Why gas earmarked for Lebanon is not Egyptian
 
 

On February 1, Petroleum and Mineral Resources Minister Tarek al-Molla announced that the export of natural gas to Lebanon will begin by the end of the month or mid-March at the latest, which is the same time period that the Lebanese president Michel Aoun had previously announced in December 2021. 

Lebanon has a dire need for energy resources, as the country has been suffering from severe shortages. However, the export plans have caused some controversy over the last four months with regards to whether the gas is Israeli or Egyptian. It started when Israel’s Channel 12 broadcasted a report stating that the natural gas meant to be supplied to Lebanon, under a deal sponsored by the United States, will actually be Israeli gas. The report stated that the deal would be presented as if the gas was coming from Egypt via the Arab Gas Pipeline in order to avoid the risk of political embarrassment of all parties involved. 

While the various parties continue to proclaim that the gas will come from Egypt, Mada Masr has spoken to sources in the gas sector and those informed of the political talks behind the deal and taken a close look at the pipeline infrastructure to discern which of the two countries will be powering Lebanon. 

Why is the gas earmarked for Lebanon not Egyptian? 

In September, Amman hosted a meeting that included representatives from Egypt, Lebanon, Syria and Jordan in order to discuss the feasibility of supplying Lebanon with Egyptian natural gas through the 1200-km Arab Gas Pipeline, which connects the four countries. The pipeline starts in Arish in North Sinai, then moves south toward Taba, crosses underneath a 15-km stretch of the Red Sea, passes through Aqaba in Jordan, then moves north toward Syria, passing through Damascus and Homs, and finally turns west to cross the Syrian-Lebanese border to arrive in Tripoli. 

The Arab Gas Pipeline was constructed over the first decade of the 2000s during the term of former Petroleum Minister Sameh Fahmy with the ultimate goal of exporting the surplus gas Egypt had at the time to Jordan, Syria and Lebanon and then on to European markets. With the beginning of the 2010s and the Arab uprisings, the pipeline in Egypt and Syria was partially damaged following a series of militant attacks in the former and the outbreak of war in the latter. 

Since 2015, Egypt has exerted its control over the territory through which its part of the pipeline passes and contained those damages. It briefly resumed exporting gas to Jordan in 2019, pumping from its Zohr mega field. 

But the situation changed when Israel began exporting gas to both Egypt and Jordan in 2020. 

Jordan and Egypt each have agreements that last 15 years to guarantee the supply of Israeli gas for different purposes. In Egypt, Israeli gas is transported through the Arish-Port Said pipeline to the natural gas liquefaction plants in Damietta and Edco, where it is liquefied and re-exported. 

Egypt, in turn, receives fees for transporting the gas through its national grid and for the liquefaction process, according to what former Petroleum Minister Osama Kamal told Mada Masr. 

Mada Masr previously reported that Egypt’s General Intelligence Service stood to reap the greatest profits from the import and resale of Israeli gas to the Egyptian state through its undisclosed ownership stake in East Gas and its partnership with Dolphinus Holdings, the firm that signed the agreement.

The Egyptian-Israeli agreement also stipulates that Egypt is allowed to use some of the natural gas domestically if it needs to. 

In Jordan, the Israeli gas is allocated for domestic consumption, powering three electric power plants in the north of the country. Those power plants used to receive natural gas from Egypt, but Israeli gas currently feeds about 80 percent of Jordan’s electric power generation. 

Once Egypt began importing gas from Israel at the start of 2020, natural gas began flowing from Arish to Port Said and Egyptian gas exports to Jordan halted. The move to reverse the flow of gas in Arish in order to facilitate imports from Israel via the East Mediterranean Gas Pipeline seems to have hindered Egypt’s ability to export gas through the AGP. 

The Arab Gas Pipeline intersects with Israeli pipelines at two different points, the first of which is in Egypt at Arish, where the line meets with the EMG pipeline coming from Ashkelon. The second point is in Jordan, where the pipeline connects with an Israeli pipeline coming from the Leviathan gas field and intersects at a border point between both countries, in the city of Mafraq. 

Given the current situation and assuming that Egypt still has surplus gas that it can export to Lebanon to help with the current crisis, the infrastructure for transporting gas must be technically equipped for moving gas outside of Egypt. Under present circumstances, in order to achieve gas exports to Jordan, Egypt would either have to stop importing Israeli gas, modify the Arish station, or construct a new parallel pipeline to transport gas from one of the pipelines in Port Said to Arish, which would then be transferred to the Arab Gas Pipeline. 

When asked about the source of gas that would feed into the Arab Gas Pipeline, Kamal stated that Egyptian gas will be provided from the national network, which in this context means all of the internal pipelines that connect different cities and regions across Egypt. The network contains all of the country’s natural gas whether it was manufactured locally or imported. But two sources that spoke to Mada Masr on condition of anonymity, one of whom is a maintenance engineer and the other a project manager in a gas distribution company, stated on separate occasions that it is impossible to transport gas from the national network to the larger pipelines due to the discrepancy in pressure. 

