The ruling by the International Chamber of Commerce Court of Arbitration awarding Israel Electric Corporation (IEC) (TASE: ELEC.B22) $1.8 billion in compensation for the halt in the supply of gas from Egypt in 2011 is likely to further complicate deals for exporting natural gas from Israel to Egypt, energy sector specialists today predicted. They said that the only way that Egypt would agree to approve gas contracts with Israel is if Israel waives IEC's claim for compensation.
Four gas export deals between Israel and Egypt are under discussion: two with the Tamar gas reservoir partnership and two with the Leviathan partnership. The Tamar partnership has already signed letters of intent to export gas with Spanish company Union Fenosa and with a consortium of private companies in Egypt named Dolphinus Holdings. The Leviathan partnership has also signed letters of intent with Dolphinus and with UK company British Gas.
"Although the contacts for exporting gas are not with Egyptian government companies, Egyptian government approval is still needed for the contracts to become effective," notes Eco Energy CEO Amit Mor. "Therefore, if the "Egyptian government makes exports contingent on IEC waiving its claims for compensation, it will create problems with the gas export contracts."
In fact, Egypt has already demanded that Union Fenosa, which owns a gas liquefaction facility in Damietta, waive its claim for compensation from the Egyptian government as a condition for approval of its gas contract with Israel. The facility was shut down in 2012, after the Egyptian government decided to use gas for its internal needs. In 2013, the Spanish company sued Egypt, claiming that Egypt had violated the agreement between them, thereby causing Union Fenosa enormous monetary damages.
"Eventually, IEC, the Israeli government, the gas companies, and EMG will have to sit down and find a solution for this," said former Israel National Gas Authority chief economist Miki Korner, currently an independent consultant in the field. "In order to push ahead with the gas contracts for Egypt, it will be necessary to concede compensation from Egypt, or at least some of it. The larger picture requires Israel to make concessions to Egypt. If we stick to the letter of the law, we won't get far."
Published by Globes [online], Israel business news - www.globes-online.com - on December 6, 2015
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