EMG won't cooperate on Tamar Egyptian gas deal

Tamar gas drilling

EMG wrote to Energy Minister Yuval Steinitz that the Dolphinus deal is illegal under Egyptian law.

EMG, which owns the rights to the natural gas pipeline connecting Israel and Egypt, states in a letter sent today to Minister of National Infrastructure, Energy, and Water Resources Yuval Steinitz that exporting gas from the Tamar Reservoir to Dolphinus Holdings in Egypt through EMG's pipeline will harm competition, and the company has no intention of taking any part in it.

"EMG has no usage contract for its pipeline for the supply of gas from Israel to Egypt in the near future," wrote Niv Sever, from the M. Firon & Co. Advocates law firm, the attorney for EMG. Sever was once a candidate for the post of Antitrust Authority director general. "If and when the use of EMG's pipeline becomes possible in the future, granting an exclusive right to a single purchaser like Dolphinus is likely to prevent Israeli concerns from purchasing large quantities of gas from the Tamar partners in order to supply it to Israel and Egyptian customers, among others, at competitive prices." The lawyer therefore states that EMG "has no intention of being a party to such illegal activity."

The agreement in question is for the supply of 5 BCM of gas to industrial customers in Egypt for NIS 5 billion. Gas from the Tamar reservoir will be transported through the Israel National Gas Lines Company system to Ashkelon, and Egyptian company Dolphinus will be responsible for transporting the gas from Ashkelon to Egypt through the existing pipeline operated by EMG, the partners reported when the deal was signed last March. Two weeks ago, Steinitz granted the partnership approval to export gas to Dolphinus in Egypt.

According to EMG, the possible contract with Dolphinus is meaningless. "Since the license you recently issued refers specifically to transporting gas through EMG's pipeline, the company considers it an absolute duty to inform you that it regards the transactions referred to in the license issued as essentially meaningless and contrary to its interests and those of both Israel and Egypt."

The letter also states that pipeline was built to transport gas in only one direction: from Egypt to Israel, not Israel to Egypt. "Although EMG unfortunately does not see how transporting gas in the opposite direction, from Israel to Egypt, through its pipeline can be achieved in the near future, it will of course welcome this opportunity if and when it becomes possible at some time in the future."

Sever also lists various legal, regulatory, and administrative obstacles preventing the use of EMG's system and pipeline. "At the advice of EMG's legal advisor, under Egyptian law, foreign companies (and also companies partly owned by non-Egyptians) are forbidden to import gas (or any other products) to Egypt." Since Dolphinus is incorporated in the British Virgin Islands and most of EMG's shareholders are not Egyptian, "It appears that this requirement under Egyptian law is not fulfilled," Sever writes.

Finally, Sever mentions the ongoing arbitration between EMG and Egyptian gas companies EGPC and EGAS concerning the halt in the supply of gas from Egypt in 2011. "Under Egyptian regulations, importing natural gas and the use of the Egyptian national transportation system by private sector companies requires approval from the Egyptian gas companies (the parties in the arbitration), but these companies have not yet published the regulations listing the conditions for importing natural gas to Egypt," he stated.

Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

Tamar gas drilling
Tamar gas drilling
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