According to the two sources, following the extraction of gas from gas fields, there must be pressure reduction stations by the wells. At this stage, the pressure is very high and reaches 70 bar, which is the same amount of pressure used in the pipelines carrying gas between countries. At every stage in which gas is transported to a smaller network, pressure is reduced for safety considerations and because the amount of gas is less. Gas pressure is continuously reduced at various stations along the smaller pipelines until it reaches 0.1 bar, which is the pressure at which gas reaches houses. 

The project manager explained that building a gas pipeline from Port Said to Arish will require a construction process that lasts at least one year and as long as 10 years due to the many stages included, such as transporting the pipes, welding, cleaning and testing. 

And if it’s not Egyptian… 

An informed Egyptian source who is familiar with the gas file told Mada Masr that exporting natural gas to Lebanon will happen in April, which likely means that the gas will be coming from Israel. 

A source close to Hezbollah who spoke to Mada Masr said that, despite being an open secret among all parties that the gas reaching Lebanon would be mostly Israeli, Hezbollah does not have the political maneuverability to obstruct the project, as it would be seen to be acting on behalf of Iranian interests.

The source close to Hezbollah also said that the deal had many benefits, including the return of Syria into the Arab fold, opening the door for exceptions to the United States’ Caesar Act, which places sanctions on the Syrian regime of Bashar al-Assad, the establishment of a securitized zone around the passage of the Arab Gas Pipeline, and the funding of it by international organizations such as the World Bank after its damage in the civil war.

In addition to the above, when Israeli Energy Minister Karine Elharrar was asked last week at Egypt’s international energy conference EGYPS about whether the gas would be exported to Jordan and Egypt then to Lebanon, she said “so be it” if exported gas reaches Lebanon. 

At the end of last week, Israel also announced that it would be increasing its exports to Egypt by as much as 50 percent. The gas will flow through Jordan, using the Arab Gas Pipeline, rendering that route for the export of Egyptian gas impossible. 

What does Molla mean when he speaks of Egypt exporting gas to Lebanon?

In his announcement in early February, Molla did not say that the main goal for Egypt was the export of gas. Rather, Egypt is aiming to become a “regional hub for the commerce of gas.” Molla further clarified that exporting pure Egyptian gas is seasonal and tied to the availability of surplus in the case of less local demand, such as in the winter where there is lower electricity usage, which currently relies on natural gas to meet 60 percent of production. 

But Molla emphasized that Egypt’s aspiration to be a hub “depends on acquiring gas from the Mediterranean Basin, such as from Israel and Cyprus, in order to export through liquefaction stations and connective grids with several countries,” adding that the Damietta station entering into service last year has helped in the expansion of exporting Israeli gas.

Fitch Solutions’ report agrees with Molla’s views, tying Egypt’s gas export ambitions to its ability to serve as a transport space from neighboring countries, especially Israel. The report was written by energy analysts from the agency and emphasizes that Israeli natural gas imports are the main guarantor of Egypt’s ambitions to become a regional energy hub. The report did not mention Egypt having reserves of its own to export.

The deal between Egypt and Israel includes a gradual increase, over three years, in the quantities of gas imported from Israel until it reaches a peak of 7 billion cubic meters of gas per year in 2022, which corresponds to Molla’s announcements regarding raising Egypt’s import of Israeli gas by about 45 percent during the first quarter of this year. It also corresponds with what the Israeli energy minister said in mid-February about raising Israeli gas exports to Egypt by 2 to 2.5 billion cubic meters annually, adding that the increases would help Egypt in meeting local demand.

Fitch Solution’s report added that at the beginning of 2023, Egypt’s export of gas could decrease because of two factors. The first is growing local demand, which will increase consumption of imports locally. The second is in the case the country does not expand production and discover new reserves. 

A June 2021 report published by MEES, a regional energy and gas sector analysis firm, said that Egypt’s production suffered when the Zohr field was breached by water and its productivity fell.

Kamal told Mada Masr that Egypt’s capacity to export large quantities of gas does not take into account the overwhelming local demand, where Egypt’s daily local production sits between 7 and 7.5 billion cubic feet. The government takes 5 billion and the partnering company responsible for the excavation takes the rest. However, local consumption currently stands at 6 billion cubic feet per day. According to Kamal, to fill this gap, the government buys the remaining 1 billion cubic feet from the private company’s share, which means Egypt does not have natural gas reserves.

In addition, three sources who spoke to Mada Masr, one of whom works at Gasco, which operates the national grid for the transportation of gas, and another who previously worked in a multinational company that worked in excavating gas in Egypt, confirmed that Egypt takes natural gas in kind instead of the dues the GIS stood to benefit from as a form of payment for the liquefaction and transportation of Israeli gas. The third source, who is a diplomat for the UN mission in Lebanon, said that the goal of this agreement was to meet the gap in local demand, especially in light of Zohr being depleted faster than expected.

*Omar Said contributed to this report.

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Sara Seif Eddin 
 
 

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