EMG denies consenting to Tamar Egypt gas deal


EMG says cost estimates for use of its pipeline are unrealistic and it has not been consulted on negotiations.

"EMG was surprised to read in the press about an agreement that assumes the use of its pipeline for a 'reverse gas flow' between the partners in the Tamar Israeli natural gas reservoir and Dolphinus," wrote Niv Sever, from the M. Firon & Co. Advocates law firm, the attorney for EMG, in a letter sent today to the partners in the Tamar reservoir. "EMG protests the repeated unauthorized use of its name, apparently designed to profit from its assets."

Last week, the partners in the Tamar reservoir reported a NIS 5 billion agreement to supply 5 BCM of Israeli gas to industrial customers in Egypt over three years.

According to the partners, the gas will be brought from Tamar to Ashkelon through the Israel Natural Gas Lines system, and Egyptian company Dolphinus will be responsible for transporting the gas from Ashkelon to Egypt through the existing gas pipeline operated by EMG. Gas was transported through this pipeline from Egypt to Israel. The pipeline is constructed to transport gas only from Egypt to Israel. Senior Egyptian officials in the natural gas sector estimate that making the pipeline bi-directional will cost an additional $10 million.

"EMG is not a party to the reported transaction, and was not included in these negotiations. In order to remove all doubt, no talks are taking place between EMG and Dolphinus for such a deal, and no negotiations took place between them in the past," Sever writes in his letter, adding, "Furthermore, the preliminary costs of such activity, as reported, is unrealistic for the pipeline, which has been out of use for several years. Future activity in transporting the reported quantities in a non-continuous manner will not be economically worthwhile for EMG."

Sever also mentions the conditions set by Egypt several weeks ago for such a deal between Israel and Egypt. The conditions listed included approval of the deal by the Egyptian government; creation of added value for Egypt, which is hungry for cheap gas; and a solution for the international claims in arbitration between EMG and its shareholders and Egypt. EMG and Israel Electric Corporation (IEC) (TASE: ELEC.B22) are suing Egyptian gas companies E-Gas and EGPC for billions of dollars for the halt in the supply of gas to Israel, which was fully stopped in 2011. The halt in the supply of gas forced IEC to purchase more expensive fuel at an added cost of over NIS 10 billion, and also halted the activity of EMG's pipeline.

"The positions taken by Egypt to date in this arbitration and the existing restrictions in Egyptian legislation currently prevent any consent by EGM to agreements for the use of its pipeline for bi-directional gas transportation on any terms whatsoever," Sever writes.

The Tamar partnership said, "In pursuance of the reports about a Dolphinus transaction, to the best of the partners' knowledge, contacts are taking place for the use of the EMG pipeline. Under the transaction, the point of gas delivery is in Ashkelon, and the Tamar partners are therefore not a party to the negotiations between Dolphinus and EMG."

Published by Globes [online], Israel business news - www.globes-online.com - on March 22, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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