The supply of gas to Israel from its Egyptian neighbor was stopped on Friday, and as of Wednesday morning it had not yet been resumed, prompting some in Israel to fear that its main supplier of natural gas is running low on the resource.
Egypt supplies natural gas to a number of countries, and sources in Jerusalem are increasingly concerned that the Egyptian-Israeli gas consortium EMG is rationing supplies to its clients, signaling a possible dwindling of gas reserves.
As Egypt’s largest consumer of natural gas, Israel pays a reduced price for the commodity, and the recent cutoff has forced the Israel Electric Corporation to increase purchases at much higher market prices from another supplier, the Tethys Sea group.
As a result, Israelis may soon be paying significantly higher electricity bills, since the Israel Electric Company (IEC) is not expected to absorb the cost difference.
After signing a contract with the IEC offering favorable prices to Israel, EMG began construction in 2006 of a 100-kilometer pipeline from the Sinai to Ashkelon, but since gas began to flow in May of 2008 there have been repeated problems with delivery, including interruptions due to quality problems with the gas. All in all, only a fraction of the expected amount of gas has come through the pipeline.
In Egypt the constant presence of anti-Israel sentiment has led to increased political opposition against supplying Israel with the gas, particularly in light of the low price that the current deal guarantees.
In attempts to safeguard the continued flow of gas, a series of urgent meetings have been held behind closed doors, in which both the Egyptian and Israeli sides are attempting to renegotiate the terms of the original EMG-IEC contract. Success of a new gas deal is contingent on several factors that have apparently complicated negotiations, including Israel’s role among a growing list of customers, the reliability and availability of Egyptian reserves, and Egypt’s recent refusal to sell gas to Israeli consumers in addition to IEC.
In the meantime, Israel’s Ministry of Infrastructure says it has faith in the success of Egyptian-Israeli energy negotiations, but at the same time it says that is working to secure arrangements with alternative suppliers, such as Russia and Azerbaijan.