As the Egyptian North Sinai gas pipeline remains a security risk, Israel and Jordan must adopt and adapt to ensure the continued supply of oil to their economies and people. Ian McInnes looks at some of the issues. In 2005, the Egyptian government led by Hosni Mubarak signed an export deal with Israel to supply natural gas through the North Sinai pipeline to Israel and then onto Jordan and Syria. Following the overthrow of the Mubarak government and subsequent allegations of corruption during its time in office, the deal, along with other matters, has now come under scrutiny. As a result, media sources have reported now for months dissatisfaction with the price that Israel has been paying and there is no clear consensus from the Egyptian and Israeli press as to the actual price level. Egyptian media report prices between US$0.70-1.50/mBtu while their Israeli counterparts indicate a price range of US$2.50-4.00/mBtu. However, the real figure could be any one of these or somewhere in the middle. Price rises impending ? Following an announcement from the new cash-strapped Egyptian government of its intention to review the price of its natural gas supplied through the North Sinai pipeline, the Jordanian government was reported as being willing to pay more in May 2011. However, even amongst public calls to double the price of natural gas to Israel, the agreement signed in 2005 is for a 20-year term and the Israeli government and Ampal-American Israel Corp (Ampal), a 12.5% owner of pipeline operator and builder East Mediterranean Gas SAE (EMG), are in no mood to pay more. Indeed, Ampal has joined with other EMG shareholders to, “Initiate an international arbitration process against the government of Egypt (GOE) under the US-Egypt bilateral treaty for the protection of investments.” At the end of May 2011 Yosef A Maiman, chairman, president and CEO of Ampal said that Ampal and other international shareholders of EMG are, “Determined to pursue every available avenue to secure the smooth operation of EMG and meeting its contractual obligations to our downstream clients.” Continued attacks As disagreements and tensions mounted between Egypt and Israel, which relies on Egypt for around 40% of its natural gas needs, the price point has been made pretty moot as continued attacks on the pipeline during 2011 have meant a stop-start process. Repairs were made only for the pipeline to suffer more attacks. The current status is stop again after yet another attack. On 12 July 2011 saboteurs struck again with Ampal reporting that a gas terminal serving the North Sinai pipeline was blown up. Furthurmore, on 30 July Ampal reported another attempt, “In the wake of violent incidents in El-Arish, Egypt, on July 29th, in the early morning of July 30th there was an attempt to cause damage to the EMG site near El-Arish,” said an Ampal spokesperson in a statement. “The security forces on site returned fire, prevented any penetration of the EMG site and repelled the attack. No casualties were reported. EMG reports that the incident will not affect its operations once Egyptian General Petroleum Corporation (EGPC) resumes supply after it was interrupted due to an explosion at a GASCO terminal on July 12, 2011.” According to reported Egyptian sources, Bedouin insurgents have been using heavy weapons to stage attacks and, despite the Egyptian government announcing that it is hiring Bedouin tribesmen to protect the pipeline, the pipeline remains closed from 12 July. This problem shows little sign of being solved anytime soon. Israel – gas security before the bounty For a state, any state, energy security is vital. Israel is reliant on natural gas to fuel its power stations and it appears the nation will have to go to the global market to get what it needs and may even have to assume that the supply of natural gas from Egypt will stop for good. For the medium-long term, Israel has more than enough oil and gas for its needs from the Tamar and Leviathan offshore fields. The Tamar field is set begin to selling natural gas to Israel during 2013. Another new discovery at the Tamar field was announced in July 2011. As for the Leviathan field, things are the little more complicated. Leviathan has been proclaimed as the biggest deepwater natural gas find in ten years. Reported estimates say that there may be 16tnft3 of natural gas reserves in Leviathan and perhaps 4bnbbl of oil too. However, with governments still more than a little edgy about the word “deepwater” following the disastrous spill in the Gulf of Mexico after the Deepwater Horizon rig exploded, it is likely to be some time before Leviathan starts producing. There is also the thorny issue of a maritime border dispute between Lebanon and Israel concerning Leviathan’s ownership to factor in. Israel also has likely sites for onshore shale gas reserves too and it is a case of coping with a temporary shortage for a potential surplus to come. Jordan – adopt and adapt At the far end of the delivery route for Egyptian natural gas, Syria, while inconvenienced, has its own natural gas. However, Jordan will have to adopt and adapt to keep the lights on and the country working. With currently little or no independent energy resources of its own, the country must rely on neighbouring Middle Eastern countries for around 95% of its energy needs. Jordan has been reported as considering a nuclear energy option. However, this not a quick fix and, in the meantime Jordan has switched its electricity generating stations to take diesel and heavy oil as fuel. In June 2011, Jordan signed an agreement with Iraq for its oil imports that are trucked through the desert to be raised by an additional 5000bpd, taking its total imports to 15,000bpd, with an option for a later increase to 30,000 bpd. Iraq is planning an oil pipeline into Jordan.

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