US embassy cable - 05CAIRO4972

C O N F I D E N T I A L CAIRO 004972 
 
SIPDIS 
 
E.O. 12958: DECL: 06/29/2015 
TAGS: EINV, ENRG, EPET, ETRD 
SUBJECT: EGYPT AND ISRAEL SIGNED GAS DEAL 
 
 
Classified by ECPO Counselor John Desrocher for reasons 1.4 
(b) and (d). 
 
1.  (C)  Israeli Infrastructure Minister Binyamin Ben Eliezer 
and Egyptian Oil Minister Sameh Fahmi publicly signed June 30 
in Cairo a memorandum of understanding for Egyptian gas sales 
to Israel.  Negotiations on this agreement have dragged out 
over 10 years largely because of political concerns in Egypt. 
 In an effort to distance itself from the political 
implications, the GOE encouraged the formation in 2000 of the 
Egyptian Eastern Mediterranean Gas joint venture company, 
owned by Israeli businessman Yossi Mieman's Merhav Group 
(25%), Egyptian businessman Hussein Salem (65%), and the 
GOE's Egyptian Gas Holding Company (10%).  Having a private 
company negotiate with the Israel Electric Corporation made 
the arrangement more palatable for the GOE.  The parties 
concluded an agreement in principle in early summer 2004 and 
concluded a framework agreement in February 2005.  The 
agreement signed today was a political understanding between 
the two governments; today's signing, witnessed by Egyptian 
Prime Minister Nazif, was the most high-profile public 
recognition of the deal to date.  A commercial agreement 
laying out the precise terms remains pending. 
 
2.  (SBU)  According to the agreement, an offshore pipeline 
will be constructed from El Arish in Sinai up to the coast of 
Israel, bypassing Gaza.  Construction could begin as early as 
October 2005 with Egyptian gas possibly flowing to Israel by 
the second half of 2006.  Under the agreement, Egypt would 
provide approximately 1.7 billion cubic meters of gas per 
year 15 years for a total amount of USD 2.5 billion, making 
this Egypt's most lucrative gas deal ever. 
 
 
Visit Embassy Cairo's Classified Website: 
http://www.state.sgov.gov/p/nea/cairo 
 
You can also access this site through the 
State Department's Classified SIPRNET website. 
 
CORBIN