SYRIA - Gas Imports & Exports.

Syria will begin importing Egyptian natural gas by pipeline from the Jordanian border in 2005. In 2005/06, Syria will be exporting some of its own natural gas to Lebanon.

Agreements to that effect were signed on Jan. 25, 2004, at a meeting in Amman between the prime ministers of Egypt, Jordan, Lebanon and Syria. One of the agreement called for the construction of the second phase of the Arab Gasline, which now supplies Egyptian gas to a power plant and some small industries at the Jordanian port of Aqaba. The gas is pumped by pipeline from the Egyptian town of El Arish in northern Sinai.

The gas reaches El Arish by pipeline from Egypt's offshore Mediterranean fields. From El Arish the gas is pumped through the first phase of the Arab Gasline to Aqaba, passing from north Sinai and through a 15-km marine section from Taba in south Sinai. The first phase was inaugurated in July 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. (Nepco) was committed to buy 1,100 MCF/day from 2003 and to raise the purchase volume to 3,500 MCF/day by 2013.

The Cairo-based Al Sharq Gas Co., which runs the pipeline, buys the gas from Egypt's Egas transmission subsidiary Gasco under a 15-year ToP contract and sells it to NEPC.

Al Sharq was formed at the end of 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 Egypt in Review No. 4). Al Sharq is a major shareholder in an Egyptian constortium called EPEG, which is having the second phase of the Arab Gasline built.

The second phase, being built for EPEG through the agency of Al Fajr Egyptian-Jordanian Company for Natural Gas Transmission and Supply, is a 393-km pipeline to run from Aqaba to the Rehab power plant in northern Jordan which will be completed in 2005 and is estimated to cost a little over $270 million. The gas will fuel other power plants and industry in Jordan. The pipeline will be built on BOOT basis.

EPEG groups 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 last September registered the Al Fajr in Amman as a project company in charge of designing, building, financing and running the pipeline. It will have a 30-year licence to buy the gas from Al Sharq and sell it to NEPC under a 30-year ToP contract.

The Egyptian side is financing 40% of the project's cost. Jordan's Social Security Fund is financing another 20%. The rest is being covered by borrowings.

In a third phase, from 2005, the pipeline will be extended to Syria and Lebanon and will later run to Turkey and Europe. The final capacity to feed these countries, as well as Jordan, will be 10,000 MCF/day.

One of the agreements signed in Amman on Jan. 25 covers a permit to Al Fajr Egyptian-Jordanian Company for Natural Gas Transmission and Supply (Al Fajr) and operation of the pipeline through to northern Jordan. A second agreement cover Nepco's purchases from Al Sharq, with Nepco to transfer its rights to Al Fajr when the latter's permit comes into force. Al Fajr will then sell the gas to Jordan.

A third agreement relates to the funding of the second phase over and above the 60% contributions of the Egyptian side and Jordan's Social Security Fund, which will come from Jordanian banks.

From the Rehab power plant near the Jordanian border with Syria, the Arab Gasline will be extended to Banias. From Banias, a pipeline will run to the Beddawi power plant in northern Lebanon, where it will connect with another export pipeline from Syria.

The Lebanon-bound section, called GASYLE-1, is a 64-km pipeline scheduled for completion in May.

The Lebanese section is being built by a local firm, Argosy-Hawi, at a cost of about $13.7 million. In the initial phase, this will have a capacity of 1.5 MCM/day of Syrian natural gas.

In a later phase, the Lebanese pipeline will be extended to the Zahrani power station in the south. Then its capacity will be doubled to 3 MCM/day

According to an expert at the Lebanese Ministry of Energy and Hydraulic Resources, the switch from gasoil to natural gas by the state-owned Electricite du Liban (LdB) will make annual savings of $108 million on the basis of a crude oil price of $29/barrel. LdB is to be restructured and privatised eventually.

The Syrian government is yet to decide on the volume of Egyptian natural gas which it will be purchasing when the related pipeline extends from the Jordanian border.

The price of the Egyptian natural gas being supplied to Jordan and the one to be sold to the other countries is yet to be disclosed to the public. An APS source says the price to Jordan CIF-Aqaba it is between $2.60-2.75 per million BTU.

It has been speculated in the past year that Syria has agreed to price its natural gas to Lebanon at a special discount, which would work out at less than $2.60 per million BTU in current US dollar terms. It this proves to be true, then the Syrians will be demanding a similar price for the Egyptian gas.

It is not yet clear how the Egyptian gas will reach Turkey through Syria and the European market through the Turkish territory. Turkish demand for natural gas is expected to grow rapidly once the country's economic recovery picks up steam. Turkey has been acutely short of natural gas and electricity in recent years (see survey of Turkey to be serialised in APS Review next April and May).

In early 2004, Syria and Turkey established a free trade zone along their common border. This followed a successful visit to Turkey by Syrian President Bashar Al Assad. Among projects being promoted as part of efforts towards peace between Syria and Israel is a proposed pipeline to carry fresh water from Turkey to the Jewish state through Syrian territories. Turkey is also trying to mediate peace between Syria and Israel.

A marine extension for natural gas to be supplied from Syria to Cyprus has been an option discussed with the Greek Cypriot authorities during the past five years. But Cyprus has opted for spot LNG.