Newsday

Israel To Buy Gas from Egypt

JERUSALEM (AP) -- Israel's state-owned Electric Corporation decided Thursday to award the bulk of a $3 billion natural gas contract to Egypt despite pressure from Israeli suppliers to buy domestic gas.

Israel Electric Corporation said it would begin talks with an Egyptian-Israeli group to import 35 billion cubic feet of Egyptian gas over 10 years.

Egypt already supplies oil to Israel, the company's chairman of the board, Eli Landau, said. The oil has flowed without interruption since 1979, when Israel and Egypt signed their peace treaty.

The decision caps years of political debate over whether Israel should buy large quantities of gas from Egypt, whose relations with Israel are frosty, rather from purchasing gas from friendly but expensive suppliers.

The dilemma became more acute when Israel discovered about 929 billion cubic feet of proven gas reserves off its coast within the last three years. Another 1.2 trillion cubic feet are believed to have been found off the coast of Palestinian-controlled Gaza.

Israeli suppliers launched an aggressive advertising campaign, saying Egypt and the Palestinians could not be trusted to maintain supplies if there is another Middle East war.

On Wednesday Ariel Sharon, front-runner in the race for the Feb. 6 election for prime minister, said Israel should not buy natural gas from Egypt or the Palestinians.

Landau said the company opted for Egyptian gas for strictly economic reasons.

''The Egyptians offered it about 20 percent cheaper than the Israeli suppliers and about 30 percent cheaper than the British-Palestinian partnership,'' he told Israeli army radio.

In accordance with Israel's policy of varying energy sources, the board also decided to begin negotiations with the Israeli suppliers for the remaining 26 billion cubic feet of gas that Israel needs.

The Israeli decision gives a boost to Egypt's natural gas industry, which has huge reserves and is seeking buyers.

AP-NY-01-25-01 1919EST< 

-- Rachel Gibson (rgibson@hotmail.com), January 25, 2001