CAIRO: Ampal-American Israel Corporation reported a net loss of $9.7 million due to the “impairment” on the Eastern Mediterranean Gas Co. (EMG), which supplies Egyptian natural gas to Israel, for the quarter ending June 30.
Ampal, which has a 12.5 percent stake in EMG, reported $39.3 million in overall losses compared to $2.8 million in losses for the corresponding period in 2010.
The loss is amplified to $16.9 million when including the non-controlling shareholders.
Attacked four times this year, the Egyptian Natural Co. (GASCO), which transports gas to EMG, caused most of Ampal’s losses.
For the six-month period that ended June 30, the company’s losses increased to $22.1 million compared to a net loss of $10 million for the corresponding period in 2010.
The company, however, recorded $279.2 million in revenues for the second quarter compared to $241.3 million from the corresponding period in 2010.
The first attack on GASCO was on Feb. 5 just 6 days before mass protests forced president Hosni Mubarak to leave office. It halted gas to the company until March 15. That same gas line also served Jordan, Lebanon, and Syria.
A second attack on April 27 stopped gas until June 9, while the third attack, which happened on July 4, discontinued flow until July 5.
On July 12, the fourth attack caused an explosion in a valve station of GASCO’s pipeline.
“Following the explosion, [the Egyptian Natural Gas Holding Company] EGAS initiated its standard shut down procedure affecting gas transportation throughout the Sinai area and gas supply to Jordan, Lebanon and Syria; to major Egyptian industries and gas consumers in the Sinai; and to EMG,” the company said.
According to Ampal, there was a failed fifth attempt that threatened the security of the pipeline.
“On July 30, 2011, in the wake of violent incidents in Al-Arish … there was an attempt to cause damage to the EMG site near Al-Arish,” the company said, “The security forces on site, returned fire, prevented any penetration of the EMG site and repelled the attack.”
In late May, US investors in the East Mediterranean Gas Co. threatened they would seek international arbitration against the Egyptian government in order to ensure that gas flow to Israel would resume.
“As a result of the continued interruption of gas supply to EMG and the delivery of gas to EMG below contracted quantities, the international shareholders of EMG, including Ampal, have commenced procedures under applicable bilateral investment treaties between their countries and Egypt,” Ampal said in its financial statement.
“Such procedures may ultimately result in arbitration of claims under the various treaties, its gas supply agreement or other agreements.”
The company added: “Ampal has also been advised by EMG that EMG is considering initiating arbitration proceedings against the government- owned Egyptian gas supplier alleging a breach of various provisions of its gas purchase agreement.”
In May, after the first three attacks on gas line, EMG ensured Ampal that Egypt would implement additional security measures in order to prevent future attacks.
Noran Ali, petroleum analyst at CI Capital, said the problem of gas flow to Israel has never been about the security.
As long as there is wide discontent among Egyptians and lack of transparency regarding the price of gas exports, the pipeline will continue to be under threat, she said.
The Mubarak regime has never been clear on how much Israel pays for Egypt’s gas; however it is known that it is well below the international standard price of $4, she explained.
Under the auspices of former Minister of Petroleum Sameh Fahmy, who is currently under investigation along with other figures of the previous regime for corruption charges, the pipeline continued to operate despite criticism from the Egyptian public.
Egyptian businessman Hussein Salem, American businessman and chairman of EGI Sam Zell, Egypt Natural Gas Co., Thailand’s PTT and Ampal-American Israel Corp. all own EMG, which is responsible for ensuring gas flow to Israel.
The Egyptian government issued an arrest warrant for Salem, who fled the country in February.
In June, Salem was arrested in Spain on charges of money laundering. According to Spanish news agency, Europa Press, Spanish authorities also froze his bank accounts, worth $45 million, and seized $14 million worth of real estate under his name in Madrid and Marbella.
While there is a growing shortage of natural resources in Egypt, many see the ongoing gas flow to Israel as an unfair deal with a country which many reject normalization of relations with.
Magda Kandil, Executive director of the Egyptian center for economic studies previously told Daily News Egypt that the country could save $3 or $4 billion yearly if the gas deal with Israel is reassessed.
EMG constructed the pipeline in 2008 from Al-Arish in Sinai to Ashkelon in Israel, costing $460 million. Currently, the company provides 45 percent of Israel’s gas needs for electric utility.
Under a 20-year contract, Egypt has been exporting gas to Israel since 2005.
However, Egypt’s current Petroleum Minister Abdullah Ghorab said in March that talks are underway to adjust the gas contracts, adding that widespread public disapproval of the export to Israel is enough to make the government revisit the terms of the deal.
