It Takes Three to Tango

The failure of the electricity supply system in Egypt due to lack of Natural Gas is shameful. Egypt since the late nineties became one of the major producer of Natural Gas in Africa and Middle East. The Egyptian Government have been criticized for such performance that many describes as dwindling, if not has failed and lost direction.

“Due to major recent discoveries, natural gas is likely to be the primary growth engine of Egypt’s energy sector for the foreseeable future. Egypt’s natural gas sector is expanding rapidly with production having nearly tripled between 1998 and 2008. In 2008, Egypt produced roughly 1.9 trillion cubic feet (Tcf) and consumed 1.1 Tcf.” reported the USEIA site.

On the other hand, it was reported in June 2010 on the Bloomberg Businessweek site that Israel is on the path to exporting energy for the first time in its 62-year and the offshore discoveries in Israel may hold 16 trillion cubic feet of gas. It also reported that Israel has the potential to become a key regional gas player, competing with the likes of Egypt,”

Egypt has been exporting natural gas to Israel indirectly in a deal least described as a shoddy deal. “The deal was signed in 2005 at a price that was significantly lower than the market price. One-third of Israel’s natural gas is in fact provided by Egypt under that deal.” Reported the IsraelNationalNews web site. The same site reported that the deal was signed as a result of massive political pressure from US.

The Green Prophet blog reported, that the Egypt based East Mediterranean Gas Company (EMG) which exports natural gas from Egypt to Israel has been granted a 20 year tax exemption by the Israeli government. The same site reported that Israel may deny Turkey exports of Natural Gas due to the recent tension.

The Egyptian-Israeli consortium Egyptian Mediterranean Gas (EMG) had reached a deal to export natural gas to Israel in June 2005. The deal entailed the supply of Israel with 1.7 billion cubic meters a year for 15 years at a price of $1.5 per million British thermal units (BTU), which critics said was well below international market prices.

EMG holds an exclusive right to export natural gas from Egypt to Israel, which is building a $469 million gas pipeline from El-Arish in northeastern Egypt to Ashkelon in Israel. EMG signed an accord to purchase 677 MMcfd of gas for 15 years from Egyptian General Petroleum Corp. and state-owned Egyptian Natural Gas Holding Co.

“The single largest owner in EMG is Egyptian businessman Hussain Salem with 28%, followed by the Thai energy giant PTT with 25% and Israeli businessman Yossi Melman controls 20% through Ampal-American Israel Corporation”.

The aforementioned reports demonstrate that:

1. Egypt is not supplying Israel with Natural Gas.
2. Egypt does not grant preferential pricing on its Natural Gas.
3. Egypt supplies EMG Natural Gas at preferential pricing system.
4. EMG is the sole supplier of Natural Egyptian Gas to Israel.

From above some questions has to impose themselves:

1. Did the US really pressurize Egypt to sign the concession to EMG?, and why?
2. Why does Egypt sell to EMG at such low price?
3. If the Egyptian Gas is likely to be the primary growth engine of Egypt, why was it sold so cheap ignoring opportunity costs?
4. Was Israel importing the gas to re-export it to another countries?, and If that is the case,
5. Why Egypt did not export the gas directly to those countries instead of Israel?
6. Who gave EMG such concession for supply and does such concession requires the approval of the Egyptian Parliament as a Public Private Partnership deal?
7. Why EMG is the sole supplier of Gas?.
8. Who gave the land (servitude) right to EMG to build the pipeline, and was it built under a PPP agreement by which the line is to revert to Egypt afterwards.
9. The allocation to EMG was based on supply surplus in Egyptian Gas, was there an under estimate of the growth in demand in Egypt? Who is responsible for such miss-estimation?
10.  If the EMG-Egypt deal is signed under the Egyptian law, why can it be deferred or the least renegotiated for market related pricing?
11.  What is the impact of the new discoveries of Israel of the gas deal? Shall Israel use that gas and exports its own due to its cheap prices?!!!

All these questions are not yet to be answered by a government that is unpliable to the criticism of its opposition, citizens and ,

The critical mind of

NED

Reference:

http://www.oilinisrael.net/

http://www.businessweek.com/news/2010-06-03/israel-may-join-gas-exporting-nations-with-leviathan-discovery.html

http://www.pennenergy.com/index/petroleum/display/314171/articles/oil-gas-journal/finance-companies/ptt-buys-25-of-east-mediterranean-gas-co.html

http://www.greenprophet.com/2010/08/egypt-tax-israel-natural-gas/

http://www.winne.com/egypt/toe123.html

Egypt and The Baradei …..(2)

If Dr. Baradei indulges in the presidency race without preparations, he shall not have any vote. The reality is that 80 percent of the voters are passive voters. At least 50% of t hose passive voters might not have heard about the achievements of Dr. Baradei and if it happens that they know, they do not care about his international achievements.

