Bethel Finance: Egypt rejects Bedouin pipeline demands

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Bethel Finance news:
An investigation by "Globes" found that demands by Bedouin tribes in the Sinai for protection money from the Egyptian government is the primary motive for the attacks on gas pipelines in the peninsula. The Egyptian government is refusing to capitulate the Bedouins' demands for now, but neither is it rushing to complete the defense works on the pipelines against more attacks. Experts believe that Egypt will not seriously consider resuming gas deliveries to Israel until a new government is in place.

The Egyptian gas pipeline network in Sinai delivers natural gas to Israel, Jordan, Syria, and Lebanon, as well as to Egyptian factories in the El Arish area. There were at least ten attacks on the pipelines during 2011, resulting is the suspension of deliveries for more than 200 days.

Israeli sources estimate that the cost of the stoppage to the economy could reach NIS 15 billion if Egyptian gas deliveries do not resume before the Tamar field comes on line toward mid-2013. The estimate is based on Israel Electric Corporation's (IEC) (TASE: ELEC.B22) need to buy more expensive diesel and industrial oil instead of natural gas. This cost will be borne by Israeli consumers through electricity rate hikes, which will probably be spread out over several years.

Three demands

Information obtained by "Globes" indicates that Egyptian government representatives have held several meetings with Bedouin tribal leaders in northern Sinai over the past few months. The Bedouin made three demands at these meetings: money to the tribes on whose land the pipelines passes, on the basis of a fixed fee per kilometer; employment of Bedouin guards to protect the pipelines and facilities; and the release Bedouin prisoners in Egyptian jails. The Egyptian government has rejected all three demands out of hand.

At the same time, the Egyptian government is building defenses at weak points along the pipeline network, which is owned by the government-owned Egyptian Natural Gas Company (GASCO). This project involves 26 facilities along the network of pipelines, which themselves are below ground and safe from simple attacks. The defense plan includes guards, as well as fences and cameras at all the facilities.

In practice, the pipeline defense plan is stuck, and only a few facilities are protected, because of Egypt's well-known bureaucratic inertia and power-struggles between the Army and the Ministry of Petroleum and Mineral Resources, each of which is trying to pin the responsibility on the other. As a result, Chairman of the Supreme Council of the Armed Forces General Muhammad Tintawi, Egypt's actual ruler, has to approve everything.

Israeli officials believe that there will be no serious discussion about resuming gas deliveries to Israel until a stable Egyptian government is established. Since the fall of President Hosni Mubarak in February 2011, Egypt has had three governments.

Former Minister of Petroleum Sameh Fahmi, who approved the gas export agreement with Israel, is now in jail, after being convicted of selling the gas for too little. Hussain Salem, a partner of Yosef Maiman in East Mediterranean Gas Company (EMG) shareholder, was sentenced two months ago in absentia to seven years in prison on similar charges.