-Naga, who said Israel was welcome to negotiate a new contract.
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