The only way that Dr. Baradei may be able to attract the passive voters is through a declared detailed vision that can touches on the livelihood of those silent protesters.

Dr. Baradei has been subject to character assassination in the state media, which is, to the majority of the Egyptians in peri-urban and rural population is the government voice and it is subconsciously obeyed. The state media contents steams from excessive researches about the nature of the belief system of the Egyptians. They are the same population that complain vehemently about every aspect of governance yet they, in hypnotized like manner, vote for the ruling party, either willingly or unwillingly through other means.

Such belief system is fed continuously through proverbs, test balloons and rumors that touch on their routed fear of risk. A typical Egyptian is not a risk taker, thus by nature is the enemy of change. Such attitude results from poverty and deprivation of choices. Another reason being is geo-political nature of Egypt itself, and the socio-economic relation between the government with its brutality from one side and the interest of the individual in avoiding risks.

The ruler of Egypt has to be autocratic, even unwillingly; he is forced to such situation by the workings of the oldest bureaucratic machinery known to mankind. Most of the speeches of the Egyptian rulers are empty of any sign of respect to the voters’ opinion, or that Egyptian leaders are elected to oversee the people’s interest. That shall be a major challenge to Dr. Baradei success.

Another aspect that Dr. Baradei has to face is the brutal and selfish capitalism that exploded in Egypt in the past ten years. Such Capitalists are ready to invest in the sustainability of the current political system at any cost to maintain their monopoly and protect their interests.

Dr. Baradei has been outside the loop of such groups and has been tagged now as a threat to the system, so financing his campaign is confronted with a waves of counter investments and he shall not have except the good will of a bunch of middle class thinkers, that have hardly made a difference in the political landscape of Egypt in the past.

Dr. Baradei has won elections in international institutions through lobbying limited identified interest groups. He has worked through limited campaigns with limited budgets, how would he finance a campaign to 80 million interest groups with high illiteracy rate. That for sure is a challenge that need to budgeted and planned for.

Another aspect is that Dr. Baradei is a technocrat, he is used to office and interest groups politics through a defined set of rules that can be bent but not broken, how would he manage his campaign through presidency’s election landscape in Egypt, where every law could be, if not already, broken.

The wondering mind of

NED

Egypt and the Baradei

Having not visited Egypt for sometime  makes it difficult to be objective in criticizing the constitution and the workings of the politics. However, looking at the economic indices we cannot deny that there is economic progress and development.
Having said that, it is necessary to ask: Is that the optimum economic progress that the country could have attained? With no doubt the answer is no. relying on indices in assessing the progress of a country can be deceptive and cannot reflect the actual situation of the workings of the politics and the markets in the country.
The level of poverty in the country have increased with no doubt, yet the GDP per capita increased resulting in increased disparity in income between the rich and the poor (Gini Coefficient), not that the number of the rich have increased. The major problem the poor are having in Egypt is the exclusion from political participation and misrepresentation. In my opinion not only the poor are excluded from political participation, but also the youth and the eroded middle class. Of course, we are not talking here about the elites of the youth, which the national party present and use whenever change is demanded; we are talking about the ordinary youth and their energy that rests idle in the midst of a changing world that calls on every muscle to join the struggle against the economic dominance of China and the developed world.
The workings of the politics have lead to segregation of the community based on connections, not racial and tribal factors, but based on creation of islands of interests, attached to the ruling party, that serves as a monopoly. Such monopoly kills every talent and will that seek participation and growth. The tools for such social apartheid are numerous, from a controlled state media that serves like professional character assassin, to a brutal police force that can be deployed under any cause to suppress the demanding voices when need arises.
Another question needs to be answered, who opposes the change, in spite of the numerous people calling for it? With no doubt those  are the beneficiaries of such statuesque. They are too lazy to create new connections in a new system and not sure if the new system will condone the economic atrocities that they have committed.
It is not normal that the sustainability of an economic system in a country of 80 millions to be tied to the presence of one person even if it is the president, he is not immortal. The negative fluctuation of the money and stocks markets when roomers erupts about his health, shows with no doubt that monopoly and autocracy is prevailing in such system and it would be risky for any foreign or even local investor to invest trasparently in such country.
In the end, it is necessary to mention that the voices calling on Mr. Baradei to partake in the Egyptian election for presidency are sentimental and emotional. Mr. Baradei has not indicated what he can do to take over such role, and what would be his vision for the country if he becomes the president. It seems that those voices are so desperate for change and Mr. Baradei ask them to pave the way for him instead of working his way through.

The wondering mind of

NED.