The Egyptian government succeeded in settling the dispute between the East Mediterranean Gas Company and the Egyptian Natural Gas Holding (EGAS), after the latter paid $288m in compensation, according to the ruling of the International Chamber of Commerce (ICC) in Geneva.
Hence, Egypt succeeded in ending the arbitration case, a senior government source told Daily News Egypt.
He added that the government succeeded in imposing its conditions announced in 2014 to settle international arbitration cases and achieve the best economic return to Egypt, which is the condition to allow the export of Israeli gas through its territory.
According to the source, the agreement reached was due to the strength of Egypt’s position and the need of the Israeli side, as the gas produced from the Mediterranean Sea has no way out for exportation except through Egypt, through its national gas network and liquefaction plants.
The transfer of gas from two Delek fields in the Mediterranean to Egyptian territory will start by the first quarter of next year.
The International Chamber of Commerce (ICC) issued a ruling mandating EGAS and the Egyptian General Petroleum Corporation (EGPC) in December 2015 to pay compensation to the Eastern Mediterranean Gas Company worth $288m and $1.7bn to the Israel Electric Corporation, following Cairo’s decision to suspend gas exports to Tel Aviv in April 2012.
Earlier, the Ministry of Petroleum and Mineral Resources announced an agreement on an amicable settlement over the dispute with the Israeli side on the issue of gas export, which includes three main items.
The first clause states that after reaching the closing date “the date of activation of the settlement agreement by the parties,” the Israel Electricity Authority will waive all rights arising in connection with the arbitration award rendered in its favour.
The second item included setting the settlement value and the mechanism of payment by $500m to be repaid over eight and a half years. On the date of activating the settlement agreement, $60m will be paid as a down payment, and $40m will be paid six months from the date of activation of the settlement agreement. The remaining 16 semi-annual instalments amount to $25m.
Payment will be guaranteed by issuing a letter of credit from the National Bank of Egypt in accordance with the provisions of Egyptian law.
The last clause stipulates that in case of non-payment of two instalments and the inability of the Israel Electricity Authority to obtain the amount of the settlement remaining under the settlement agreement, by requesting expedited payment of the remaining amount through the bank letter of credit issued to it, it is entitled to terminate the settlement agreement provided that it refunds all amounts obtained under the settlement agreement.
The source pointed out that Egyptian liquefaction plants are a major hub in the Mediterranean region to export 1.88bn cubic feet of gas per day (scf/day) to European markets, in addition to a national network to transport natural gas within the country with a capacity of 9bn scf/day.
Egypt has achieved self-sufficiency of gas locally and total production increased to about 7bn scf/day, compared to the market needs estimated at 6.3bn scf/day.