Egypt-Israel Deal On Natural Gas May Be Scrapped

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A fire burns on a gas pipeline in the Massaeed area west of the Mediterranean coastal town of al-Arish, North of Sinai, February 5, 2012.
A fire burns on a gas pipeline in the Massaeed area west of the Mediterranean coastal town of al-Arish, north of Sinai, on Feb. 5. The pipeline from Egypt to Israel has come under attack at least a dozen times since deposed Egyptian President Hosni Mubarak was toppled last year.

Notice of the termination of a natural-gas purchase agreement between companies in Israel (the buyers) and companies in Egypt (the sellers) was confirmed Sunday by those on both sides of the contentious issue.

The Ampal-American Israel Corp. (Nasdaq: AMPL) announced it had been advised by the East Mediterranean Gas Co., or EMG, in which Ampal has a 12.5 percent interest, that the Egyptian General Petroleum Corp. and the Egyptian Natural Gas Holding Co. had notified EMG they were terminating the Gas Supply and Purchase Agreement between the parties.

Mohamed Shoeib, chairman of the Egyptian Natural Gas Holding Co., contended the agreement was being terminated not because of political considerations but because of contractual violations, the Associated Press reported.

Egypt provides Israel with about 40 percent of its natural-gas supply, which is primarily used to generate electricity, BBC News reported.

EMG considers the termination attempt unlawful and in bad faith, and consequently demanded its withdrawal, Ampal said in a statement. Therefore, it added, EMG, Ampal, and EMG's other international shareholders are considering their options and legal remedies as well as approaching the various governments.

The natural-gas deal at issue was negotiated while deposed Egyptian President Hosni Mubarak was still in power, and it has become a symbol of renewed tensions between the two states since his departure.

One bone of contention is the price the Israelis pay for the Egyptians' gas. It is set at $1.50 per million British thermal units, AP said.

Israeli Finance Minister Yuval Steinitz expressed great concern about the termination notice, calling it a dangerous precedent which casts a shadow on the peace agreements and the peaceful atmosphere between Egypt and Israel, Reuters reported.

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