Energy consortium suing Egypt over pipeline blasts

AP News
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Posted: Jul 12, 2011 3:33 PM
Energy consortium suing Egypt over pipeline blasts

Shareholders of a Cairo-based energy company that delivers natural gas to Israel said Tuesday they are seeking more than $8 billion in damages from the Egyptian government due to repeated attacks that have disrupted the gas flow.

Four bombings since February have repeatedly halted gas shipments to Israel, and even during times of quiet, they said, shipments have been only 30 percent to 40 percent of the regular pipeline capacity. On Tuesday, following the latest attack, an Israeli Cabinet minister warned that relations with Egypt could be harmed.

The Egypt-Israel gas deal has come under strident criticism from leaders of the popular uprising that toppled longtime Egyptian President Hosni Mubarak in February. Critics charge that Israel got bargain prices, and Mubarak cronies skimmed millions of dollars off the proceeds. Israel insists it is paying a fair price for the gas.

The attacks on the pipeline could reflect that discontent, though there are other possible factors behind the bombings.

Nimrod Novik, an Israeli board member of East Mediterranean Gas Co., said shareholders were concerned with "repeated terrorists' successes" in upsetting gas deliveries. He said the explosions have led to financial losses, caused serious problems in the Israeli energy market and "undermined Egypt's reputation as a reliable supplier."

He said that just two years ago, the firm reached a deal with Egypt that offered what he said were generous prices for Egyptian gas.

"Given that even this far-reaching price concession has not secured reliability of supply, the shareholders were left with no alternative but to seek protection from the international court of arbitration in Washington D.C.," he said, adding that the Egyptian, American and other governments had been notified of the legal action.

As part of the legal procedure, initial consultations among the parties are expected to take place in the coming weeks. If there is no settlement, the case would then go before the judges.

East Mediterranean Gas is a consortium whose shareholders include Israel's Ampal-Merhav Group, a state-owned Egyptian energy company, the state-owned Thai company PTT and American billionaire Sam Zell.

There was no immediate comment from Egypt.

In Tuesday's attack, masked gunmen blew up a terminal in the city of el-Arish in the northern part of Egypt's Sinai Peninsula, about 30 miles (50 kilometers) west of the Israeli border. There were no casualties, Egyptian officials said.

No one claimed responsibility, but disgruntled Bedouin tribesmen in the area have been blamed for attacking the pipeline in the past. Islamists opposed to Egypt's 1979 peace treaty with Israel have also been suspected.

The pipeline, which also serves Jordan, provides some 40 percent of Israel's natural gas supplies.

Israel's Infrastructure Minister Uzi Landau said the attacks on the pipeline could further undermine Egypt-Israel relations.

"This was an anchor, perhaps the most important element of our peace agreement with Egypt from an economic perspective and it is slowly, slowly eroding," he told Israel Radio.

He said Israel had other sources of energy and that consumers were not expected to face disruptions.