$20 bn deal to sell Israeli natural gas to Egypt-based companies

From Al Masry al Youm:

Companies extracting natural gas from the Tamar gas field said they signed a memorandum of understanding to sell natural gas to the Spanish company Union Fenosa, which co-owns a factory with the Italian company Eni to export liquefied natural gas in Damietta, Egypt.

The Israeli Calcalist website said the agreement, which was signed on Monday evening, is the first contract to sell Israeli gas to Egypt, adding that the two sides are signing a formal agreement in six months for Israel to supply an annual 4.5 billion cubic meters of natural gas to Egypt for 15 years, a fifth of the field’s total production capacity.

It also said that the contract is worth US$20 billion and that the gas would be supplied through a pipeline from Tamar to the shores of Egypt 300 kilometers away, the cost of which would be borne by the purchaser.

Union Fenosa is one of the largest liquefied gas companies in the world. Together with Eni, it owns 80 percent of the Damietta factory, the rest of which is owned by the Egyptian General Petroleum Corporation and the Egyptian Natural Gas Holding Company (EGAS).

The website also said that Israel is signing a similar agreement with British Gas, which also owns a factory in northern Egypt. It has been operating in Egypt for 25 years, producing a third of domestic natural gas consumption.

Egypt doesn't have much choice in the matter:

Egypt, which owns 20 percent of UFG's LNG plant in Damietta, has been unable to honour its contractual obligations to provide the facility with natural gas for liquefaction and export, as fuel shortages have forced it to divert its resources for domestic consumption.

"This is especially damaging as LNG plants are by nature highly capital-intensive, compared to, say, a pipeline," explains Mohamed Abu Basha, chief economist at Cairo-based investment house EFG-Hermes.

Last April, UFG – a joint venture between Spain's Gas Natural and Italy's Eni – filed a complaint against the Egyptian Natural Gas Holding Company (EGAS) with the International Chamber of Commerce's (ICC) International Court of Arbitration, alleging that EGAS had failed to keep up its contracted payments – regardless of production – needed to cover operating expenses, investments and debt servicing, Reuters reported at the time.

Realistic peace doesn't come from agreements or pressure or even grassroots efforts at teaching coexistence. Realistic peace comes when self-interests coincide.

Economic self-interest is a powerful motivator. Which is why Israel's best chance for a region free of major violence is to have the most powerful economy that can also help its neighbors. It then becomes in their interest to reduce friction.

Israel's economic strength, and the security it provides, is the exact reason why Israel-haters target its economy. And fail. Increased strength in natural resources is icing on the cake of Israel's existing brainpower resources.

Israel will never have any real friends in the Middle East. But it is respected for its economic, military and political strength. That's the best we can ever hope for.