EGYPT - Export Pipeline Projects.

There have been several pipeline projects for the export of natural gas from Egypt to east Mediterranean markets. The only one to have materialised is the Arab Gas Pipeline (AGP) linking Egypt's offshore Mediterranean gas fields to the Jordanian port of Aqaba, passing from the Egyptian coastal town of el-Arish in north Sinai and including a 15-km marine section from Taba in south Sinai to Aqaba. The pipeline was inaugurated on July 27, 2003, as the gas reached the Aqaba power plant.

Under a 15-year contract with a take-or-pay (ToP) clause signed in June 2001, Jordan's National Electric Power Co. (NEPC) was committed to buy 1,100 MCF/d from 2003 and to raise the purchase volume to 3,500 MCF/d by 2013. Al-Sharq Gas Co., which runs the AGP, buys the gas from Egas' transmission subsidiary Gasco under a 15-year ToP contract and sells it to NEPC.

Al-Sharq was formed at end-2000 under the chairmanship of Egypt's Midor refining venture promoter Hussein Salem (a former intelligence chief and now an influential businessman close to President Mubarak - see who's who in Part 4 in Review No. 4).

On May 2, 2005 the Secretary-General of the Jordan's Ministry of Energy and Minerals Khaldoun Qutishat said his government had begun a feasibility study on providing Egyptian gas to household uses in Amman, Zarqa and other areas as a substitute to high-cost oil products. In February of that year, this ministry, together with the Housing Bank for Trade and Finance (HBTF), had selected Tractebel Engineering as technical consultant for construction of the $300m Jordan Gas Transmission Pipeline (JGTP).

Completed in 2006, the JGTP was the Jordanian section of the AGP. The JGTP is 393 km long with 36 inches in diametre and runs from Aqaba to Rehab, in northern Jordan. Tractebel Engineering has also been commissioned to carry out a study for the development of the gas transmission network in Lebanon, which is due to be connected to the same AGP eventually.

In a $700m upgrade project, Jordan's oil refinery at Zarqa has been revamped. This meets local demand for lighter fuels as the refinery receive natural gas from Egypt through the JGTP. Jordan's energy sector is being modernised under a $3,000m programme. This is being financed by public and private sector companies over a 10-year period to 2015.

The JGTP was built on BOOT basis for an Egyptian group called EPEG comprising Egas, Gasco, pipeline contractor and EGPC/Egas affiliate Petrojet, and EPC contractor Engineering for the Petroleum & Process Industries (Enppi) which is another affiliate of EGPC and Egas. The group in 2004 registered the al-Fajr in Amman as a project company in charge of designing, building, financing and running the pipeline. It has a 30-year licence to buy the gas from al-Sharq and sell it to NEPC under a 30-year ToP contract.

Stroitransgaz of Russia, a 41% Gazprom unit, has built part of a gasline which runs from northern Jordan to Syria, under a contract it won in October 2005, with an extension to Turkey being added. The Russian firm is in charge of a 324-km section between the Jordan-Syria border and the al-Rayan gas compressor station near the Syrian town of Homs.

Cairo wants to connect the AGP to the European network in order to be able to increase its gas exports. This will link up with the planned Nabucco gasline - the latter to run via Turkey, Bulgaria, Romania, Hungary and Austria in a project to supply Eastern and Central Europe with gas from the Caspian and the Middle East, with construction start-up likely to be in 2008 or in 2009 and the first phase is to be completed two years later. The total volume of gas the AGP will be carrying to these Arab countries, Turkey and Europe would be up to 14,000 MCM/y.

At a meeting in Cairo, the Egyptian, Jordanian, Syrian and Turkish petroleum ministers signed an accord on Aug. 16, 2005, agreeing to the extension of the AGP from the Jordanian-Syrian border, through Syria and on to Turkey, the gateway to mainland Europe. But the agreement left many questions unanswered about the obstacles facing this cross-border project. The pipeline will eventually snake its way through four countries.

By Aug. 16, 2005, the pipeline was running from el-Arish on the Mediterranean coast to Taba in southern Sinai. It then passed beneath the Red Sea, surfacing at the port of Aqaba, where it continued its journey to the Rehab power station in the north of Jordan. From there, it was to cross the border to Homs, in central Syria, in 2007, and later on to Kilis in southern Turkey. The route to Europe is yet to be determined.

The August accord covered the third phase of the pipeline. Ministers agreed to establish a new joint venture company to include the Egyptian, Syrian and Turkish interests to have the pipeline extension built, stretching from Homs to the Turkish border. It was then agreed that the extension should be completed within 22 months from the October 2005 award to the Russian contractor.

In April 2007 Minister Fahmi said Egypt, Turkey and Syria had signed a memorandum of understanding (MoU) to develop phases 5 and 6 of the AGP system to stretch to Turkey through Jordan and Syria. It was then said that Phase 5 will cost about $140m and would take the gas to the Syrian-Turkish border, while Phase 6 inside Turkey would cost around $80m.

Fahmi then said first gas through the pipeline extension should reach Turkey within two-and-a-half years. The three countries are still discussing volumes of gas to be exported. Phases 3 and 4 of the pipeline was to come online in mid-2008. This will be nearly a year later than the delivery date negotiated in 2006 by resigned Lebanese Energy Minister Muhammad Fneish.