Corruption inquiry focus on Egyptian gas contract

Egyptian gas exports to Israel hang in the balance as the former Egyptian president is questioned over the deal.

Workers build a pipeline for transporting natural gas to Israel in north Delta Nile, 300km north of Cairo.

Egyptian gas supplies to Israel have become the focus of a wide-ranging corruption investigation into the dealings of Hosni Mubarak, the former Egyptian president, and key associates.
The Egyptian public prosecutor this week ordered Mr Mubarak to be detained for a further 15 days to allow time for him to be questioned about a controversial contract to export gas to Israel.
The prosecutor alleges the deal has cost Egypt more than US$714 million (Dh2.62 billion) in lost revenue, and the future of the exports is now in doubt.
Sameh Fahmy, the former Egyptian oil minister, and five other former energy officials are in custody pending an investigation of the deal.
They have been charged with "hurting the country's interest, squandering public money and enabling others to make financial gains" by exporting gas to Israel below the market price and based on "unfair contractual conditions", said the office of the prosecutor general.
Under a 20-year contract signed in 2005 between the Israeli-Egyptian company East Mediterranean Gas (EMG) and Israel, up to 1.7 billion cubic metres a year of Egyptian gas was to be delivered by pipeline to southern Israel at a maximum price for the first 15 years of $1.25 per million British thermal units (btu).
But by the time the gas started flowing in 2008, international prices were at least three times higher. The direct cost of exporting the gas had risen to an estimated $2.56 per million btu.
In early 2009, an Egyptian court ordered the exports halted, but it was overruled by a higher court. Last year, EMG signed a new contract valued at $19bn, boosting the exports to 6 million cubic metres a year or about 40 per cent of Israel's total gas demand.
The prosecution's case hinges on allegations the Egyptian government sold gas to EMG at below market price, with key government figures, including Mr Mubarak, receiving kickbacks.
The former president and his energy minister are reported to have each testified that the other was responsible for the deal.
The gas dispute is a political touchstone that Israel fears will be used to overturn the 1979 peace treaty between it and Egypt. The accord signed by Mr Mubarak's predecessor, Anwar Sadat, was from the outset deeply resented by many Egyptians Mr Sadat was assassinated in 1981.
EMG's major shareholders include the Israeli investment firm Ampal-American Israel and the Egyptian businessman Hussein Salem, a close friend of Mr Mubarak.
Mr Salem is believed to have fled to Saudi Arabia on January 26, the day after the protests began. On Sunday, three tonnes of valuables reported to belong to the businessman were confiscated at Cairo airport, from where they were allegedly being smuggled to Jeddah.
The 100 intercepted parcels contained paintings, antiques and carpets, including one bearing Mr Salem's name, expensive watches, gold statues and items that may be subject to Egypt's antiquities protection law.
 
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