London (Platts)--2Dec2008

The European Union is to sign an accord with Egypt on Tuesday over
greater cooperation in energy, the European Commission said.

European Energy Commissioner Andris Piebalgs and External Relations
Commissioner Benita Ferrero-Waldner are to sign a memorandum of understanding
with Egypt's foreign affairs minister, Ahmed Aboul Gheit, in Brussels on
Tuesday afternoon.

The accord covers energy market reforms and the "convergence of Egypt's
energy market with that of the EU," as well as the promotion of renewable
energy, energy efficiency and the development of energy network
infrastructure. It also covers technological and industrial cooperation.

"Egypt is a strategic energy partner for the EU. The memorandum that we
are signing today will upgrade our cooperation in the sector, recognizing
Egypt's role as the sixth-largest natural gas supplier to the EU and a key
transit country between the Middle East, Africa and the EU," said
Ferrero-Waldner ahead of the signing ceremony.

"Egypt's commitment to energy reforms is crucial for the creation of a
Euro-Mediterranean energy market," she said.

EU SEEKS TO STRENGTHEN LINKS WITH AFRICA

The EC, in its second strategic energy review published November 13,
identified Africa as a key source of future energy supplies in its effort to
diversify EU energy sourcing away from current suppliers such as Russia. In
the review, the EC said it wanted to create a Mediterranean energy ring to
link up the power and gas grids of the North African Mediterranean countries
with those in southern European countries, and take advantage of the huge
renewables potential in the region.

"The memorandum that the European Commission [will sign] today is one
element of fulfilling Europe's intentions to strengthen relations in external
energy, just as it is expressed in the strategic energy review," Piebalgs
said.

He added that in recent years the EU has significantly strengthened its
energy relations with Egypt and other countries in the region. He said the EU
is already working with Egypt in gas, regional electricity interconnections
and market integration, and pointed to the inauguration earlier this year of a
regional center for excellence in renewable energy and energy efficiency in
the Egyptian capital, Cairo.

The EC supports the construction of the Arab Gas Pipeline, which is to
take gas from Egypt and possibly from Iraq to European markets. Egypt already
supplies gas to Europe in the form of LNG, with Britain's BG Group and a joint
venture between Spanish power utility Union Fenosa and Italian energy group
Eni involved in the production and export of LNG from Egypt.

The International Energy Agency has forecast that gas exports from
African countries including Egypt to Europe are set to triple by 2030.

In its annual World Energy Outlook published on November 12, the IEA
projected European gas imports from Africa would reach 261 billion cubic
meters by 2030, overtaking Russia and other former Soviet Union states as the
main source of European gas imports. Russian and FSU exports to Europe are
only projected to rise to 156 Bcm by 2030 from 137 Bcm at present.

Egypt is also a significant oil producer and plays an important role in
the global oil transport through the Suez Canal, the EC said.